Mumbai: What was supposed to be two private equity funds’ bet on India’s booming infrastructure and education sectors has unravelled in less than five years, with the funds and their portfolio company battling it out in court.
Matrix Partners and Resurgence PE Investments are fighting to retrieve ₹ 190 crore from Kanpur-based Maharana Infrastructure and Professional Services Ltd (MIPS), a company Matrix once described as having an “innovative business model". The story begins in 2011 when Palo Alto-based Matrix Partners—whose portfolio now includes Ola and Quikr—invested ₹ 50 crore in MIPS, which offers services related to infrastructure development and consultancy for educational institutions. A couple of years later, Matrix and Resurgence PE (then known as Avigo PE) invested ₹ 100 crore more in the firm. According to their agreement, the firm will help the PEs exit through a put option.
A put option is a financial instrument that gives the owner the right to sell assets at an agreed price on or before a particular date.
However, the exit did not materialize as planned. The funds, say MIPS, refused to honour this part of the deal, forcing them to move court.
In Bombay high court documents filed in 2017, the funds alleged MIPS had diverted ₹ 277crore to four subsidiaries and affiliate companies—Maharana Construction Pvt. Ltd, Maharana Pratap Education Centre, Sakshi Institute of Technology and Management and Mair Rajput Educational Society. The court asked MIPS promoters to show assets and means to satisfy the put option, along with source of funds.
MIPS, however, moved the Supreme Court, claiming its investment deal with PE funds had the option of arbitration, which had to be attempted first. Both parties then agreed to resolve the matter through arbitration, and Justice B.N. Srikrishna was appointed the sole arbitrator. The arbitrator asked MIPS to keep ₹ 190 crore in a separate account, and when the company failed to do so, the PE funds moved the Bombay high court on 13 August, under Section 17 of Arbitration and Reconciliation Act. A single-judge bench on 20 August asked MIPS to deposit around ₹ 190 crore in an account or furnish a bank guarantee of the same amount, in four weeks starting 20 August, and decided to hear the matter on 17 September.
“Respondent Nos. 5 to 7 (affiliates of MIPS) are jointly and severally liable with respondents Nos. 1 to 4 (promoters Shailendra and Surabhi Bhadauria and others) are also required to jointly and severally make this deposit of ₹ 190 crores," ruled Justice G.S. Patel.
Email queries to Matrix Partners as well as MIPS did not elicit any response till the time of filing the report. Law firms Shardul Amarchand Mangaldas and Co. is representing the investors in the dispute while Jaykar and Partners is advising Bhadaurias.
However, MIPS on 3 September challenged the order in a division bench of Justices S.C. Dharmadhikari and P.B. Colabawalla, which will now hear the matter on 12 September. The battle to recover money from a soured deal drags on.