With the Indian startup ecosystem, starting to show signs of devaluations amid the current global macro-economic scenario, Info Edge, one of India’s pioneers in the internet space, has written off its entire investment in Bizcrum Infotech Private Ltd, the parent entity of Bijnis. According to media reports, the total investment by Info Edge in the New Delhi-based B2B marketplace amounted to around ₹76.6 crores, and now, it wrote the entire amount off in Q4 FY23. The move by Info Edge highlights the challenges faced by startups and investors in a landscape where valuations are starting to get real and startups are facing harsh downgrades from the 2021 investment haydays they got accustomed to.
The development came as Info Edge filed its financial results and earnings statement for both the final quarter and the year FY23. For the three months ended March 2023, the firm witnessed its consolidated net loss narrow from ₹629 crores in the corresponding quarter in the previous year to ₹273 crores for the current period. Its revenue from operations rose to ₹605 crores – an annual increase of 28% – for the same period as well.
As for Bijnis, it clocked an increase of 2.9 times in its net loss to ₹54.5 crores in FY22, while its revenue from operations rose by 1.5 times to reach ₹25.1 crores in FY22 (as compared to ₹15.9 crores in FY21). The B2B marketplace is known to connect manufacturers and retailers in the fashion, lifestyle and other categories, as well as offer third-party payments and logistics solutions.
Info Edge attributed the continued cash burn of Bijnis’ parent company, as well as limited availability of cash in proportion to unspecified liabilities with respect to buyback obligations (including liquidation preference) of the company towards investors, and the uncertainty of raising further capital in the future. These reasons, Info Edge notes, have resulted in its investment in Bijnis losing its inherent value.
The write-off decision by Info Edge serves as a wake-up call for startups to evaluate and address their financial health, sustainable growth plans, and investment strategies. It emphasizes the importance of implementing effective cost management, revenue generation, and business expansion strategies to mitigate the risks associated with cash burn and limited availability of funds, even if it means the exploration of new avenues for the generation of revenue.
The development also marks the second writing off of investments by the company in recent quarters. An early investor in the likes of PB Fintech and Zomato, Info Edge had earlier written off ₹276 crores of its investment in Rahul Yadav’s 4B Networks.
Info Edge is the largest shareholder in Bijnis.
“This is to clarify that the write-off taken in Bicrum Infotech Pvt Ltd is a technical write-off due to the unspecified liabilities on Bizcrum which may materialise owing to the buyback obligations in the existing shareholders’ agreement signed between the company and the investors,” Rishabh Katiyar, part of the investment team as Principal at Info Edge Ventures, said in a statement. “This liability is contingent in nature and has been factored in based on the conservative accounting policies followed by the company in compliance with IndAS accounting standards. Therefore, this is not a reflection on the company’s financial performance, the market opportunity and the value proposition.”
“Further, this liability would only materialize if the company is unable to provide an exit to the key investors via other exit mechanisms like third party sale, listing, among other mechanisms captured in the agreements by a specified date in future and all the key shareholders together choose to exercise the buyback right as an exit mechanism,’’ he added.