SUMMARY
Allcheckdeals India Private Limited (AIPL), a wholly owned subsidiary of Info Edge, invested INR 276 Cr in 4B Networks and provided debt financing of INR 12 Cr
AIPL has initiated a forensic audit into the affairs of Rahul Yadav’s startup as the latter repeatedly failed to provide the information sought by the former
Founded in 2020 by Yadav, 4B Networks last raised INR 90 Cr in September 2022 at a valuation of $185 Mn
Housing.com founder Rahul Yadav’s 4B Networks finds itself in roiling waters as Info Edge said on Thursday (June 1) it has initiated a forensic audit into the affairs of the proptech startup in which it holds a stake.
In an exchange filing, Info Edge said it has appointed Deloitte Touche Tohmatsu India LLP (Deloitte) as the forensic auditor to look into the affairs of 4B Network. Deloitte will be supported and assisted by Saraf and Partners Law Offices, the legal advisor to Info Edge.
Allcheckdeals India Private Limited (AIPL), a wholly owned subsidiary of Info Edge, invested INR 276 Cr in 4B Networks, which operates ‘Broker Network’ platform, the company said in the filing. Besides, AIPL also provided debt financing of INR 12 Cr to the startup.
However, AIPL’s investment and loans given to 4B Networks have been fully impaired due to factors such as “excessive cash burn, prevailing liquidity issues and significant uncertainty towards funding options”.
Info Edge said AIPL at various instances sought information, including details and particulars of financial transactions, transactions with related parties and such other aspects, from 4B Networks and its current management, all of which are required to be provided to AIPL contractually under the shareholders’ agreement and articles of association of 4B Networks.
“However, 4B Networks has repeatedly failed to provide AIPL with such information and has also not responded to the information requests by the company on several occasions. As a consequence thereof, AIPL has exercised its contractual rights under the shareholders’ agreement and articles of association of 4B Networks and pursuant to the same, is initiating a forensic audit into the affairs of the investee company…” the filing said.
On the financial front in FY22, 4B Networks witnessed a 20X jump in net loss to INR 57.8 Cr from INR 2.89 Cr in FY21.
While the startup had a negligible revenue of INR 60,000 in FY21, its total revenue rose to INR 17.92 Cr. Meanwhile, expenses ballooned 26X to INR 75.8 Cr in FY22 from INR 2.9 Cr in the previous fiscal.
The development comes nearly four months after the listed internet giant said its investment of INR 519.93 Cr in 4B Networks has been fully impaired.
“Owing to concerns around [the] uncertainty of funding environment for 4B Networks, an impairment of INR 276 Cr has been charged as an exceptional item,” said Info Edge in its financial results for the third quarter of the financial year 2022-23 (Q3FY23).
Info Edge added another INR 12.3 Cr in Q4 FY23, taking the total amount of investment in the proptech startup which has been impaired to INR 532.2 Cr in FY23.
Founded in 2020 by Rahul Yadav, 4B Networks last raised a funding of INR 90 Cr in September 2022 at a valuation of $185 Mn. The deal was executed via AIPL, which owns a 59.8% stake in the Mumbai-based proptech platform.
The Mumbai-based startup claims to host more than 1 Lakh brokers and has more than 1,000 real estate projects live on its platform. Besides, the startup also claims to have disbursed home loans worth INR 4,000 Cr since its inception.
4B Networks is Yadav’s third startup, having founded Housing.com along with 10 others while he was studying at IIT-Bombay. However, in 2015, he left Housing.com following a public spat with Shailendra Singh of Sequoia India.
After his time at Housing.com came to an unsavoury end, he founded Intelligent Interfaces in 2015, raising funds from Flipkart founders Sachin Bansal and Binny Bansal, Paytm founder Vijay Shekhar Sharma, Micromax cofounder Rahul Sharma and cricketer Yuvraj Singh.
Intelligent Interfaces was supposed to provide intelligent data aggregation and visualisation solutions to the government. However, after having raised INR 3.1 Cr at a valuation of over INR 170 Cr, Intelligent Interfaces shut down in 2016.
Info Edge, which operates real estate portal 99acres.com, online recruitment platform Naukri.com, matrimony portal Jeevansathi.com, and education platform Shiksha, posted a consolidated net loss of INR 503.2 Cr in Q4 FY23. Its operating revenue stood at INR 604.8 Cr.
