According to individuals acquainted with the situation, the tax department of India is looking into claims of tax evasion made against the founders of three Indian unicorn companies: FirstCry.com, Globalbees Brands Ltd., and Xpressbees.
According to the people, who asked to remain anonymous because the details are private, the department, which is overseen by India’s Ministry of Finance, has sent founder Supam Maheshwari notifications questioning why he didn’t pay more than $50 million in taxes on stock transactions carried out in privately-held FirstCry.
They said that at least six FirstCry investors, including the family office of Sunil Bharti Mittal and the private equity firm ChrysCapital Management Co, had also received inquiries about the situation. According to the people, Maheshwari is in discussions with the tax authority to end the investigation.
Emails requesting comments about the investigation from Maheshwari, ChrysCapital, the tax authority, and Mittal received no response.
After years of problems, FirstCry achieved profitability in the fiscal year that concluded on March 31, 2021. According to a previous Bloomberg story, it is one of the few businesses in India looking to access the IPO market after becoming operationally profitable.
The Pune-based company distributes its orders from warehouses all around India. It is present in the UAE in addition to India. Diapers, baby food, infant accessories, gear (strollers, high chairs), nursery furniture, clothes & footwear, toys, and school supplies are all available for purchase at FirstCry.
Who is Supam Maheshwari?
Maheshwari is a first-generation businessperson best known for co-founding and leading FirstCry. He was born in 1974 and attended Delhi College of Engineering to study mechanical engineering.
Later on, he graduated from IIM-Ahmedabad with a management degree. In 2000, Maheshwari launched his first business, which was called Brainvisa Technologies. For $25 million, it was purchased by Indecomm Global, a US-based company, in 2007. He contributed to establishing FirstCry in 2010. Since then, he has served as its CEO.
Implications on FirstCry
The authorities had sent notices to Supam Maheshwari, who is also well-known for his positions at Oi Playschool and GlobalBees. The tax division is investigating allegations that Maheshwari failed to meet her tax requirements for equity transactions. These transactions took place on the FirstCry website, which sells baby care supplies.
To solve the problem, Supam Maheshwari is aggressively negotiating with the tax division. The result of these conversations could have a big impact on his financial and professional situation.
As FirstCry prepares for an Initial Public Offering (IPO), the inquiry comes at a critical time. In compliance with Foreign Direct Investment (FDI) requirements, the company seeks to reduce foreign stakeholders and enhance local ownership. The ongoing tax investigation can have an effect on the business’s IPO plans and investor sentiment.
Prominent investors and stakeholders
Recent reports have highlighted the acquisition of FirstCry interests by Indian family investment offices, notably MEMG Family Office, Sharrp Ventures, and DSP family office, through a secondary share sale. As part of attempts to comply with FDI requirements, SoftBank is reducing its stock in order to reach the foreign shareholding requirement.
The inquiry into Supam Maheshwari’s alleged unpaid taxes highlights how crucial it is to follow tax laws when engaging in equity transactions. The results of this investigation may have an effect on Maheshwari’s reputation as well as FirstCry’s future business prospects. The business and investment community will closely monitor any new developments as long as the conversations with the tax administration are ongoing.
