Mumbai Zilingo Ptey’s founders have proposed taking back control of the fashion e-commerce company and preventing its liquidation, two people familiar with the matter said. While co-founder Dhruv Kapoor has proposed to the board of the Sequoia Capital-backed company, co-founder Ankiti Bose has endorsed it.
On Sunday evening, Kapoor wrote to Zilingo’s board that he has “investor commitments” and is making an “initial, non-binding offer” to pay off the $48 million outstanding debt owed to Verde Partners and Indies Capital, and Investing $8 million in this. Fresh equity in the company. Kapoor, who holds an 8.5% stake in Zilingo, offered the deal as an “option to the voluntary liquidation,” but did not name the investor group that backed the deal.
Kapoor’s proposal was immediately supported by Bose, who owns an 8.5% stake in the business.
“As the founders, it is our ultimate responsibility to make sure that the lights remain on in Zilingo and in the homes of hundreds of people, we do everything we can to make sure that no matter what our differences are. Maybe, at the end of the day, we started this company with the same goal. Today, we have come together to fight for the same goal,” Bose said in a statement.
Kapoor declined to comment.
The proposal comes a day before a board meeting on Monday, where voluntary liquidations, including the sale of Zilingo’s assets, are on the agenda.
The scheme suggests a moratorium on loan repayment for the first 36 months after the proposal is accepted, after which it will be repaid in four equal instalments. It does not offer an amount to buy out existing investors, but does offer to negotiate shareholdings with existing investors, including Sequoia Capital and Temasek Holdings.
Merchant banker Strand Hanson is brokering the transaction and in talks with distressed investors to stitch together a deal on behalf of the cofounders, said one of the two people cited above. Strand Hanson did not respond to requests for comment. Zilingo, as well as Sequoia, which has a 26.5% stake in the company, declined to comment.
Earlier this year, the company was valued at around $970 million when it approached new investors for additional funding.
However, since then, Zilingo has been mired in controversy from one controversy to another. In March, co-founder Bose was suspended pending an investigation following a whistleblower report alleging financial irregularities. Subsequently, the Zilingo board appointed Kroll to conduct the investigation.
Following the investigation, Zilligo fired Bose “with reason” on May 20, and said it was evaluating options to pay lenders. Since then, several board members have resigned. Sequoia Capital’s Shailendra Singh stepped down and Sandeep Kher took over as VC. The firm’s representatives on the board were Temasek Holdings’ Xu Wei Yang, and Burda Principal Investments’ Albert Shay, and Goto (formerly Gojek) chief executive Andre Soelistio also resigned from Zilingo’s board.