I doubt it a a full-on scam like Tingo, but the financial allegations are still of a serious nature and, if even somewhat true, definitely would have contributed to the bankruptcy. It looks and smells a lot like Tingo in many respects, particularly in the financial reporting being controlled by one person, as that screams fraud.
From the original June 2022 Hindenburg report:
The top customer reported just $151,000 in sales in its most recent financials (2020) but has supposedly accounted for $46 million in revenue to EbixCash in FY 2021. We visited its official corporate address and found it was no longer in use. The entity’s key product was an app with only 1000+ downloads and 5 reviews, the last of which was 2018.
The second customer accounted for $43 million in revenue to EbixCash in FY 2021. Despite claiming in corporate filings that 99% of its revenue is derived from e-commerce, its website no longer works. The entity is registered to a 525 sq. foot office space in Delhi. We visited the site and found the business is no longer there.
EbixCash also claims to have a large retail distribution network. We visited the featured branch outlet highlighted in an EbixCash corporate presentation and found it doesn’t exist at the address. The picture of the branch seems to be obviously photoshopped to include an Ebix storefront where there isn’t one.
EbixCash’s subsidiary lists 970 supposed EbixCash independent distributors. We called every one of them: 403 didn’t pick up, 527 told us they didn’t sell Ebix cards, and 40 (~7% of those who picked up) told us they sold the cards. Many who sold the cards told us they were selling fewer now than prior to the pandemic, contrary to Ebix’s claims.
EbixCash also touts its technology offering, claiming its app has 1.5 million downloads. The Google Play store shows “100,000+” downloads with an average review of 1.5 stars across 2,400+ reviews. The ocean of 1-star reviews cite complaints such as money being fraudulently stolen from users, terrible customer service, and the app not working.
We also tested the app. Virtually every claimed feature didn’t work. An EbixCash rep told us the app was “under maintenance”. Based on our experience, the app isn’t even ready for the market let alone a prime-time IPO.
Ebix has a complicated corporate structure, reporting 69 key subsidiaries in 2021, with other sub-entities. In 2021, ~37% of its pre-tax income was derived from murky, opaque tax havens like Dubai and Mauritius. Given our findings on gift card revenue, we suspect there are other accounting skeletons in its closet.
Ebix has cycled through 7 different auditors since 2004, a classic hallmark of accounting irregularities. Its current auditor, KG Somani, is an Indian firm whose only U.S.-listed client is Ebix, per Public Company Accounting Oversight Board (PCAOB) records.
As a former executive of EbixCash told us, “The financial reporting was a very controlled thing. It’s very difficult for anybody running the company to have much visibility on the financial side. It’s very centrally controlled by (Chairman & CEO) Robin (Raina) and his close team. They’ve been working with him for a very very long time.”
We think a substantial portion of EbixCash’s gift card revenue is non-existent. Consequently, we expect the EbixCash IPO will flop or fail. Given Ebix’s massive near-term debt load in a rising rate environment, we see significant solvency risk over the next 12 months.
