Peak XV-backed Kenko shuts operations; ran out of funds, taken to NCLT, founders tell staff

Kenko’s financial woes were worsened by its failure to secure a crucial insurance license from the Insurance Regulatory and Development Authority of India (IRDAI).

Redkenko Health Tech Private Limited, better known as Kenko Health, has shut operations following a financial and operational crisis, sources have told Moneycontrol.

The Mumbai-based healthcare startup, which raised over $13.7 million across three funding rounds from key investors such as Peak XV Partners, Orios Venture Partners and Beenext, was once valued at approximately $60 million. Despite its stable growth trajectory since 2019 and the backing of prominent investors, the company succumbed to a cash crunch and a challenging operating environment due to its failure to secure an insurance licence, leading to its eventual collapse.

The company's offices in Bengaluru and Mumbai have been closed, leaving several of the company's 100 employees in distress over unpaid dues, some stretching back to more than three months.

In a series of emails exchanged with employees between July and August, founders Aniruddha Sen and Dhiraj Goel admitted the firm had “run out of funds” and taken to the National Company Law Tribunal (NCLT) by investors.

“Unfortunately, the company has run out of funds, and we were unable to infuse equity capital in time due to various internal reasons. Our company has been taken to the NCLT by a debt fund that had extended a loan to us,” Sen said in an email to employees.

Moneycontrol has reviewed the emails.

In a separate email, addressing disgruntled employees, the founders responded to concerns about unpaid dues and lack of communication.

“The company ran out of capital a long time ago and since has had no ability to settle employee F&F’s. This is unfortunate but also the stark reality,” they wrote, revealing that they infused approximately Rs 9 crore of their personal funds between October and December 2023 to cover salaries.

“However, that wasn’t enough,” they said.

The founders said most employees had either moved on to new jobs or were seeking new opportunities, offering assistance where possible.

They were seeking investor or third-party funding to stay afloat, hoping for a resolution but it did not materialise, the founders said.

“In these situations, we had no face to communicate or request any further extension of time from any of you while we attempted to resolve the ongoing crisis. While it is disheartening that things did not go as planned, we take pride in our beginnings and the achievements we made together,” they said.

Addressing allegations of misconduct, the founders said the claims were driven more by disappointment and distress than malice.

“There are some disturbing allegations about siphoning etc. I’m fairly certain these are the echoes of deep disappointment and distress and hold no real malice," they wrote, inviting employees to discuss the matter further.

Queries sent to the founders and shareholders — 9unicorn, LetsVenture, Orion, and Blacksoil—did not elicit a response, while Peak XV declined to comment.

Kenko's troubles

Mumbai-based Kenko, which specialised in offering subscription-based health plans, had been grappling with financial troubles since January, leading to its complete shutdown in July.

Despite significant revenue growth — from Rs 5 crore in FY22 to Rs 85 crore in FY23 — the company's net losses tripled to Rs 68 crore.

According to Traxcn data, the firm was backed by marquee investors, including Peak XV Partners, Orios Venture Partners, Beenext, LetsVenture, Waveform Ventures, accelerator 100Unicorns, and angel investors Jitendra Gupta (Jupiter), Kunal Shah (Cred), and Amrish Rau (Pine Labs).

The startup offered subscription-based health plans which covered outpatient department (OPD) benefits, medicines, healthcare products etc.

Kenko’s financial woes were worsened by its failure to secure a insurance licence from the Insurance Regulatory and Development Authority of India (IRDAI).

A June report by Inc42 said IRDAI imposed stringent conditions, mandating domestic capital as the lead investor for obtaining the licence. Despite Kenko’s efforts to meet these criteria, the company was unable to secure the necessary backing, leading to delays and mounting financial pressure.

The company was reportedly in negotiations with potential investors, including the Hero Group, but the talks fell through due to concerns over significant equity dilution in the restructuring plan, which alarmed investors.

Additionally, Kenko’s attempt to raise Rs 220 crore in 2023 also failed, compounding its financial woes.

TPAs’ alarm

Adding to Kenko’s troubles was an FIR over unpaid dues filed by a large third-party administrator (TPA) that handles claims for the startup and co-ordinates with hospitals across India for bill payments, according to industry insiders.

Another firm is also looking to take legal action to recover the dues. “On behalf of Kenko, we issued pre-authorisations (commitment to hospitals to settle subscriber-patients' bills) to hospitals. Now, Kenko has refused to honour its commitments. So we are obliged to file an FIR against Kenko on behalf of hospitals, who are our clients,” a senior official at company that handles claims for Kenko said.

Employees' ordeal

The crisis at Kenko had been brewing for some time, with employees enduring unpaid salaries since March and a lack of communication from the management.

While some employees have found new positions, others remain on the lookout, having given up hope of receiving their dues.

“Troubles have been brewing since December. We saw it coming and were already on the lookout. Formally, everyone has resigned since the communication in June and has received their relieving letters, but it was hard for a few after the voluntary resignation,” three employee said.

“Dues have not been settled,” added another.

Another employee shared that the firm had begun implementing work-from-home arrangements between February and March, likely foreshadowing the impending shutdown.

"I went to the office to collect my things when the building manager told me that the office was shut. There was a notice placed outside the office. I was also told there was a police visit in June," the employee recounted, highlighting the growing tension and uncertainty during those months.