Quick Take: eFishery’s Fishy Accounting

[Note: My Quick Takes are my personal commentaries and do not represent IWIRC Indonesia. I have moved in February 2025 to Acrostics Asia.]

By Eveline Danubrata

One of the hottest topics in Southeast Asia right now is the alleged eFishery fraud and a lot of ink (pixels?) has been spilled to dissect how the Indonesian unicorn managed to bamboozle a string of marquee investors.

There’s quite a bit of schadenfreude in the finance and tech circles, with comments that these MBA graduates couldn’t smell a stinking fish even if it’s put right under their noses. While hindsight is often 20/20, I’m interested in the accounting side and how the rot was undetected for so long.

?? The math doesn’t add up

eFishery’s sales flow is reportedly divided into two categories: 1) Sale of fish that was farmed with an automatic feeding tool on loan, and 2) Sale of the feeder itself. When the fish farms failed, eFishery’s management covered it up and recorded the uncollectible?receivables as assets, according to local newspaper Kontan.

In its financial statement, eFishery reported IDR 5 trillion (USD 309 million) of assets, but the price of each tool is only IDR 1.3 million (USD 80), Kontan quoted a source as saying. “So how many tools do they have? Imagine how absurd and illogical this is.”

eFishery claimed to have more than 400,000 feeders, but a draft report by FTI Consulting—which was hired by the board to conduct an investigation after a whistleblower raised red flags—put the actual number closer to 24,000. Even if we were to take the inflated figure of 400,000 feeders, it would still be hard to explain the remarkably high value of receivables.

Receivables—which are the amount owed to your business that hasn’t been paid yet—are a common tool to cook the books because they are basically a promise of a future payment. In 2018, Indonesian consumer finance firm Sunprima Nusantara Pembiayaan (SNP Finance) was discovered to have secured funding with marked-up receivables and went bankrupt.

An independent auditor that was appointed during Indonesian textile company Sri Rejeki Isman (Sritex)’s local in-court restructuring in 2021 also made an allowance for impairment losses that represented 55% of receivables totalling USD 222.7 million. These included an allowance for “doubtful receivables” owed by customers that struggled to make payments.

Did eFishery’s auditors check its receivables? Verifying receivables can be a time-consuming and labour-intensive process, but they are a potential minefield that investors should pay more attention to.

?? Starry valuations

Over the weekend, a banker friend sent me a link to the BRAVE Southeast Asia Tech Podcast, which raised valid points about the eFishery collapse.

One of the podcasters said that each of eFishery’s business segments—fish feed, logistics and trading—should have its own multiple, but investors took the consolidated revenue and assigned a tech multiple. In short, they misclassified an essentially brick-and-mortar business as a tech one and gave it a peak valuation, leading to a “double error”.

Harsh Rajpal, Founding Partner of Capital Code, also wrote that eFishery should have been classified as an aquaculture or fish supply chain player, instead of an agritech startup. Core business drivers like cash conversion cycles and net working capital ought to be prioritized over tech valuation metrics like gross merchandise value (GMV) and revenue growth, according to his post.

Investors tend to get starry-eyed about Southeast Asia’s potential, especially Indonesia with its population of around 280 million. But the lion’s share of Southeast Asia’s economic value is in its capitals and almost all of the region’s monetizable users are in the top 20 cities, according to a report by venture capital firm Lightspeed. In eFishery’s case, does it make sense to sell electronic feeders to fish farmers in less developed areas that may not be as tech-savvy?

?? Key exits

eFishery founder Gibran Huzaifah’s life story sounds like something out of a fairytale. He reportedly grew near slums and ran his own catfish farm while studying at Bandung Institute of Technology (ITB), Indonesia’s version of MIT. He started eFishery in 2013 and achieved a USD 1 billion valuation around a decade later.

Startups are often built around their founders, but as the BRAVE podcasters noted, there are “micro signals” that can provide a clue on what’s happening behind the scenes, such as the departure of eFishery’s former Chief Financial Officer Dhianendra Laksmana?last year. Senior executives are often bound by confidentiality agreements when they leave, but the board should find out the reasons for their exit.

Two investors also exited during eFishery’s Series D round in 2023, each netting a 40x return, according to the BRAVE podcast. However, different investors may have divergent strategies and liquidity considerations, so I think it might be risky to read too much into an exit.

?? What’s next?

eFishery’s co-founders have been suspended and more details should come out after the investigation is completed. In the meantime, eFishery’s employees are getting restless as rumours are circulating that liquidation is the top option being discussed, which may lead to mass layoffs in February.

This is a reminder that a startup involves many livelihoods and there should be accountability on what went wrong.