Report II - Wirecard AG - Project VisMas Wirecard GI Retail India

REPORT II: WIRECARD AG. Nov 25, 2016.
STRICTLY CONFIDENTIAL. PROFESSIONAL LEGAL PRIVILEGE
Project VisMas
REPORT II: WIRECARD AG

November 25, 2016
STRICTLY CONFIDENTIAL
PROFESSIONAL LEGAL PRIVILEGE

Tasking
1. This company was tasked with carrying out investigative research on Wirecard AG in order to
examine allegations of improper conduct and ties to illegal activity.
2. This phase of the investigation focused on Wirecards acquisition of the GI Retail Group and
associated companies, with the aim of identifying false and misleading statements made by
the management of Wirecard.
Background
3. Wirecard has been alleged to have conducted illegal activity and overstated acquired
companies financials.
4. On October 27, 2015, Wirecard announced its acquisition of the payments business of Great
Indian (GI) Retail Group and its associated companies for 230 Million, to be paid in cash, and
up to a total of 110 Million linked to the GI financial performance in 2015 to 2017.1
Summary
5. Wirecard claims for the financials of the GI Retail Group appear significantly stronger than
official company filings that were obtained from the Indian Ministry of Corporate Affairs. 2
6. Wirecard stated revenue for the GI Group of companies of 2,677 Million INR (38.3 Million)
in 2014/15. Calendar year 2015 revenue is claimed to have been 3,250 Million INR (45.7
Million) with a forecast of greater than 5,250 Million INR (75 Million) in calendar year 2016. 3
7. Wirecard stated EBITDA for the GI Group of companies of 241.4 Million INR (3.4 Million) in
2014/15. Calendar year 2015 EBITDA is claimed to have been 520.5 Million INR (7.3 Million)
with a forecast of 1,050-to-1,260 Million INR (15-to-18 Million) in calendar year 2016.
8. The only element of the GI Retail Group to be making any sort of significant profit is Hermes
iTickets Private Limited. However, this combined with the financial performance of the other
group companies, is markedly lower than the financial performance stated by Wirecard.
9. Hermes iTickets own auditor expressed concern and qualified its opinion relating to Hermes
iTickets revenue recognition in 2012/13 and 2013/14.
10. Excluding GI Retail Private Limited (which reported ZERO revenues in 2013/14), the combined
GI Retail Group of companies revenue was 415 Million INR (approx. 5.7 Million) in 2014/15.
This compares to 2,677 Million INR (approx. 38.3 Million) claimed by Wirecard in 2014/15.
11. The declared total LOSS for the combined GI Retail Group of Companies was 18.8 Million INR
(approx. LOSS of 260,000) in 2013/14. Excluding GI Retail Private Limited (which reported a
Loss of approx. 560,000 in 2013/14), the combined GI Retail Group of Companies total profit
was 51 Million INR (approx. 703,000) in 2014/15. This compares to 241.4 Million INR (approx.
3.4 Million) in EBITDA claimed by Wirecard in 2014/15.
http://ir.wirecard.com/websites/wc/English/3150/financial-news.html?newsID=1516245
www.mca.gov.in
3 http://ir.wirecard.com/download/companies/wirecard/Presentations/CMD2016_complete_0405_final_websecured.pdf
2

Conclusions
12. Wirecards claims of the GI Retail Group of companies revenues are overstated by approx. 7x
in 2013/14 and estimated to be overstated by approx. 7x in 2014/15.
13. It is probable that Wirecards claims of the GI Retail Group of companies profitability is
overstated by a similar factor.
Further Action/Recommendations
14. Investigation of further Wirecard acquisitions.
Wirecard AG
15. Wirecard AG is a global financial services and technology company headquartered in
Aschheim, Munich, Germany. Its internet payment service competes with PayPal and Western
Union. Wirecard AG is listed on the Frankfurt Securities Exchange. 4
Acquisition of Great Indian (GI) Retail Group
16. On October 27, 2015, Wirecard announced its acquisition of the payments business of Great
Indian (GI) Retail Group and its associated companies for 230 Million, to be paid in cash, and
up to a total of 110 Million linked to the GI financial performance in 2015 to 2017. 5
Great Indian Retail Group
Wirecard AG entered into agreements to acquire the payments business of Great
Indian (GI) Retail Group on 27 October 2015. Founded in 2006, GI Retail Group is one
of India's and South East Asia's leading groups in the area of electronic payment and
e-commerce solutions for payments in local retail businesses.
Wirecard has acquired 100 percent of the shares of the companies Hermes I Tickets
Pte. Ltd., GI Philippines Corp. and Star Global Currency Exchange Pte. Ltd. that offer
payment services in India, the Philippines, Indonesia and Malaysia under the brands
iCASHCARD, Smartshop, StarGlobal, Commerce Payment as well as others.
Furthermore, Wirecard has also acquired 60 percent of the shares in GI Technology
Private Limited (GIT), a licensed Prepaid Payment Instrument (PPI) issuer in India. As a
result of this overall transaction, Wirecard has taken over more than 900 employees
in sites in Delhi, Chennai, Hyderabad, Bangalore, Mumbai, Kolkata, Lucknow, Manila,
Batam and Kuala Lumpur.
The total cash consideration for the overall transaction including a capital contribution
to GI Technology will amount to EUR 230 million, payable in cash and approved lines
of credit. Further payments of up to a total of EUR 110 million are linked to the
achievement of certain financial results in the 2015 to 2017 calendar years.
According to the provisional financial statements for the fiscal year, revenues from the
acquired payment business reached EUR 45 million in the 2015 calendar year, an
increase of more than 50 percent compared to the 2014 calendar year. Operating
earnings before interest, tax, depreciation and amortisation (EBITDA) doubled in the
4
5
https://www.wirecard.com/company/our-story/
http://ir.wirecard.com/websites/wc/English/3150/financial-news.html?newsID=1516245

same period (2015 in comparison to 2014) to reach EUR 7 million. Revenue for the
2016 calendar year is expected to exceed EUR 75 million and EBITDA after integration
costs is expected to be between EUR 15 million and EUR 18 million in 2016.
Acquisitions in 2015
The companies Hermes I Tickets Pte. Ltd., Chennai (India), GI Philippines Corp., Manila
(Philippines), and Star Global Currency Exchange Pte. Ltd., Bangalore (India), were
newly included in the consolidated financial statements with effect from 30 December
2015 because Wirecard had already gained control at this point in time over these
companies through a trust agreement in the sense of IFRS 10.7 and held economic
ownership of the shares. The transaction was closed at the beginning of 2016. The
purchase price to be paid as part of this transaction amounted to around EUR 215
million. Furthermore, three earnout components must be paid that will depend on the
operating earnings of the acquired company in the years 2015 to 2017 and could
amount to up to EUR 110 million, of which on the day of consolidation EUR 99.3 million
has been reported as a liability. Due to the consolidation on 30 December 2015, the
companies did not make any revenue or earnings contribution to the Group in 2015. In
the 2015 fiscal year, the company achieved revenues of kEUR 45,653 with an annual
net profit of kEUR 4,542.
As a result of the short period before preparation of the consolidated financial
statements, the amounts recognised are not final. Non-separable assets, such as the
specialist knowledge and contacts held by the employees and management, as well as
the synergy effects within the Wirecard Group, are recognised under goodwill.
17. Wirecard stated revenue for the GI Group of 2,677 Million INR (38.3 Million) in 2014/15.
Calendar year 2015 revenue is claimed to have been 3,250 Million INR (45.7 Million) with a
forecast of greater than 5,250 Million INR (75 Million) in calendar year 2016.6
18. Wirecard stated EBITDA for the GI Group of 241.4 Million INR (3.4 Million) in 2014/15.
Calendar year 2015 EBITDA is claimed to have been 520.5 Million INR (7.3 Million) with a
forecast of 1,050-to-1,260 Million INR (15-to-18 Million) in calendar year 2016.
http://ir.wirecard.com/download/companies/wirecard/Presentations/CMD2016_complete_0405_final_websecured.pdf

GI Retail Group Company Structure
19. The GI Retail Group consists of 4 main entities:
a. GI Retail Private Limited top level holding company.
b. GI Technology Private Limited issuer of iCashcard. Also 35% shareholder in Dream
Smartcards Private Limited.
c. Hermes iTickets Private Limited Owner of the SmartShop retail agent brand. Owner
of GI Philippines Corp Limited, which would appear to control the Biyahe Ko travel
agency brand.
d. GI Hospitalities Private Limited Owner of the Ease Room hotel booking system.
GI Retail Private Limited
20. The official company documentation and accounts for GI Retail Private Limited (Corporate
Identity Number: U72900TN2009PTC072064) were obtained by the Company from the Indian
Ministry of Corporate Affairs (MCA). This documentation and accounts are significantly
different from the information claimed by Wirecard.
21. GI Retail Private Limited was incorporated on June 24, 2009.
22. Previous names of GI Retail Private Limited:
a. Game Stars Techsol Private Limited (Incorporation Date).
b. GI Retail Private Limited (C/N as of August 24, 2009).
23. Although the returns confirm that the companies listed above are subsidiaries, the net worth
of the holding company, GI Retail, is detailed to be 105,937,037 INR (approx. 1.5 Million) as
at September 30, 2014.7
24. GI Retail reports no revenue whatsoever and a LOSS of 40.8 Million INR (approx. LOSS of 0.6
Million) in the reporting period up to March 31, 2014.
GI Technology Private Limited
25. The company documentation and accounts for GI Technology Private Limited (Corporate
Identity Number: U72200TN2005PTC057560) were obtained by the Company. This
documentation and accounts are significantly different from the information claimed by
Wirecard.
26. GI Technology Private Limited was incorporated on September 21, 2005.
27. The net worth of, GI Technology, is detailed to be 19,213,300 INR (approx. 0.3 Million), as at
March 31, 2015.
An exchange rate of 72.5 EUR:INR is used for conversions throughout this document.

28. GI Technology reports total revenue of only 92 Million INR (1.3 Million) and a profit of 0.78
Million INR (10,542) in the reporting period up to March 31, 2015.
Hermes iTickets Private Limited
29. The official company documentation and accounts for Hermes iTickets Private Limited
(Corporate
Identity
Number:
U63040TN200PTC082562,
previously
U63040KA2006PTC040026) were obtained by the Company from the MCA. This
Wirecard.
30. The return details that the company has one 100% subsidiary, GI Philippines Corporation
Limited and that this firm controls the travel brand, Biyahe Ko.
31. Hermes iTickets Private Limited was incorporated on July 24, 2006.
32. The net worth of, Hermes iTickets, is detailed to be 312,360,380 INR (approx. 4.3 Million), as
at March 31, 2015.
33. Hermes iTickets reports total revenue of 2,573 Million INR (approx. 35.5 Million) and a profit
of 93.6 Million INR (approx. 1.3 Million) in the reporting period up to March 31, 2015.
34. Gross value of Airline Ticket and Railways Ticket sales is reported to represent 84% of
total reported revenue in the year up to March 31, 2015.
35. Hermes iTickets reports total revenue of 1,085 Million INR (approx. 15 Million) and a profit
of 53.4 Million INR (approx. 0.7 Million) in the reporting year up to March 31, 2014.
36. Gross value of Airline Ticket and Railways Ticket sales is reported to represent 83% of
total reported revenue in the year up to March 31, 2014.
37. For the year up to March 31, 2014, Hemes iTickets revenue/income recognition policy is
stated as:
The Company has been following a consistent policy by taking the gross value of
services rendered as gross income.
38. This revenue/income recognition policy does not appear to have changed in 2015. For
example, Hermes iTickets reports the gross value of airline ticket sales to be 875.7 Million INR
(approx. 12 Million) in the year to March 31, 2014. At a 2% ticket commission fee, this would
imply 17.5 Million INR (approx. 240,000) in commission earned. Alternatively, if Hermes
iTickets reported airline ticket sales commission earned of 2,126 Million INR (approx. 29.3
Million) in the year to March 31, 2015, then at a 2% ticket commission fee, this would imply
the gross value of airline ticket sales to be 106 Trillion INR (approx. 1.5 Billion) in 2015. This
would mark a 12,040% YOY increase in the value of airline tickets sold through Hermes
iTickets.
39. Hermes iTickets auditor states that Hermes iTickets total true revenue (excluding the gross
value of ticket sales) was approx. 132.5 Million INR (approx. 1.8 Million) in the year ended
March 31, 2014.
40. Hermes iTickets revenue is estimated to be approx. 312.2 Million INR (approx. 4.3 Million)
in the year ended March 31, 2015. Alternatively, if Wirecard and Hermes iTickets stand by the

2,566 Million INR (approx. 35.4 Million) as being total revenue attributable to the Group and
not incorporating gross value of ticket sales, then this would imply that Hermes iTickets
revenue rose 1,866% in the year ended march 31, 2015.
41. Hermes iTicketss accounts were qualified in its auditors report in 2013 and 2014 for
overstating its gross revenue by a factor of 10:
Basis for Qualified opinion 2014
b) The Companys major revenue is the commission it earns from online booking of
air/rail /movie/ bus tickets and other support services which is in the nature of agency
commission. As per Accounting Standard 9, gross commission earned should be taken
as gross revenue and not the gross inflow of cash or sales value. However, the
Company has followed the policy of recognizing gross inflow of cash from sale of
tickets as sales value instead of taking gross commission earned as its revenue. This
has resulted in the gross revenue overstated by Rs 1,520.17 crores (previous year
Rs.1,118.70 crores)and gross purchase cost overstated by Rs.1,492.02 crores (previous
year Rs.1,101.86 crores). This is the result of a decision taken by the management and
caused us to qualify our audit opinion on financial statements since 2012-13. The effect
on the financial statements on account of the same could not be quantified by us. The
Company has not disclosed the effect of departure from the Accounting Standard in
the financial statement.
Basis for Qualified opinion 2013
b) The Companys major revenue is the commission it earns from online booking of
air/rail /movie/ bus tickets and other support services which is in the nature of agency
commission. As per Accounting Standard 9, gross commission earned should be taken
as gross revenue and credited to the profit and loss account and not the sales value.
However, the Company has followed the policy of recognizing gross inflow of cash from
sale of tickets as sales value instead of taking gross commission earned as gross
revenue. This has resulted in the gross revenue overstated by Rs 1118.99 crores and
gross purchase cost overstated by Rs.1,101.86 crores.
42. Hemes iTickets claims to be present across more than 90,000 locations across India and more
than 9,000 locations in the Philippines.8,9 Hermes iTickets expensed 9,660,473 INR (approx.
133,248) in advertising, business promotion and development expenses in the year to March
31, 2015; an average expense per location of 1.35 for the year 2014/15.
8
9
http://giretail.com/
http://web.archive.org/web/20141217051349/http://hermes-it.in/


GI Hospitalities Private Limited

43. The company documentation and accounts for GI Hospitalities Private Limited (Corporate
Identity Number: U55101TN2010PTC102436) were obtained by the Company. This
Wirecard.
44. GI Hospitalities website details:
GI HOSPITALITIES PVT LTD(GIH) is a technology solutions provider addressing the
growing needs of travel, service and hospitality industry. GIH is India's first Travel
Solution and Distribution Company that has integrated and delivered all forms of travel
related products and services in a single unified services platform.

We now bring you an extensive array of cutting-edge e-commerce solutions through
EASE ROOM - bringing digital travelers to your hotel's doorstep. 10
45. GI Hospitalities Private Limited was incorporated on August 11, 2010.
46. The net worth of, GI Hospitalities, is detailed to be NEGATIVE 95.7 Million INR (approx.
NEGATIVE 1.3 Million), as at March 31, 2015.
47. GI Hospitalities reports total revenue of 10.9 Million INR (0.15 Million) and a loss of 43.4
Million INR (0.6 Million) in the reporting period up to March 31, 2015.
GI Retail Group Companies
48. The declared total revenue for the combined GI Retail Group of companies was 167 Million
INR (approx. 2.3 Million) in 2013/14. This compares to the 1,109 Million INR (approx. 15.8
Million) claimed by Wirecard in 2013/14.
49. Excluding GI Retail Private Limited (which reported Zero revenues in 2013/14), the combined
GI Retail Group of companies revenue was 415 Million INR (approx. 5.7 Million) in 2014/15.
This compares to the 2,677 Million INR (approx. 38.3 Million) claimed by Wirecard in
2014/15.
50. Wirecards claims of the GI Retail Group of companies revenues are overstated by approx. 7x
in 2013/14 and estimated to be overstated by approx. 7x in 2014/15.
51. The declared total LOSS for the combined GI Retail Group of companies was 18.8 Million INR
(approx. LOSS of 0.26 Million) in 2013/14. Excluding GI Retail Private Limited (which reported
a Loss of approx. 0.6 Million in 2013/14), the combined GI Retail Group of Companies total
profit was 51 Million INR (approx. 0.7 Million) in 2014/15. This compares to the 241.4 Million
INR (approx. 3.4 Million) in EBITDA claimed by Wirecard in 2014/15.
52. Wirecard has paid 230 Million plus 110 Million in future performance related payments for
GI Retail Group. This would represent 83x the GI Retail Group 2013/14 net worth, 148x the GI
Retail Group 2013/14 revenue, and 59x the estimated GI Retail Group 2014/15 revenue.
10
http://www.gihospitalities.com/about_us.html





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Report II - Wirecard AG - Project VisMas Wirecard GI Retail India

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REPORT II: WIRECARD AG. Nov 25, 2016.

STRICTLY CONFIDENTIAL. PROFESSIONAL LEGAL PRIVILEGE