Investors acquire Trell's stake in AppsForBharat for $9 million as startup struggles for cash
By Team Startupcity | Tuesday, 05 April 2022, 09:06 IST
Cash-strapped social commerce platform Trell, which has been under a probe for alleged financial irregularities, has sold its 10% stake in AppsForBharat to one of its existing investors, Mirae Asset, multiple people briefed on the matter said.
The secondary transaction amounting to $9-9.5 million also saw Middle East investment fund MSA Novo buy AppsForBharat shares from the influencer-led video and shopping app, one of the sources said.
South Korea’s Mirae Asset owns close to 11% in Trell. While it has picked up about 7-8% stake in AppsForBharat, MSA Novo has bought 2%. The transaction is an effort by Trell to keep itself afloat even as it has laid off 200-300 of its employees, said a person in the know.
“It's majorly Mirae which has picked the stake as there were conversations held by the fund to buy a stake in AppsForBharat for some time now…but things moved quickly keeping in mind the dire situation Trell was in,” a person briefed on the matter said. “For Mirae it was better to invest in AppsForBharat and in a way be able to give some cash to Trell,” the person said.
A Trell spokesperson said on Monday that the “divestment was always the plan as it was non-core”.
A forensic team from EY India has been looking into alleged related-party transactions, incorrect reporting of business numbers, and other financial irregularities in Trell.
AppsForBharat, a product studio for spiritual and devotional content, was founded by Prashant Sachan, one of the Trell founders. It is backed by the likes of Sequoia Capital, Elevation Capital, Matrix Partners, among others. Sachan left Trell last year and sold his entire stake last year, as per a report.
So, when did the trouble start?
Last year, Trell was in talks for a new round of funding and even received a term sheet from Bestseller India, which runs brands like Vero Moda, Jack & Jones and Only, at a valuation $750 million, up from $120 million just a few months earlier. Bestseller A/S is a privately held family-owned clothing company based in Denmark. But it was stalled after a whistle blower raised concerns to Sequoia Capital about alleged financial misappropriation at the Bengaluru-based startup. And Sequoia – a common investor in Trell and AppsForBharat – initiated the probe.
In a fiery note to investors, as per a report that had said one or two investors had begun the probe and claimed that it was not authorised by the company board.
However, according to a person aware of the matter, now the company is cooperating with the probe. “A handshake has happened between Trell and its investors and Agarwal is now cooperating with investors on the probe and its outcome,” the person said.
The Trell spokesperson said that there are no differences between founders and investors of the company. "They remain deeply committed to the business and have full faith in the founders and leadership of the company.”
Asked about the EY India investigation, the person said the company conducted a 'usual review' without giving specific details and that it was 'standard practice' for businesses to check on their business controls and 'tighten the system and processes.' "Hence, your questions have no basis,” the person added.
As per sources, EY probe has reviewed related party transactions in the firm. Trell was allegedly inflating revenue and gross merchandise value (GMV) numbers by 30-40% and relied on bots to boost its DAU (daily active users) and MAU (monthly active users) numbers, they said.
The company denied it. “That is incorrect. We stand for onboarding and engaging only genuine users at Trell. All the figures mentioned are grossly misrepresented. However, we cannot share confidential company information,” the spokesperson said.
Mails sent to Mirae, Sequoia Capital, MSA Novo, and Bestseller India did not elicit a response as of press time Monday. AppsForBharat founder Sachan confirmed the transaction and reiterated he is no longer associated with Trell and had sold his stake in the firm last year.
A report said that Trell has undertaken a huge cost cutting exercise with major layoffs already being executed.
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