Sequoia Capital finds itself in eye of ED storm

By: and |
Bangalore | Published: April 20, 2016 6:18 AM

The Enforcement Directorate (ED) has raided the Bengaluru office of venture capital (VC) firm Sequoia Capital India in connection with an ongoing investigation...

In December last year, the ED, along with the income tax department, had conducted searches at Vasan Healthcare and Advantage Strategic Consulting as part of a probe into suspected violation of foreign exchange rules.In December last year, the ED, along with the income tax department, had conducted searches at Vasan Healthcare and Advantage Strategic Consulting as part of a probe into suspected violation of foreign exchange rules.

The Enforcement Directorate (ED) has raided the Bengaluru office of venture capital (VC) firm Sequoia Capital India in connection with an ongoing investigation into the Chennai-based Vasan Healthcare Group, owned by entrepreneur AM Arun. The VC holds a minority stake in Vasan Healthcare Group.

Officials said a team of agency sleuths carried out searches at the business premises of Sequoia Capital in Bengaluru under the provisions of the Foreign Exchange Management Act (FEMA), adding that the action was necessitated as the ED is probing Vasan Eye Care, with which Karti Chidambaram, son of former finance minister P Chidambaram, was once linked. Sources added that investigators picked up some documents as part of the search.

Confirming the raids, the VC firm on Tuesday tweeted, “Yesterday’s ED visit is part of the ongoing investigation into Vasan where Sequoia India is a minority investor along with others. Sequoia has adopted a policy of full compliance with that investigation and has dutifully responded to governmental inquiries received to date. We continue to cooperate with the ongoing investigation on Vasan.”

In December last year, the ED, along with the income tax department, had conducted searches at Vasan Healthcare and Advantage Strategic Consulting as part of a probe into suspected violation of foreign exchange rules. The current raid is seen as a continuation to the developments last year.

Based on a complaint filed by M Srinivasa Rao, commissioner of income tax (central) to the Central Administrative Tribunal (CAT), RSS ideologue S Gurumurthy had earlier alleged that Karti Chidambaram owns Vasan Eye Care through front companies. This is an allegation Karti Chidambaram has always denied and when contacted on Tuesday, he told FE, “I am not related to Sequoia Capital in any way and I don’t want to comment on this.”

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Officials of ED’s Bengaluru office were unavailable on Tuesday due to it being a public holiday on account of Mahavir Jayanti.

In 2010-11, Sequoia had bought 30,000 shares of Vasan Healthcare at Rs 7,500 per share from Advantage Strategic Consulting, a firm reported to be linked to Karti Chidambaram, also under the ED scanner for alleged violation of FEMA rules in the Aircel-Maxis deal case.

However, Sequoia said in a statement: “Contrary to media reports, Sequoia Capital India has absolutely no association with companies like Aircel or Maxis. Our only connection to the ED visit is that Sequoia Capital India is a minority investor in Vasan, which is one out of the 100+ investments made in India over the last 10 years.”

Before this, the VC firm had subscribed to Rs 100 crore worth of Vasan Healthcare preference shares. Sequoia Capital’s managing director VT Bharadwaj, who had been a member of the board of directors of Vasan Healthcare until recently, could not be reached.

The Chennai-based Vasan Healthcare is largely engaged in providing eyecare services. It offers a wide range of eye treatment such as refractive surgery, treatment for cataract, cornea, glaucoma, retina, paediatric ophthalmology and squint correction, among others.

In February 2009, Sequoia made its first investment in Vasan Healthcare. Further, in 2014, Vasan Healthcare raised around $50 million from WestBridge Ventures, Sequoia and the Singapore government’s investment arm GIC. Sequoia’s other investment in India include Ola, Zomato,
Zoomcar, Voonik, Urban Ladder and Freecharge, among others. In February this year, the company raised $920 million fund to further invest in Indian companies.

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