Not going to Plan: Gurugram fintech faces charges of violating laws to raise money

Crowdfunding is a favoured route for startups seeking capital to grow. However, a firm that aimed to facilitate such sourcing of money has come under the scanner.

Claiming to enable startups to raise equity funding from potential investors via unlisted shares and funds, Gurugram-based fintech Planify has come on the government’s radar for allegedly misusing the platform for indirect "private placement" of its own group company’s shares to investors, breaching norms.

According to the notice issued by the Registrar of Companies (RoC), NCT of Delhi and Haryana, Planify Enterprise, which runs the Planify platform, acted as a “distribution channel” of its parent firm Planify Capital and affiliate Mayasheel Retail (Bazar India) to advertise for and issue shares indirectly to the public at large, violating several provisions of the Companies Act, 2013, related to private placement of securities.

In a sense, the company ended raising money for itself.

“On the basis of the information which had come to notice, it was seen that the company has been acting as a fund-raising platform for start-ups and is engaged in selling of shares of unlisted companies to investors through its website,” the order dated  April 3 read.

“It had come to notice that the company had also campaigned and raised funds for itself through its platform,” it said.

Refuting the claims, Planify said that there has been misinterpretation of the real facts and there is no merit to the order being passed.

“Planify denies all and singular the allegations made in the order,” it said, adding that the firm is preparing documents and will be appealing against the order to the Regional Director (NR), Ministry of Corporate Affairs.

Modus operandi

A private placement of 4,53,530 shares was made by the parent entity (Planify Capital) into its subsidiary Planify Enterprise, which then advertised and reached out to potential investors via its platform to sell those shares.

The move allowed the parent firm to bypass traditional channels and rules governing private placement and reach investors directly, the officials note.

The ad campaign shared detailed information related to buying of shares, the pitch, financial ratios, news, etc., with potential investors. This was followed by YouTube videos and advertorials in news portals.

A similar modus operandi was followed for  Mayasheel Retail India, the order mentions.

To legitimise the transaction, the entities even obtained authorisation through a board resolution allowing Planify Enterprises to utilise the platform for selling shares.

However, the authorities termed this as a mere “smokescreen” with the real intent to issue the shares to the public at large and raise money for itself.

As per Section 42 of the Companies Act, a private placement can be made only to a select group of persons not exceeding 50, excluding qualified institutional buyers and employees of the company, as identified by the board.

More importantly, the company issuing such securities cannot release any public advertisements or utilise any media, marketing or distribution channels or agents to inform the public at large about such an issue.

“…Rs 3,89,53,017 was raised by Planify Capital through the platform by selling its 4,53,530 shares to Planify Enterprises Private Limited and subsequently those were offered to 76 investors,” the order said.

To this, the company said that Planify Enterprises made a secondary sale transaction where it sold 94 percent of shares among the Promoter Entity, Friends, Relatives, and HNI Client Investors, of which almost 90 percent of shares are held by the promoter entity and his friend/family himself.

“The remaining 6 percent shares which have been allotted through a legally followed secondary sale process to investors, totaling 27,658 shares have been allotted to 45 investors which are well within the limit stated under Section 42.7 i.e. 200 Investors,” it added.

Snapshots from Planify website

“…the company has not even registered itself as an NBFC (non-banking financial company). The business of the company involves risks for the retail investors which may lead to injury to public interest. The company has in the present matter raised money for itself but otherwise it has raised money for other companies, whereby it has acted as a 'distribution channel' for companies to reach out to investors, in a manner which is prohibited under section 42(7),” it added.

The company clarified that no comission was transferred from Planify Capital to Planify Enterprises. On the public advertisement, it said that the YouTube video made was not advertised by Planify itself. “The private placement took place in the Financial Year 2022-23, the aforementioned video was launched in the subsequent financial year 2023-24,” it added.

The RoC has imposed a penalty of Rs 2 crore each on founder Rajesh Singla and Planify Capital while three non-executive/independent directors Urmila Rani Singla, Davinder Kumar Singla and Uttam Prakash Agarwal were directed to pay Rs 1 crore each.

Planify alleged that the penalty has not been imposed on merit by the adjudicating officer but on prejudice.

“We would like to clarify that neither a single investor has filed a single complaint where they have claimed even a single penny of loss by investing at Planify nor has Planify earned any disproportionate gain. The amount valued at Rs 3,35,53,070 (87%) has been inducted by the promoter and the promoter group (friends and relatives) and Rs 40,46,425 (10.5%) has been inducted by HNI & existing investors. So, it can’t be said to have been raised by the public," it said.

All about Planify 

Founded by Rajesh Singla in 2019, Planify’s profit after tax in FY22 stood at Rs 8.25 crore, which came down to Rs 70.45 lakh in FY23. At the time, the company had reserves and surplus amounting to Rs 4.5 crore.

As per the company’s website, the platform allows “access to quality startups, SMEs, and pre-IPOs shares, offering a diverse range of investment options to investors”.

Snapshots of images from Planify website

Snapshots from Planify website

“Planify offers stocks that are not yet listed to investors (Angel, Accredited Investors, VC, AIF, and PE Funds) so that the exchange of hands can become easy in unlisted companies. It aims to solve problems of the availability of IPO stocks to investors with its flagship product, private boutique. Startups and private companies can raise funds on their platform,” it stated.

As per news articles mentioned on company’s website, Planify had previously led a $2-million funding round for D2C fashion brand Madbow Ventures (participated in by Junita Majumder (JK Future), Bhumika Srivastava (HR partner at Airbnb), and angel investors like Sanjay Damani, Jagannath MS, Pranab Dutta and Bhagya Lakshmi).

The reports said Planify acted as an “investment banking firm for startups and private companies to help them raise funds through different channels.

Snapshots of images from Planify website

The website further noted that the company is running two funds, Planify Infinity Angel Fund (Category 1 AIF) with a minimum commitment of Rs 25 lakh run by Planify Venture Pvt Ltd; and a VentureX Fund (Category 1 AIF) by Planify Wealth X Pvt ltd with a minimum capital investment of Rs 1 crore.

(The story has been updated with Planify’s response, received after its first publication)