Investing In Rahul Yadav’s 4B Networks Was A Mistake: Sanjeev Bikhchandani

Investing In Rahul Yadav’s 4B Networks Was A Mistake: Sanjeev Bikhchandani

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).

You have reached your limit of free stories
Become An Inc42 Plus Member

Become a Startup Insider in 2024 with Inc42 Plus. Join our exclusive community of 10,000+ founders, investors & operators and stay ahead in India’s startup & business economy.

2 YEAR PLAN
₹19999
₹7999
₹333/Month
Unlock 60% OFF
Cancel Anytime
1 YEAR PLAN
₹9999
₹4999
₹416/Month
Unlock 50% OFF
Cancel Anytime
Already A Member?
Discover Startups & Business Models

Unleash your potential by exploring unlimited articles, trackers, and playbooks. Identify the hottest startup deals, supercharge your innovation projects, and stay updated with expert curation.

Investing In Rahul Yadav’s 4B Networks Was A Mistake: Sanjeev Bikhchandani-Inc42 Media
How-To’s on Starting & Scaling Up

Empower yourself with comprehensive playbooks, expert analysis, and invaluable insights. Learn to validate ideas, acquire customers, secure funding, and navigate the journey to startup success.

Investing In Rahul Yadav’s 4B Networks Was A Mistake: Sanjeev Bikhchandani-Inc42 Media
Identify Trends & New Markets

Access 75+ in-depth reports on frontier industries. Gain exclusive market intelligence, understand market landscapes, and decode emerging trends to make informed decisions.

Investing In Rahul Yadav’s 4B Networks Was A Mistake: Sanjeev Bikhchandani-Inc42 Media
Track & Decode the Investment Landscape

Stay ahead with startup and funding trackers. Analyse investment strategies, profile successful investors, and keep track of upcoming funds, accelerators, and more.

Investing In Rahul Yadav’s 4B Networks Was A Mistake: Sanjeev Bikhchandani-Inc42 Media
Investing In Rahul Yadav’s 4B Networks Was A Mistake: Sanjeev Bikhchandani-Inc42 Media
You’re in Good company