SUMMARY
Info Edge’s board is mulling steps to tighten due diligence practices and mitigate risks associated with portfolio companies, said Sanjeev Bikhchandani
Info Edge wrote off its entire investment in 4B Networks in the December quarter of 2022 citing excessive cash burn and significant uncertainty towards funding options
Last month, Info Edge said it approached the Delhi HC against 4B Networks for failing to provide information about operations for forensic audit and received an order in its favour
Mincing no words, Info Edge cofounder and veteran investor Sanjeev Bikhchandani on Friday (August 11) reportedly said that investing in Rahul Yadav-led 4B Networks was a ‘mistake’.
“You can’t write off INR 288 Cr, it was a mistake,” Bikhchandani said during the company’s post-earnings call as per The Economic Times.
He also said that the Info Edge’s board was mulling steps to tighten its due diligence practices and mitigate risks associated with portfolio companies. The company’s board was also said to be looking at identifying indicators and ‘red flags’ that may emerge at preliminary stages during talks with founders.
At the heart of the matter is Info Edge’s decision to write off its equity investment in 4B Networks during the quarter ended December 2022. The investor then cited ‘excessive cash burn, prevailing liquidity issues and significant uncertainty towards funding options’ as the reasons for pulling the plug on the investment.
Since then, a lot has happened at Yadav’s startup, with Info Edge even initiating arbitration proceedings against 4B Networks for allegedly failing to provide crucial information about operations and management for a forensic audit.
Earlier in June, Inc42 exclusively reported about the slew of problems, ranging from corporate governance issues to unpaid dues of vendors and employees, at the brokerage startup.
At that time, Info Edge announced the appointment of Deloitte as the forensic auditor to look into the financial details of 4B Networks. However, the management of 4B Networks allegedly didn’t cooperate with the auditor, following which the consumer internet company dragged Yadav to the Delhi High Court.
In a regulatory filing late last month, Info Edge said the HC (in July) directed Yadav and Pratik Choudhary, who was also a party to the shareholders’ agreement of 4B Networks, to ‘not sell, transfer, alienate, encumber or otherwise create any third-party rights or interest directly or indirectly in the assets and properties of 4B Networks’.
The investor said that the court also directed 4B Networks to preserve all books, records, accounts, databases, servers, any other devices, documentation or information.
Meanwhile, after two subdued quarters on account of write offs, Info Edge returned to the black in the first quarter (Q1) of the financial year 2023-24 (FY24). It posted a consolidated net profit of INR 147.4 Cr, while revenue from operations jumped to INR 625.9 Cr in Q1 FY24 from INR 547.3 Cr in the year-ago period.
Shares of Info Edge closed 4.12% lower at INR 4,458.90 on the BSE on Friday (August 11).
