CE Info Systems, the owners of MapmyIndia, have formally informed stock exchanges of its decision to reverse the decision to make any investment in the new consumer-facing business being set up by CMD Rakesh Verma's son and CEO Rohan Verma, an exchange filing said on December 9, sending the shares sharply higher.
The Board said after receiving investor feedback, it has 'reversed its decision to make any equity or debt investment' in the proposed new company.
Reacting to the news, shares of MapmyIndia ended higher by over 16%, more than recovering the loss incurred during the last two weeks. On a one-month basis, shares of MapmyIndia are trading nearly flat.
MapmyIndia’s retail brand, Mappls, and the associated apps continues to be held by the company, the management said. The statement also said that the company will 'continue to invest' in the B2B and B2B2C segments for future growth, where the company has a strong track record of profitability.
On November 29, the board of MapmyIndia had approved an investment of Rs 10 lakh for a 10% stake and further investment of Rs 35 crore as Compulsorily Convertible Debentures (CCDs) in a new company being set up by Rohan Verma. The decision had invited minority shareholders' ire as it affected the parent company's prospects in the high-growth vertical of B2C business, sending the share prices sharply lower below the listing price. The management had then said that the new venture will run by Rohan Verma's own funds.
Read More: What was the controversy around MapmyIndia’s B2C business?
"The Board believe the focus of MapmyIndia should remain on the B2B and B2B2C sectors which constitute over 99% of revenues and continue to represent a significant growth opportunity for the foreseeable future," said the statement by CE Info Systems.
Read More: What next for MapmyIndia after consumer business fiasco?
The decision to hive off some of the consumer-facing mapping and navigation businesses offering promise of high growth too has rattled some of the minority investors and analysts. Several market participants criticised the decision when it was announced, with Ambareesh Baliga asking on social media platform X if the decision is 'shortchanging' the shareholders? Money manager Sanjay Dutt too pointed out that the decision is a 'related-party transaction' involving shareholder funds.
InGovern's Shriram Subramanian had talked about concerns of company’s core value being compromised in favour of the new venture. "Without proper safeguards, the spin-off could dilute their investments and undermine the long-term viability of MapmyIndia,"
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