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PhonePe’s acquisition of Indus OS can now go ahead, post settlement of dispute

Indus OS investors Affle Global and Ventureast had last May disputed PhonePe’s $60 million acquisition deal

PhonePe’s acquisition of Indus OS can go ahead as the payments company has reached an out-of-court settlement with the investors of Indus OS, the parties involved announced in a joint statement (copy below) on April 13. Indus OS investors Affle Global and Ventureast had last May disputed PhonePe’s $60 million acquisition deal. The amount and the terms of the settlement have not been disclosed.

Founded in 2013, Indus OS built a version of Android tailored for the local language needs of Indian smartphone users. This OS shipped on devices made by Indian manufacturers like Micromax, Celkon, Karbonn, Swipe, and Intex. But more recently, Indus has focused its efforts on Indus App Bazaar, an Android app marketplace tailored for the subcontinent. The app store’s zero percent commission model stands in contrast with the 30 percent that Google’s Android and Apple’s iOS charge developers, which Indian start-ups have been displeased with. Notably, Samsung’s default app store, the Galaxy Store, is powered by Indus App Bazaar in India.

What was the legal dispute about?

Affle reportedly disputed the deal because it was apprehensive about the valuation of IndusOS proposed by Walmart-backed PhonePe. Affle had valued the startup at $90 million when it bought a 20% stake in the company. Affle approached the High Court of Singapore asking it to issue an injunction on the deal arguing that it has the right of first refusal on stakes held by the company’s founders. The investor also sought to buy Ventureast’s stake in Indus to improve its leverage.

PhonePe, in turn, filed complaints against the two investors in Singapore, and also filed a complaint with the Securities and Exchange Board of India (SEBI), accusing Ventureast of engaging in “side dealing” with Affle and obstructing the acquisition. “We believe they (Affle and Ventureast) have deliberately and wilfully colluded to act in bad faith and violate the legal provisions of the term sheet which they are both signatories to. Accordingly, we have filed a lawsuit against these parties to protect our legal interests and are confident that the honourable court would uphold our position,” PhonePe said at the time.

Just a few hours before the out-of-court settlement was announced on Wednesday, Economic Times reported that the Singapore High Court last month rejected at least two appeals filed by Affle.

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Full copy of the joint statement

In a joint statement, PhonePe, Indus OS, Affle and Ventureast said:

“The settlement of the dispute involving VPF (Ventureast) shares in Indus OS is a significant step towards a greater outcome for Indus OS and its stakeholders. The joining of many important forces (Indus OS Founders, PhonePe, Samsung and AGPL) would anchor Indus OS in the next part of its value creation journey. The strategic confluence of parties and the long-term alignment could not have been accomplished without the initial strife, and the subsequent maturity of vision and leadership by all parties.

Different parties have played supporting roles in the Indus OS journey. Ventureast played a key role in the initial stages of bringing in angel investors and VC investors even before they were an investor, and subsequently was the investor who backed Indus OS in maximum number of rounds. AGPL has delivered strategic value creation and sustainable growth. Now with Phone’s involvement last year, and the long-term alignment of the founders, PhonePe, AGPL and Samsung that is coming about now, the value accretion may be huge for all stakeholders including the entrepreneurs and consumers in India.”

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