ED raids Sequoia Capital to probe Vasan investments

Vasan Healthcare fell from grace after investigators began questioning its fund diversions

India’s largest venture capital (VC) firm Sequoia Capital India on Tuesday confirmed that its offices were searched by the Enforcement Directorate (ED) to probe its investments in Tamil Nadu-based eye and dental care chain Vasan Healthcare.

According to Sequoia, it first came to know of a regulatory investigation into Vasan Healthcare through a newspaper article on September 17, 2015. V T Bharadwaj, managing director of Sequoia Capital India Advisors, who was Sequoia Capital India’s nominee on the Vasan Healthcare board of directors, demanded that the Vasan Healthcare management conduct a thorough investigation into the allegations, the VC added. Subsequently, Bharadwaj resigned from the Vasan Healthcare board on November 18, 2015, Sequoia stated.

Vasan Healthcare officials were not reachable for their comments.

“Sequoia Capital India has fully supported the regulatory investigation, has adopted a policy of complete transparency and full compliance with that investigation, and continues to dutifully respond to all inquiries received to date. During the course of this investigation, the Sequoia Capital India team has met the ED officials multiple times and has answered every query placed before us. We adopted the same approach during the ED’s visit to our offices,” the statement added.

Vasan Healthcare, once a jewel in the crown of marquee VC funds Sequoia Capital India Advisors and GIC Pte Ltd (formerly Government of Singapore Investment Corporation), fell from grace after investigators began questioning fund diversions from the company to businesses held by Karti Chidambaram, son of former finance minister P Chidambaram.

Sequoia Capital had earlier subscribed Rs 100 crore worth of Vasan Healthcare preference shares. However, in 2010-11, it bought 30,000 shares of Vasan Healthcare at Rs 7,500 a unit from Advantage Strategic Consulting, which is also under the ED scanner for suspected foreign exchange violations.

Vasan Healthcare had earlier sold shares to Advantage Strategic Consulting allegedly at a discounted price. Advantage Strategic was under the scanner of ED in connection with the Aircel-Maxis deal. Majority of the stake of Advantage Strategic was later acquired by Ausbridge Holdings, where Karti Chidambaram was a director.  “I have no idea about it. I have no comments to offer,” Karti Chidambaram said on Tuesday.

“Contrary to media reports, Sequoia Capital India has absolutely no association with companies like Aircel or Maxis. Our only connection to the ED visit is that Sequoia Capital India is a minority investor in Vasan, which is one out of the 100-plus investments made in India over the last 10 years,” Sequoia added.