Infra.Market : Unicorn Startup accused of ₹400-crore fraud
The Income-Tax Department has charged a unicorn startup group with an annual turnover of over 6,000 crores with making fake transactions, making large unaccounted cash expenditures, and getting accommodation entries of around Rs. 400 crores.
Across many locations, including Noida, Hyderabad, Bengaluru, Pune, Mumbai, and Thane, income tax inspectors searched the Offices of building materials startup Infra. Market. In a news release issued on Sunday, the agency stated it had discovered evidence of attempted tax fraud at “a startup situated in Pune and Thane.” While the firm wasn’t named, it’s clear which one it was referring to.
On Sunday, the Income-Tax Department announced that it had discovered evidence that a startup located in Pune and Thane had failed to report Rs 224 crore in revenue. While the I-T department did not name the firm, it is widely assumed to refer to Infra.Market, a building products startup seized by its inspectors last week.
Infra.Market is valued at $2.5 billion and is supported by Tiger Global, Nexus Venture Partners, and Accel.
The group directors have revealed an extra revenue of over Rs. 224 crores in various assessment years and have promised to settle their tax liabilities.
During the investigation, the agency discovered a complicated “hawala” network, including shell businesses based in Mumbai and Thane, providing over 1,500 crores in accommodation entries (bogus transactions).
According to the report, the corporation appears to have made fake purchases, made large unexplained cash expenditures, and got accommodation entries totaling more than Rs 400 crore. The department claimed in a news release that it confiscated Rs 1 crore in undeclared cash and Rs 22 lakh in jewelry during the search operations.
The I-T Department searched 23 sites of the Pune/Thane-based organization, which is primarily involved in the wholesale and retail of building materials, on March 9. The locations were Maharashtra, Karnataka, Andhra Pradesh, Uttar Pradesh, and Madhya Pradesh.
The department acquired evidence that the gang had made fictitious purchases, spent large sums of money without accounting for it, and contrived lodging entries. It raised a lot of money from overseas by issuing shares at an exorbitantly high premium in Mauritius. This subject is being looked at further.
According to the I-T Department, the “hawala” network discovered during the investigation involved entities that only existed on paper and were created solely to provide accommodation entries to several companies, facilitating tax evasion and evading detection of other financial irregularities.
During the searches, the department has confiscated $1 million in unexplained cash and $22,000 in jewelry.
When faced with the proof, the group’s directors “confessed under oath this mode of operation, acknowledged extra revenue of over Rs 224 crore in various assessment years, and promised to pay their appropriate tax responsibility,” according to the agency.
Tax inspectors searched Infra. Market Offices in 23 states, including Maharashtra, Karnataka, Andhra Pradesh, Uttar Pradesh, and Madhya Pradesh, on March 23. The firm operates across India and has an annual revenue of more than Rs. 6,000 crore.
The I-T department said it’s looking into how the business got a lot of money from overseas by issuing shares at an “exorbitantly” high premium in Mauritius. According to the report, the payments were channeled through a hawala network, including shell businesses in Mumbai and Thane.
“These shell entities exist on paper and were set up only to provide lodging entries. The entire amount of accommodation entries provided by these shell businesses surpass Rs. 1,500 crore, according to preliminary research,” the department stated.
“We continue to comply with the authorities and submit all essential information to the department,” an Infra. A market spokeswoman told ET in response to ET’s questions. We won’t say anything more because the case is still pending.”
At Infra. Market, we pay most incredible attention to guarantee we are following the law of the land at all times,” a spokesman for the firm said in an emailed answer to ET’s questions. The allegations in your email are false and deceptive, and consequently, they are rejected.”
“Due to non-filing of returns by select vendors, tax authorities have raised some questions, and we are fully collaborating with them.” “However, we are legally obligated not to comment on it publicly until further notice,” the official continued.
The raids occurred while Infra. The market was apparently putting together financing round from new and current investors, intending to raise up to $450 million at a valuation of over $4 billion. In January 2021, Infra. The market became a unicorn after raising $100 million in a round-headed by Tiger Global.
It received another $125 million from Tiger Global, bringing its total value to $2.5 billion.
Infra. Market Offices were raided by tax inspectors in 23 states, including Maharashtra, Karnataka, Andhra Pradesh, Uttar Pradesh, and Madhya Pradesh.
BharatPe, Paytm Payments Bank, and Trell are just a few well-funded entities that have recently faced compliance and governance concerns.
In February 2021, After earning $100 million in a Series C round, Infra. The market has reached the unicorn club. Tiger Global led the round with ;ast investors Accel Partners, Nexus Venture Partners, Evolvence India Fund, Sistema Asia Fund, and Fundamental Gmbh.
On the deal, Avendus Capital served being Infra.’s only Market’s financial advisor.
In June 2019, the firm received a seed round from Accel and attained unicorn status in less than 20 months. The business has now raised $150 million after the $100 million round.
The Mumbai-based digital startup, founded by Souvik Sengupta and Aaditya Sharda in 2016, is a one-stop marketplace for building materials.
Due to corporate governance concerns, many global and domestic risk investors have struggled to bring their portfolio entities into compliance with laws and regulations. Companies like BharatPe and Trell have been probed for potential financial irregularities in the recent past.
March 12, an EY India forensic team was conducting a thorough examination into Trell’s finances and had delivered an interim report.
Paytm Payments Bank was stopped from onboarding new clients by the RBI on March 11 for allegedly breaking customer acquisition and privacy standards, which probably have resulted in data breaches to Chinese entities. It requested that the corporation hire a consultancy to evaluate its IT systems.
After an Initial investigation by consulting firm Alvarez & Marsal revealed that Grover’s family members, including his wife Madhuri Jain, the former head of controls at BharatPe, were allegedly involved in financial irregularities at the company, BharatPe accused its cofounder Ashneer Grover and his family of fraud earlier this month.
