Broker Network founder Rahul Yadav has asked for two weeks to consider granting permission to Info Edge, the company’s largest shareholder, for a forensic audit, according to sources close to the company. Info Edge, earlier this month, disclosed in a filing to the stock exchanges that it had initiated a forensic audit of Yadav’s firm, appointing Deloitte as the auditor.
Unresponsiveness and Financial Requests
According to sources, Yadav has been unresponsive to Info Edge’s repeated requests and legal notices for financial data about Broker Network, as well as details about other business transactions. Instead, Yadav has been asking Info Edge for more money in exchange for sharing the data requested by the investor.
It is worth noting that Broker Network has exhausted Rs 192 crore of investor money in the past 14 months.
Background of Broker Network
Broker Network (4B Networks Private Limited), founded by Housing.com’s Rahul Yadav in November 2020, aimed to facilitate communication between real estate developers and brokers, as well as provide loan origination services for end consumers.
Yadav, who controls the company’s servers and systems, has refused to cooperate, despite the shareholder agreement granting Info Edge, which owns close to 60 percent of Broker Network, full access to the data, according to sources.
Disputed Offers
Info Edge received several offers from Yadav, none of which were considered viable. The first offer in March proposed a Rs 2 crore valuation and a primary capital infusion of Rs 4 crore, which would have made Info Edge a minority shareholder. Subsequent offers included a valuation of Rs 10 crore and a primary infusion of Rs 2 crore, as well as a “final offer” of a Rs 20 crore valuation and a Rs 50 crore primary infusion into the company.
However, Info Edge declined all these offers, and the investor associated with Yadav disappeared after Info Edge requested an in-person meeting and KYC details.
Questionable Deals and Reputation
Yadav employed a digital marketing agency for campaigns, accumulating a billing of about Rs 11 crore. Before paying that vendor, the company engaged another digital marketing company for a new campaign, despite the lack of prior experience in digital marketing. These vendors reportedly have outstanding bills.
According to a senior executive associated with Yadav, he has shown a lack of respect for money, investors, and employees, reminiscent of his behavior during his tenure at Housing.com.
Info Edge’s Concerns
Info Edge has a history of conducting due diligence and investing in founders’ companies with good references. Yadav, however, approached Info Edge claiming to be a reformed person, despite previous concerns about his short temper, immaturity, and reckless behavior.
Investment and Financial Challenges
Info Edge made several infusions of funds into Broker Network, totaling Rs 137.12 crore, but Yadav is believed to have depleted the company’s coffers with excessive spending. In September 2022, Info Edge infused an additional Rs 90 crore, taking its shareholding to 59.80 percent. However, even this amount was reportedly exhausted by Yadav.
Initiation of Forensic Audit
In response to the financial challenges and lack of cooperation, Info Edge initiated a forensic audit of Broker Network through Deloitte. The audit aims to uncover any discrepancies and potentially remove Yadav from his executive position if wrongdoing is discovered.
Info Edge stated in a filing that it had written down its investment due to liquidity issues, uncertainty towards funding options, and excessive cash burn. Despite contractual obligations, 4B Networks and its current management did not provide the requested information.
The ongoing dispute between Broker Network founder Rahul Yadav and Info Edge highlights the challenges faced by the company and the refusal of Yadav to cooperate with the investor’s requests for financial data. Info Edge’s decision to initiate a forensic audit reflects their determination to address the situation and protect their interests. The outcome of the audit may have significant implications for the future of Broker Network and its leadership.
