Startup or Joyride? Rs 280 Crore Funding Vanished! Entrepreneur Rahul Yadav Accused Of BIG Fraud By Info Edge – Here’s What He Said About the Controversy

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JUNE 9, 2023

Rahul Yadav-Info Edge Controversy: The startup ecosystem has been hit by several such cases of financial discrepancies in the past, including BharatPe Co-founder Ashneer Grover, Singapore-based fashion startup Zilingo founder Ankiti Bose and financial misreporting at GoMechanic.

In yet another case of another Indian founder taking his startup for a joyride, the founder of Broker Network, which is operated by 4B Networks, Rahul Yadav reportedly maintained a luxurious lifestyle such as owning a Mercedes-Maybach and hiring a boardroom at the Taj Land’s End for Rs 80,000 per day even as the employees at the firm were left unpaid for months.

As per startup news portal Inc42, as cited by IANS, Rahul Yadav-backed Broker Network allegedly burnt over Rs 280 crore in less than 18 months while over 150 employees have not been paid their salaries since November last year.

Rahul Yadav became a known name after he founded Housing.com in 2012. Yadav, who was an IIT Bombay dropout, was seen as a maverick founder with a spark of brilliance during the heydays of Housing.com. SoftBank boss Masayoshi Son and his then key lieutenant Nikesh Arora took an instant liking for Yadav. However, he ended up losing his position in the firm after repeated public spats with investors.

He also worked with Anarock and then founded 4B Networks in 2020.

The biggies of the Indian startup ecosystem Sachin Bansal, Binny Bansal, and Vijay Shekhar Sharma also offered support for his next venture. Publicly listed cash-rich Info Edge generously backed Yadav when he returned to the startup world after an interlude.

Info Edge’s subsidiary, Allcheckdeals India Private Limited (AIPL) invested Rs 276 crore in Yadav’s 4B Networks and provided Rs 12 crore as debt financing, Info Edge said in its stock exchange filling.

The Info Edge said that when the prop tech firm was asked about “details and particulars of financial transactions, transactions with related parties and such other aspects from 4B Networks and its current management”, it failed to give any of the latest info.

“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,” Info Edge filing added.

Meanwhile, Info Edge has initiated a forensic audit into the prop-tech startup in which it holds a stake, as Yadav “repeatedly failed to provide the information”.

“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,” according to an exchange filing by Indo Edge, as quoted by IANS.

On the other hand, Yadav speaking to ET Prime said that he is willing to amend if Info Edge, which runs Naukri.com, gives him another lease of life. He, however, also pinned the blame on the Naukri.com parent’s “slow approval process” for almost every problem at 4B Network.

The entrepreneur has also refuted the allegations against him, in a conversation with ET Prime. He said, “The centre of this specific disagreement has been a feature — instant brokerage or invoice financing.”

“I thought my last 10 years of hard work had finally paid off in real estate. With this feature at the centre we raised the funding from Info Edge. The aim was that 100 per cent of India’s real-estate deals (should) flow through our app,” Yadav said.

Stating that heavy debt was required as the aim was to do invoice financing for the whole country, Yadav added that even Info Edge had approved of this. To launch the same, 4B Networks required around Rs 500 crore in three-four years.

Yadav further suggested that people had hope in 4B Networks. They stuck around for longer than what they ideally should have in the absence of payroll. “Later, some of them went ahead and filed complaints. Being a publicly listed company, Info Edge is supposed to enquire if a complaint is made. A forensic audit is normal. We have had 10 due diligences,” Yadav said on the audit launched by the investor.

“For nine months Info Edge kept us waiting. Info Edge doesn’t like the concept of debt. It neither believes in taking or giving debt. It takes pride in earning 4.5 per cent interest on the Rs 4,000 in the banks. I had transitioned the entire business and even changed the name of the company’s WhatsApp group to Invoice Financing,” Yadav said.

Yadav claimed that Info Edge would say that they are a publicly listed company and take every data from us but would not give us approvals. “Then, I immaturely started a negotiation that I won’t send the details if you are not giving me approval,” he told ET Prime, adding he believed it would work.

Further speaking to ET Prime on how the audit is processing, Yadav said, “Our due diligence has already been done till November. By November-December, the company had no money. As a formality, they still want numbers rather than helping us get capital and run the business.”

“I said I would not cooperate, and they then sent a notice as it was their contractual right to get the information. Then they reported it to Sebi,” he claimed.

According to Yadav, the number of employees at 4B Networks is shrinking and there would be around 100 people from a peak of 2,500. “Everything has been depleted. We have liabilities. We need liquidity and all they are asking for are numbers, reports, and forensic audits,” he further said.

Discussing the need to create 4B Realtech, an entity hived off from 4B Networks, he said, “Info Edge had forced us to shut down the home-loan business. We thought why should we take away the jobs of around 1,000 employees overnight? So, we had to do it.”

Speaking about his plan from now, Yadav said, “I am surrendering my fight and just aligning with the company.”

“I bought a Maybach four years ago. Broker Network started two-and-a-half years ago. Some big builders live in South Bombay. I would have booked Taj Lands End 20-25 times in two years on an hourly basis. Rs 80,000 would be the cost for the full day. Better to have an on-demand meeting room than an expensive office,” said while answering if he had ridden Maybach and booked conference rooms for Rs 80,000 per day.

The entrepreneur recommended people to “take up a job in a nice company. Do good work and live that life.”


Courtesy/Source: Times Now / PTI