Missing Invoices And Threats From IPO Vendors: Why Mobikwik Dragged DAM Capital To Court— Profit Exclusive

A fintech and an investment bank, both listed in the same month last year, are now locked in a dispute over the latter's IPO, which has led to threats of legal repercussions and retaliatory action by affected parties.

One Mobikwik Systems Ltd.'s Rs 1.5 crore disagreement over IPO expenses with DAM Capital Advisors Ltd. has led to the Dharmesh Mehta firm withholding the release of Rs 42 crore from an escrow account that Mobikwik was supposed to use to pay to its vendors for IPO-related expenses.

Since then, these vendors have been raising concerns about pending amounts, with threats of legal action also being floated if the dues are not paid soon, three people aware of the matter told NDTV Profit.

The issues being raised by the vendors like advertising agencies, law firms, and depositories involved in the Mobikwik listing come to light as the Upasana Taku-founded firm has taken its dispute with the merchant bank to the Delhi High Court. A hearing is scheduled for Aug. 21.

One of the vendors, a leading depository, also allegedly halted certain corporate actions for Mobikwik two months ago citing non-payment of dues, one of the persons quoted above said on the condition of anonymity. The depository resumed its services only after Mobikwik paid the dues out of its own pockets, this person added.

This included, Mobikwik has ended up shelling out around Rs 14 crore to pay back multiple vendors, which were otherwise pushing for legal action, another person explained. This person added that the escrow account has enough funds to pay back all vendors, but the dispute with DAM Capital does not let them have access to it.

To be sure, during the process of an IPO, an escrow account is usually used to hold a portion of a company's funds which can later be used to pay vendors like law firms, auditors, printers and advertisers. After listing, the lead bankers of the IPO release this amount to the company through a public issue bank.

Mobikwik's Rs 42 crore are locked in an escrow account that is handled jointly by its two book running lead managers — DAM and SBI Capital Markets Ltd. Now it is claiming before the high court that DAM Capital has not given instructions to release these funds.

The Bone Of Contention

The bone of contention, the Rs 1.5 crore dispute, stems from a disagreement over the variable fees component that DAM Capital is asking for as part of its BRLM fees, a third person explained. Variable fees for any merchant banker is based on the type and number of investors it is able to bring in for the IPO-bound company.

DAM Capital and Mobikwik are engaged in a disagreement over a particular investor, with both claiming credit for bringing them in. DAM is also pursuing a certain split in incentives over another investor which it claims it brought in along with SBI Capital, this person explained.

The person also added that DAM Capital is not agreeing to release the escrow funds as it claims that Mobikwik has failed to bring in proper invoices from its vendors. Once those invoices come in, the money will be cleared for release, the third person explained.

NDTV Profit has reached out to Mobikwik and DAM Capital for comments on the story.