Investing in Rahul Yadav’s 4B Networks was a mistake: Sanjeev Bikhchandani of Info Edge

Info Edge co-founder Sanjeev Bikhchandani on Friday said that the investment in 4B Networks, a proptech venture founded by Rahul Yadav, was a mistake.

While addressing the analysts after Info Edge declared its Q1 FY24 results, Bikhchandani said: “Sometimes we make mistakes. Investors do go wrong... 4B was a mistake. I think we have to admit it. You can't write off Rs 288 crore saying it wasn't a mistake. It was a mistake," Bikhchandani said.

He added: "Companies go under but fraud is a different thing,"

Info Edge had pumped Rs 288 crore into 4B Networks, including Rs 276 crore as equity and Rs 12 crore in debt. 

The company announced in the Q3 FY23 financial results that it wrote off its investments in 4B Networks due to suspected financial irregularities. Info Edge had a 57 per cent stake in 4B Networks.

Info Edge has initiated a forensic audit into 4B Networks for not sharing business information. It has also approached the Delhi High Court and will go into arbitration with the startup, starting August 14.

Bikhchandani added that they have reviewed matters internally, and have checked if they need to change something, tighten due diligence etc.

In June, Info Edge initiated a forensic audit into 4B Networks after the proptech startup refused to share its financial information.

"What are the signals and indicators and red flags that emerge during conversations with founders where you know there may be a problem, how do we deal with other situations in case anything comes up -- which thankfully so far has not happened," Bikhchandani said.

On investments from its second fund of InfoEdge Ventures, Bikhchandani said: “We are finding it easier, we find the valuations are lower, the round sizes are smaller and we are being careful.”

He added that the company board on Friday discussed steps to tighten controls and mitigate risks associated with corporate governance of its portfolio investments.

On Friday, Info Edge reported that its consolidated revenue rose 14 per cent to Rs 626 crore and and net profit dropped 50 per cent to Rs 147 crore in the June quarter (Q1) of financial year 2023-2024, compared to the year-ago period, due to weak billings growth of its recruiting platform Naukri following a fall in IT sector job openings.

Billing for the June quarter dropped marginally by 0.2 percent year on year and was at Rs 523 crore, the company said in a regulatory filing on August 11.

The company registered profits after registering a net loss of Rs 503 crore in the Q4 FY23 on account of some of its early-stage startup investments turning wrong or facing large drops in valuation, amid a funding winter after the pandemic.

The Q1 FY23 revenue in the recruitment business grew 15.3 per cent year-on-year while the revenues in real estate business grew 24.6 per cent.

The company registered a growth of 37.2 per cent in its operating profit which stood at Rs 208.9 crore on a standalone basis for the June quarter as compared to a profit of Rs 152.3 crore in the same quarter of the previous fiscal. 

The standalone business generated cash from operation of Rs 144.6 crore for the quarter, the company announced.

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