ET BureauBENGALURU: Data crunching and analytics firm Mu Sigma, which has been accused of misleading and cheating a former investor of “hundreds of millions of dollars” and has been taken to court, said it plans to “vigorously defend the case” and dismissed the allegations as baseless.
Mu Sigma is currently valued at at least $1.5 billion after its last funding from investors such as Fidelity Investments. Aon founder and billionaire Patrick G Ryan has claimed that Mu Sigma founder Dhiraj Rajaram drastically played down Mu Sigma’s prospects in order to force Ryan’s investment firm Walworth Investments to sell back its stake in the company at a much lower price, according to an earlier media report on Thursday. An email sent to Ryan remained unanswered. “We are aware of the filing and believe the allegations to be without merit.
We intend to vigorously defend the case, but decline to comment any further,” a Mu Sigma spokesperson said in an email to ET.
When contacted on his cell phone, Rajaram declined to share any further comments and redirected all queries to his wife and Mu Sigma CEO Ambiga Dhiraj. Ambiga Dhiraj said that it was “a legal matter now” and did not have anything further to add on the matter, besides the fact that Mu Sigma would defend the case.
Legal experts said that Walworth could have a strong case if they possessed all previous valuation documents and minutes of board meetings, but Mu Sigma could always get away by saying they got lucky.
“If the investors have the board minutes of the meetings during which the buy-back decision was made, they can use those discussions to prove their case.
They can also use the documentation that supported the company’s valuation at that point in time,” said Rahul Matthan, founding partner at legal firm Trilegal.
“Valuations are usually based on the board’s assessment of the company’s financials and prospects.
But if the board suppressed or hid some clauses related to the valuation that later may have played a significant part in the increase in valuation, the investors can allege wrongdoing,” he said.
“On the other hand, the company can always say that they got lucky after the stake sale, that they had no idea that things would improve so significantly after the buy back,” Matthan added.
In an earlier interview, with ET, in February, Dhiraj had claimed that the company would touch $1 billion in revenue soon. “We will be a $1-billion (nearly Rs 6,800-crore) revenue company soon. We’re going to get there in a smooth manner. That’s what I want to go after,” she had said.
In the last round of funding in February 2013, MasterCard teamed up with Fidelity Investments to put in $45 million for a 3% stake in the company, valuing it at $1.5 billion. Mu Sigma has so far received nearly $200 million in funding from General Atlantic, Sequoia and Fidelity Investments.
Walworth had pumped in $1.5 million into Mu Sigma in 2006. Rajaram bought back Walworth’s shares in the IT firm for $9.3 million in 2010.
Earlier on Thursday, Walworth blamed Rajaram for misleading the former investors and potentially duping them of hundreds of millions of dollars.
“Only in hindsight did it become clear that Rajaram’s true objective was to gain back the ownership that he had been forced to share, and that, far from tapering off, Mu Sigma was growing geometrically,” Walworth was quoted as saying in the court documents obtained by Bloomberg.
Mu Sigma is currently valued at at least $1.5 billion after its last funding from investors such as Fidelity Investments. Aon founder and billionaire Patrick G Ryan has claimed that Mu Sigma founder Dhiraj Rajaram drastically played down Mu Sigma’s prospects in order to force Ryan’s investment firm Walworth Investments to sell back its stake in the company at a much lower price, according to an earlier media report on Thursday. An email sent to Ryan remained unanswered. “We are aware of the filing and believe the allegations to be without merit.
We intend to vigorously defend the case, but decline to comment any further,” a Mu Sigma spokesperson said in an email to ET.
When contacted on his cell phone, Rajaram declined to share any further comments and redirected all queries to his wife and Mu Sigma CEO Ambiga Dhiraj. Ambiga Dhiraj said that it was “a legal matter now” and did not have anything further to add on the matter, besides the fact that Mu Sigma would defend the case.
Legal experts said that Walworth could have a strong case if they possessed all previous valuation documents and minutes of board meetings, but Mu Sigma could always get away by saying they got lucky.
“If the investors have the board minutes of the meetings during which the buy-back decision was made, they can use those discussions to prove their case.
They can also use the documentation that supported the company’s valuation at that point in time,” said Rahul Matthan, founding partner at legal firm Trilegal.
“Valuations are usually based on the board’s assessment of the company’s financials and prospects.
But if the board suppressed or hid some clauses related to the valuation that later may have played a significant part in the increase in valuation, the investors can allege wrongdoing,” he said.
“On the other hand, the company can always say that they got lucky after the stake sale, that they had no idea that things would improve so significantly after the buy back,” Matthan added.
In an earlier interview, with ET, in February, Dhiraj had claimed that the company would touch $1 billion in revenue soon. “We will be a $1-billion (nearly Rs 6,800-crore) revenue company soon. We’re going to get there in a smooth manner. That’s what I want to go after,” she had said.
In the last round of funding in February 2013, MasterCard teamed up with Fidelity Investments to put in $45 million for a 3% stake in the company, valuing it at $1.5 billion. Mu Sigma has so far received nearly $200 million in funding from General Atlantic, Sequoia and Fidelity Investments.
Walworth had pumped in $1.5 million into Mu Sigma in 2006. Rajaram bought back Walworth’s shares in the IT firm for $9.3 million in 2010.
Earlier on Thursday, Walworth blamed Rajaram for misleading the former investors and potentially duping them of hundreds of millions of dollars.
“Only in hindsight did it become clear that Rajaram’s true objective was to gain back the ownership that he had been forced to share, and that, far from tapering off, Mu Sigma was growing geometrically,” Walworth was quoted as saying in the court documents obtained by Bloomberg.
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