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Infra.Market hid Rs 224 crore of income, I-T probe finds; cofounder distances himself from Trell

Mar 21, 2022

Infra.Market hid Rs 224 crore of income, I-T probe finds; cofounder distances himself from Trell On March 17, we reported that income tax officials had raided the offices of construction materials startup Infra.Market in several cities, including Noida, Hyderabad, Bengaluru, Pune, Mumbai and Thane. On Sunday, the department said in a press statement that it has found evidence of attempted tax-evasion at “a startup based in Pune and Thane”. While it didn’t name the company, there’s little doubt which one it was referring to. Also in this letter: ■ India’s data centre industry still faces many pain points ■ Reliance Retail picks up 89% in Clovia for Rs 950 crore Infra.Market failed to disclose Rs 224 crore of income: I-T dept probe The Income-Tax department said on Sunday it has found evidence that a startup based in Pune and Thane has not disclosed Rs 224 crore of income. While the I-T department didn’t name the company, it is believed to be referring to Infra.Market, the construction materials startup that its officials raided recently. Infra.Market is backed by Tiger Global, Nexus Venture Partners and Accel and valued at $2.5 billion. Details: It also said the company appeared to have booked bogus purchases, made huge unaccounted cash expenditures, and obtained accommodation entries totalling over Rs 400 crore. During the search operations, Rs 1 crore in unaccounted cash and jewellery worth Rs 22 lakh were also seized, the department said. When confronted with the evidence, directors of the group, “admitted under oath this modus operandi, disclosed additional income of more than Rs 224 crore in various assessment years, and offered to pay their due tax liability,” the department said. ‘Hawala network’: The I-T department said it is investigating how the company obtained huge foreign funding via Mauritius by issuing shares at an “exorbitantly” high premium. These funds were routed through a hawala network involving shell companies in Mumbai and Thane, it said. “These shell companies exist [only] on paper, and were created only for the purpose of providing accommodation entries. Preliminary analysis has revealed that the total quantum of accommodation entries provided by these shell entities exceeds Rs. 1,500 crore,” the department said. Response: A spokesperson for Infra.Market told ET, “We continue to cooperate with the authorities and provide all necessary information to the department. Since the matter is sub judice, we would not like to comment further.” On March 17 we reported that tax officials searched the offices of Infra.Market in 23 locations, including Maharashtra, Karnataka, Andhra Pradesh, Uttar Pradesh and Madhya Pradesh. Compliance and governance issues have cropped up at some well-funded startups in the recent past, including BharatPe, Paytm Payments Bank, and Trell, the subject of our next story. Trell cofounder says he sold entire stake last year, is no longer involved Prashant Sachan, one of the founders of influencer-led social commerce platform Trell, told us on Sunday that he fully exited the company in October 2021 to build his spiritual and devotional tech startup AppsForBharat. He said he was no longer involved in Trell’s operations. Context: The news comes as a forensic team from EY India is carrying out a detailed investigation into Trell’s finances , as we reported on March 12. The six-year-old firm is also in the middle of a ‘restructuring’ exercise as part of which it plans to lay off hundreds of employees. Details: Sachan said he first diluted the majority of his equity in Trell by transferring it to the management stock options plan (Msop) in December 2020. He later sold his remaining stake, about 1.5%, to LOGX Venture Partners and LetsVenture syndicate in October 2021. Trell had received a 17% stake in AppsForBharat for Rs 85,000 because Sachan started working on it while at Trell. It later diluted its holding to about 10% as AppsForBharat closed two funding rounds of about $14 million from Elevation Capital, Sequoia Capital India, Beenext and Matrix Partners India. Trell does not have any governance rights in AppsForBharat, Sachan said. Trell’s troubles: On March 17, ET reported that Trell cofounder Pulkit Agarwal had sent a fiery note to all investors of the firm, questioning the nature of the forensic audit by EY India and claiming the exercise was ordered by a cohort of select financial backers –- not by the company or its board. India’s data centre industry still faces several pain points India’s data centre industry is expected to attract investments worth Rs 70,000-72,000 crore over the next five to 10 years , driven by large corporate groups and cloud service providers, according to an estimate by ratings agency Ind-Ra. Much of this growth will be centred around Mumbai and Chennai due to their business and infrastructure advantages, strategic location, and cable landing stations, an analysis by Airtel and realty industry consultancy JLL has shown. Data centre push: Already, major domestic conglomerates such as Reliance Industries, Bharti Airtel, Adani group, Hiranandani group, and multinational companies such as Microsoft, Alphabet Inc and Amazon Web Services have joined forces with traditional data centre players such as NTT, Sify, CtrlS, STT and others to invest huge sums in the data centre space. The government has also made several positive changes to its data centre policies over the years, such as giving the sector ‘infrastructure’ status in the latest budget. Yes, but: A lot remains to be done, say stakeholders, as the data centre ecosystem is facing quite a few pain points. Issues around power sourcing, captive networks, procuring equipment, and ease of doing business remain major irritants. Industry experts also said things like the restriction on laying captive fibre for data centre use, their heavy dependence on telecom operators, delayed right-of-way permits, restrictions on power banking, and a lack of clarity on building codes and permits for establishing data centres are slowing the sector’s growth. India central to IBM Consulting’s strategy, says senior VP John Granger John Granger, senior vice president of IBM Consulting India remains at the centre of IBM Consulting’s strategy to drive growth, according to John Granger, senior vice president at the firm. He said India was central to how the company executed its strategy. “We’re doubling down on our acquisition of talent,” Granger said. Acquisitions are another area of focus, with IBM having acquired 12 companies in the 20 months since Arvind Krishna took over as its chief executive. Its most recent acquisition, Neudesic, has about 700 employees in India – about half its workforce. The third aspect on which India is driving the global strategy IBM Garage, an end-to-end offering to help clients accelerate their digital transformation. The company runs a number of these Garages in India in areas like blockchain and hybrid cloud. Re-skilling its existing workforce in emerging technology areas is another important focus area for the company. Going forward, it will work to strengthen IBM Garage and use its India operations to drive more collaboration with clients, Granger said. TWEET OF THE DAY Reliance Retail picks up 89% in online lingerie retailer Clovia for Rs 950 crore Reliance Retail has acquired an 89% stake in online lingerie retailer Clovia for Rs 950 crore. The deal includes a primary investment and secondary share sale, according to a statement by the company. The founding team and management of Clovia will own the rest of the stake in the firm, Reliance Retail Ventures added in its statement on Sunday night. This is the third online lingerie retailer Reliance Retail has acquired, after Zivame and Amante, The deal comes after it led a $240 million funding round in Dunzo to pick up a 25% stake in the Bengaluru-based firm. IPV launches $50M fund: Meanwhile, early-stage angel investing platform Inflection Point Ventures (IPV) has launched Physis Capital, a $50 million venture capital fund, senior officials told us. The new fund will have a greenshoe option of $25 million, taking the total available pool to $75 million. It will look to invest in 15-20 startups in their pre-Series A to Series B rounds. The cheque sizes will range from $2 million to $10 million, said Ankur Mittal, cofounder of IPV. UpGrad clocks revenue of Rs 1,900 crore in FY22 Grad cofounder Ronnie Screwvala Edtech firm UpGrad is expecting to close the current financial year (FY22) with consolidated revenues of Rs 1,900 crore and has hit overall profitability in the current quarter, cofounder Ronnie Screwvala told ET in an interaction. In FY21 ending March 31, UpGrad had reported a consolidated revenue of Rs 302.26 crore and net losses of Rs 211 crore, according to the company’s regulatory filings. With the fourth quarter (January-March) of the ongoing fiscal (FY22) being profitable, UpGrad expects to curtail losses to about Rs 150 crore in FY22. UpGrad’s peer Eruditus reported revenues of almost Rs 961 crore in FY21, with annual losses for the firm also rising to Rs 1,994 crore for the same period. The expected revenue growth comes after the company made around five acquisitions in the current fiscal year, contributing to its topline. Other Top Stories By Our Reporters Zoho CEO Sridhar Vembu Zoho plans more offices in tier II and III towns: Software-as-a-service (SaaS) firm Zoho is accelerating its drive to open more rural offices as more employees choose to work from locations closer to their hometowns. This year, the company will open at least 10 offices that can accommodate 500-1000 people in tier II and III cities and towns. It plans to surround these offices with smaller rural offices, using the hub-spoke model to manage talent. CERT-In flags bugs in older versions of Chrome: The IT Ministry’s Computer Emergency Response Team (CERT-In) has issued a warning for people using versions of Google Chrome prior to 99.0.4844.74. In a notification last week, it said that multiple vulnerabilities have been reported in these versions of Chrome, “which could allow a remote attacker to execute arbitrary code, bypass security restrictions or cause a denial of service condition on the targeted system”. Global Picks we Are Reading ■ Elon Musk’s Starlink is keeping Ukrainians online when traditional Internet fails (The Washington Post) ■ Uber hopes for an easier ride with its new London licence (The Guardian) ■ Chip sanctions challenge Russia’s tech ambitions (WSJ) Today’s ETtech Morning Dispatch was curated by Zaheer Merchant in Mumbai and Judy Franko in New Delhi. Graphics and illustrations by Rahul Awasthi.

John Granger Investments

2 Investments

John Granger has made 2 investments. Their latest investment was in Buyosphere as part of their Seed VC on January 1, 2012.

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John Granger Investments Activity

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Date

Round

Company

Amount

New?

Co-Investors

Sources

1/5/2012

Seed VC

Buyosphere

$0.32M

Yes

Angel

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Date

1/5/2012

Round

Seed VC

Angel

Company

Buyosphere

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Amount

$0.32M

New?

Yes

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Co-Investors

Sources

0

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