PhonePe files complaint with Sebi against Ventureast Fund over OSLabs deal

PhonePe says Ventureeast sold shares to Affle in a side deal while engaging on the sale of same shares in favor of PhonePe

Walmart-backed PhonePe, one of India’s largest digital payments platform, has filed a complaint with the markets regulator Securities and Exchange Board of India (Sebi) against Ventureast Proactive Fund-II (VPF), an alternative investment fund (AIF) operating out of India. PhonePe accused Ventureast of committing multiple violations on the part of its side dealings with Affle, in a deliberate attempt to ‘scuttle’ its (PhonePe’s) OSLabs acquisition. 

The Sebi complaint is in addition to the lawsuit filed by PhonePe against Ventureast and Affle in the Singapore High Court claiming that Ventureast ‘deliberately’ deceived them by continuing to engage with them and OSLabs on the sale of its shares in the latter, in favor of PhonePe, even though it had sold those same shares to Affle in a side deal without OSLabs and PhonePe’s knowledge on a prior date during a legally binding no-shop period. Affle Global holds around a 23 per cent stake in IndusOS. 

In the Sebi complaint, PhonePe has emphasised that the managing partner, general partner, and principal of VPF, who are involved in the transaction relating to OSLabs, have undertaken and are continuing to undertake actions that are allegedly unethical, in bad faith, and potentially illegal. 

Through the complaint, PhonePe is asking Sebi to to look into alleged ethical violations and dereliction of VPF’s fiduciary duties to protect the interests of OSLabs, its investee company.

“...in this case, VPF has not only broken Sebi’s code of conduct, but it has also acted in complete negligence of its fiduciary duties as a large shareholder of IndusOS”, said Sameer Nigam, MD&CEO, PhonePe. 

“By deliberately derailing PhonePe’s acquisition of IndusOS, a deal which all three OSLabs founders continue to also believe is in their company’s best long-term interests, VPF has also hurt OSLabs’ long term interests," he said. 

PhonePe was in talks to acquire homegrown content and app discovery platform Indus OS. The acquisition was supposed to give an exit to existing investors of InduOS such as Omidyar Network, Samsung Ventures, and Ventureast. 

IndusOS, founded in 2015, provides an Android-based app store named App Bazaar, which allows developers to list their apps on its platform and enables first-time internet users to discover and access new content in vernacular and regional languages.