InfoEdge initiates forensic audit into Rahul Yadav’s proptech startup 4B Networks

In a stock exchange filing, InfoEdge has said that it has appointed Deloitte to conduct the forensic audit into the affairs of the property-tech startup. Notably, Info Edge had written off its equity investment of Rs 276 crore in 4B Networks during the December 2022 quarter citing “excessive cash burn, prevailing liquidity issues and significant uncertainty towards funding options”.

The company said its wholly-owned subsidiary Allcheckdeals India Pvt Ltd (AIPL), which has invested in 4B Networks, has sought information and particulars of financial dealings and related party transactions 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 – at various instances.

“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,” it said.

“As a consequence thereof, AIPL…is initiating a forensic audit into the affairs of the investee company, i.e. 4B Networks, and has appointed Deloitte Touche Tohmatsu India LLP as the forensic auditor in this regard, who will be supported and assisted by Saraf and Partners Law Offices, legal advisors to the company,” the company added.

Through AIPL, InfoEdge has invested a total of Rs 288 crore in 4B Networks, including Rs 12 crore as debt financing. Founded in November 2020, 4B helps real estate developers and brokers communicate with each other and conduct business via the Broker Network Platform. It helps brokers conduct site visits and provide home-loan-related services to their clients.

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Writing off investment While announcing the write off of its investment in 4B Networks, InfoEdge had said that 4B Networks was showing good growth but given the startup’s rate of cash burn and the overall funding environment led to the investor following “the principles of conservatism”, and decided to write off the investment.

“We had an interesting idea when we first invested and the company did well for a while and…at one point in time, 30% of all site visits in Bombay were happening through the app, which is why we invested more money. But I think the (funding) market has suddenly turned and it’s difficult to sort of see the company raising money going forward,” InfoEdge copromoter and managing director Hitesh Oberoi said during the company’s post-earnings analyst call on February 10 this year.

“I guess that’s why we want to be conservative and that’s why we have sort of written down the investment,” he added.

Last month, InfoEdge, while declaring its results for the quarter-ended March 31, said it has also written off its investment in Bizcrum Infotech, the parent company of B2B startup Bijnis, amounting to Rs 76.6 crore during the quarter.

InfoEdge, which holds around 26% stake in Bijnis, said that it made the decision “following the principles of conservatism and prudence”, and after taking into account the startup’s continuing cash burn and limited availability of cash in proportion to “unspecified liabilities” with respect to its buyback obligations.