The Securities and Exchange Board of India (SEBI) has passed an ex-parte interim order against SME-listed Kore Digital Limited and three of its key managerial personnel after its preliminary investigation found prima facie indications of major financial-statement misrepresentation, revenue inflation, questionable subsidiaries, suspicious accounting entries and alleged diversion of preferential-issue proceeds.
According to SEBI's preliminary findings, Kore Digital's consolidated financial statements were prima facie misstated by approximately ₹541.3 crore during FY 2024-25 and FY 2025-26. The amount represented around 73% of the company's total reported revenue during that period.
The matter is particularly important for Chartered Accountants because SEBI has also raised concerns relating to the audit of financial statements and has directed that a copy of its interim order be forwarded to the National Financial Reporting Authority (NFRA) for appropriate action, if any, concerning the auditors.
How did the ₹541.3 crore issue arise?
SEBI's preliminary examination focused significantly on subsidiaries acquired by Kore Digital during FY 2024-25 and their step-down subsidiaries.
According to the regulator's findings reported from the order, these entities contributed a very large portion of Kore Digital's subsequently reported consolidated revenue. However, several red flags emerged concerning whether the underlying entities and transactions represented genuine business activity.
SEBI noted issues including limited or missing MCA filing history, lack of meaningful public-domain presence, problems locating entities at their registered addresses and questions surrounding their GST registrations. Site visits undertaken during the examination reportedly failed to establish the presence of certain entities at their stated addresses.
Based on these findings, SEBI arrived at a prima facie consolidated financial-statement misstatement of around ₹541.3 crore for FY25 and FY26.
Standalone revenue also under SEBI scanner
The concerns were not restricted to consolidation.
SEBI also identified prima facie issues concerning Kore Digital's standalone revenue.
Approximately ₹31.49 crore of alleged revenue misstatement was identified in transactions involving entities including Navayuga Engineering Company Limited, Vodafone and Bharti Airtel across FY24 and FY25.
Another approximately ₹26.42 crore of FY25 revenue was flagged in connection with Kashvee Infra Projects Pvt. Ltd.
According to SEBI's findings reported from the order, GST authorities had indicated that Kashvee's GST registration was under cancellation because genuine business activity could not be established, and the entity was reportedly not found at its registered address during a site visit.
Serious audit-related observations
SEBI's examination raised questions not only about management accounting but also about the audit evidence surrounding subsidiary financial statements.
One CA whose name appeared on financial statements submitted as audited accounts reportedly informed SEBI that she had certified provisional financial statements but had not conducted the statutory audit. SEBI recorded a prima facie concern regarding audit reports bearing her signature and stamp.
In another instance, questions arose regarding UDINs associated with limited-review reports, including their timing relative to SEBI's information requests.
These are extremely serious observations, but they should presently be described as SEBI's prima facie findings/concerns, rather than final findings against any individual auditor. CA Sansaar