Technology company Info Edge suffered a total loss of Rs 532 crore from writing-off its investment in Rahul Yadav’s proptech startup, Broker Network (4B Networks Private Limited), Info Edge disclosed in a note to investors during the quarterly results announcement on November 7.
While Info Edge’s cash infusion in the startup stood at Rs 288 crore, the rest is the notional loss from a higher valuation that the startup commanded earlier. The startup had a valuation of Rs 719 crore before Info Edge had to write down its entire investment made through its wholly owned subsidiary ALLcheckdeals India.
Info Edge first invested in 4B Networks in 2021 and followed it up over multiple tranches in 2022 while the debt fund infusion happened early this year. The investment was written off early this year.
Info Edge has a 59 percent stake in 4B Networks.
4B Networks was started in November 2020 by Housing.com founder Rahul Yadav, and was created to enable real-estate developers and brokers to communicate with each other and conduct their business through its platform. It also helped in loan origination for end consumers.
“In line with the company’s accounting policies, investments in 4B Networks Pvt Ltd, a partly owned subsidiary of Info Edge’s 100 percent subsidiary Allcheckdeals, amount to Rs 532 crore, consisting of Rs 719 crore of goodwill and Rs 81 crore for net assets and Rs 12 crore as debt,” the note said.
The write-down is part of the quarterly evaluation of the company’s investment and the value of the investments the company has made. The quarterly investment mark-down or mark-up is often given for other investee companies, including food delivery startup Zomato, insurance aggregator PB Fintech and others as the valuation goes up or down.
According to Info Edge, the write-down is based on the current state of affairs and other relevant factors, including excessive cash burn, prevailing liquidity issues and significant uncertainty towards funding options.
“The company continues to explore various options in the best interest of the stakeholders and will re-evaluate such positions, if and when underlying assumptions relating to survival and sustainability of the investee company improves,” Info Edge added.
At its peak in September 2022, Broker Network was valued at $185 million or around Rs 1,400 crore.
Yadav’s legal troubles
Early last month, Info Edge had filed a complaint with the Economic Offences Wing (EOW) of the Mumbai police over an alleged cheating of Rs 288 crore, its investment value. It accused 4B Networks, Rahul Yadav, and other senior executives of financial irregularities and embezzlement of funds.
The Mumbai police had, in August, filed a first information report (FIR) based on a different complaint against Yadav and Sanjay Saini of 4B Networks for cheating. The complaint was filed by Vikas Om Prakas Nowal at the EOW, Mumbai. Nowal's Interspace Communication Pvt Ltd carried out an advertising campaign for Yadav's 4B Networks.
Employees and other vendors have accused him of non-payment of dues and salaries, even though Yadav has repeatedly raised money from Info Edge for this purpose.
A forensic audit was initiated by Info Edge but Yadav did not provide details. The audit was initiated after 4B Networks, under Yadav, failed to provide the company with information about operations and management, details and particulars of financial transactions, and transactions with related parties, which it says it was contractually obligated to receive.
Info Edge approached the Delhi High Court, and two companies went into arbitration in August as mandated by the court.
Meanwhile 4B Networks did not respond to another arbitration with co-working space Innov8, and the company’s time to respond has lapsed as well.
Moneycontrol had reported that Innov8 has been in arbitration with the startup for unpaid rental dues amounting to Rs 1.08 crore.
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