PhonePe files complaint with Sebi against Ventureast fund over Indus OS

PhonePe says it has approached Sebi to look into ethical violations and dereliction of VPF’s fiduciary duties to protect the interests of OSLabs.

Walmart-owned PhonePe's attempt to acquire mobile operating system startup Indus OS took a new turn, with the payments firm filing a complaint with markets regulator Sebi against Ventureast Proactive Fund-II (VPF), a fund operating out of India.

PhonePe said in a statement that the complaint relates to multiple violations of Sebi’s code of conduct in relation to VPF’s recent side dealings with Affle, which it claims are a deliberate bad faith attempt to scuttle PhonePe's acquisition of OSLabs, which is the Singapore-based holding company of Indus OS.

The Sebi complaint in India is in addition to a lawsuit that PhonePe has already filed against Ventureast and Affle in the Singapore High court. The lawsuit claims that VPF deceived PhonePe, by continuing to engage PhonePe and OSLabs on the sale of its shares in OSLabs in favour of PhonePe even though it had sold those same shares to Affle in a side deal without OSLabs and PhonePe’s knowledge on a prior date during a legally binding no-shop period.

"As founders, we are always held to the highest standards of legal and ethical integrity by our investors. But these standards should apply to investors in startups too," Sameer Nigam, CEO and Founder PhonePe said.

He further said: "I believe in this case, VPF has not only broken Sebi’s code of conduct, but it has also acted in complete negligence of its fiduciary duties as a large shareholder of Indus OS."

Nigam said that the move to file a complaint is important for the sake of the larger startup ecosystem. "We have a very strong case and are confident that we will prevail on both fronts, and hopefully in the process also create a strong deterrent against bad actors trying to bully young startups."

PhonePe was almost in the final stages to acquire Indus OS for $60 million, with plans for the startup to work with PhonePe’s Switch -- a service which enables multiple apps such as Ola, redBus, Goibibo, Myntra, Delhi Metro, and Grofers on a single platform.

But this hit a hurdle when Affle, a shareholder in Indus OS filed a case in a Singapore court seeking an injunction, as it claimed it had right of first refusal. PhonePe too has filed a case against Affle and Ventureast in Singapore. While PhonePe holds over 32 percent in Indus OS, Affle owns over 20 percent.

In a previous statement, Affle had said, "Affle Global Pte Ltd (AGPL) is a long term investor in OSlabs Pte Ltd (registered entity of Indus OS) and our investment of over $20 million values OSlabs at over $90 million."

"AGPL has no inclination to support the low balled USD60Mn valuation based PhonePe transactions for OSlabs. We value our investment based on over USD90Mn valuation of OSlabs and we are confident that OSlabs would unlock greater growth in the near future,"​ it stated.

While the legal cases are being heard, PhonePe said it has approached Sebi to look into ethical violations and dereliction of VPF’s fiduciary duties to protect the interests of OSLabs, its investee company. VPF is a Sebi-registered Alternative Investment Fund. ​

Indus OS, founded by Akash Dongre, Rakesh Deshmukh, and Sudhir Bangarambandi, has raised about $20 million so far from Samsung Ventures, Omidyar Network and Snapdeal founders Kunal Bahl and Rohit Bansal among others.