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Tuesday, October 26, 2021

Mauritius leaks: Conyers advised iYogi on failed Nasdaq listing bid

A US court judgement dealt the tech support firm a big blow

Written by P Vaidyanathan Iyer | New Delhi |
July 27, 2019 3:28:32 am
ifogi ltd, mauritius leaks, nasdaq listing, mauritius firm, express investigation, indian express According to records investigated by The Indian Express, iYogi, through Conyers, had prepared a draft registration statement to be submitted to the Securities and Exchange Commission (SEC), United States.

Conyers Dill and Pearman advised iYogi Ltd, the Mauritius holding company of international tech support provider iYogi Inc and iYogi Technical Services Private Ltd, on its proposed NASDAQ listing in 2011, which never materialised. The Mauritius firm, which was originally named iYogi Holdings Private Ltd, hoped to raise $125 million through the listing.

According to records investigated by The Indian Express, iYogi, through Conyers, had prepared a draft registration statement to be submitted to the Securities and Exchange Commission (SEC), United States. Conyers wrote to Financial Services Commission of Mauritius on April 11, 2011, that iYogi will file a copy of its F-1 Registration Statement (containing the company’s prospectus) when it is declared effective by the SEC.

iYogi was promoted in 2007 by entrepreneurs Vishal Dhar and Uday Challu. It took over an existing firm IQ Resource, a company controlled by Challu, Dhar and Bernard Lunn, paying about $672,163. Just before the proposed listing, the three held 6.35 per cent each in iYogi. While Challu was the Group CEO, Dhar was a Director and Group President of Marketing.

A mail seeking Challu’s response bounced back; he could not be contacted.

In 2011, iYogi’s revenues were estimated at $36.1 million with gross profits of $15.5 million, a significant jump over the previous year’s revenues of $11.5 million and gross profits of $5.3 million. Net loss for 2011 stood at $36.9 million, almost three times the net loss of $12.5 million in 2010.

After iYogi called off the listing due to bad market conditions in 2011, the company made another unsuccessful attempt in 2013-14, but after being accused of scamming consumers in 2015 by Washington State Attorney General, the listing plans were abandoned. In an April 19, 2018, press statement, the Washington State AG’s office said that its lawsuit shut down iYogi. A particular issue red-flagged by Conyers ahead of the proposed Nasdaq listing pertains to a gift of 5,568 shares by Lunn, who was one of the co-founders, to his colleague and iYogi Group CEO Challu. Eventually, the issue seems to have been addressed with Lunn issuing a certificate to that effect to Conyers.

The company raised significant funds from a bunch of private equity players before it faced the lawsuit by the Washington State Attorney General. According to Venture Intelligence, a firm that tracks private equity flows, iYogi raised over $85 million from venture capital investors between 2007 and 2014 based on public announcements and reports. It last raised $28 million in May 2014.

Ahead of its plans to list, iYogi intended to issue preference shares of $0.1 par value to a set of investors including DFJ Mauritius Inc, SAP AG, Sequoia Capital, SVB India Capital Partners I and Canaan VII L.P. The total funds the investors would have brought in was to the tune of about $30 million, according to a Directors’ written resolution in December 2010. iYogi Limited was ready for the listing in Mauritius informing Conyers that it had granted the company an exemption in respect of disclosure requirements under Mauritius laws. Conyers also advised Ernst & Young, auditor to iYogi, that no judgment was delivered against the company and no legal proceedings were pending against it as on September 13, 2011. But the fatal blow of the Washington State Attorney General lawsuit had a debilitating impact. The lawsuit, filed in December 2015, accused iYogi, described as one of the largest independent tech support providers in the world, of “scamming consumers” and “using deception and scare tactics to pressure consumers into buying unnecessary tech support services”.

The US had seen a dramatic increase in tele-marketing fraud of all types over the previous few years. Dhar had, in a statement then, said nobody from the AG’s office had reached out to iYogi. “Pursuing us will not achieve that goal, it will only embolden the real criminals to continue with their scams because the AG has chosen to try and punish a good company due to its prominence,” he said on December 17, 2015.

Two years later, the judgments, entered in King County Superior Court, however, said iYogi India and iYogi Inc committed multiple violations of the state’s Consumer Protection Act. The court entered $6.3 million in lawsuits in judgments against the Indian and US business of iYogi — iYogi Technical Services Private Ltd and iYogi Inc.

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