The cofounders of Zilingo—Dhruv Kapoor and Ankiti Bose—have proposed to buyout the troubled fashion startup as the duo aims to restructure and revive the company’s operations amid prospects of liquidation.
“Given the potential of the business and the value you know this company can achieve, I urge you to consider the management buyout as a preferred alternative to voluntary liquidation,” Kapoor said in the proposal sent to the Zilingo board on Sunday evening. A copy of the proposal was obtained by Forbes Asia.
Bose—whom the board terminated as CEO in May following an internal accounting probe—has thrown in her support for the MBO [management buyout] proposed by Kapoor. “I endorse this proposed MBO plan with this [new] investor group and encourage all shareholders of Zilingo to see beyond the personal differences here and do what’s right,” Bose told the board by email shortly after Kapoor sent the proposal. “I would like to encourage all interested parties to engage alongside the management and founder group with the new investor group to support this initiative.”
Under the preliminary and non-binding offer, Kapoor said the cofounders and an unidentified new investor group will form a new company to take over Zilingo’s assets including the factory, the sourcing business and the digital platforms Z Connect, Z Trade and Z Spotlight, while the rest of the company’s assets will be liquidated. The proceeds from the liquidation will be used to repay debts of about $40 million to Zorro Assets over 36 months.
As part of the deal, Zilingo will also receive a fresh capital injection of $8 million from the new investor group, which is also open to existing shareholders subscribing to equity in the new company. The startup was founded by Bose and Kapoor (both of whom are alumni of Forbes Asia’s 30 Under 30 list, and each own 7.9% of the company) in 2015. And it now counts Singapore state-owned investment firm Temasek Holdings and Sequoia Capital among its biggest investors.
At its peak, Zilingo—a digital platforms that helps fashion merchants to sell their products to consumers across Southeast Asia—was valued at $970 million in 2019. The company was seeking to raise as much as $200 million in February when allegations of irregularities emerged the following month, prompting an investigation that led to the dismissal of Bose.
“As founders it is our ultimate responsibility to make sure that we do whatever it takes to make sure the lights stay on at Zilingo and in the homes of the hundreds of people who are part of it,” Bose said in a statement to Forbes Asia. “No matter what our differences may be, at the end of the day, we started this company with the same goal. Today, we have come together to fight for that same goal.”