According to people familiar with the matter, the board of Zilingo Pte has authorized repayment of loans sought by creditors as the troubled startup fights to address the liquidity crisis.
Weeks after Ankiti Bose was removed from her position as chief executive officer, the company’s directors on Wednesday asked co-founder Dhruv Kapoor to transfer money sought by creditors to a $40 million loan facility with immediate effect. Authorized, which people asked not to happen. The matter is being told private. Kapoor and Bose started Singapore-based Zilingo together in 2015.
The move puts the beleaguered fashion startup in a precarious financial position, given its money-losing operations and limited access to fresh capital.
“The board has evaluated all options for the business and is continuing to do so,” the firm said in an emailed statement. “All important decisions relating to the Company are taken collectively with the full participation and authorization of the majority of investors.”
Since Bose was fired on May 20, investors and top management have debated whether Zilingo can continue operating. According to several, key investors including Sequoia Capital India and Koru Partners have proposed to put the firm into liquidation, who want to consider other possible financial options, as well as Kapoor who wants to save the company.
“I do not believe that the liquidation is necessary or meaningful in the interests of the Company and its customers, shareholders, note holders and lenders,” Kapoor wrote in an email seen by Bloomberg News sent to Zilingo’s shareholders on May 31. Emailed, Kapoor, who serves as chief technology officer, sought his support, saying the company only needs $6 million to $8 million for the next year.
“While we have many multiples of this figure in our accounts today, there is a real risk that this money will be blown away by lenders,” he wrote. He said he was approached by companies expressing interest in the merger or acquisition.
Creditors do not support the liquidation option partly because that process in Singapore can take six to nine months, a relatively long period for the fast-paced world of startups, and it can be costly, one of the people said. .
Faced with an uncertain future, Zilingo employees are moving out. According to a person familiar with the matter, about 100 employees have moved to Zilingo’s eight offices in recent months. The former CFO of fashion e-commerce platform Myntra, Chief Financial Officer Ramesh Bafna, left in May, just two months after joining. According to people, other senior managers including the Thailand head of the startup are also leaving.
In May, Zilingo halted some of its operations in Indonesia, the biggest market for struggling startups, the people said. One of the people said that some employees in the country, which totaled more than 100 before the crisis, have asked their managers to start looking for jobs elsewhere.
Indies Capital Partners and Verde Partners, the companies behind Zilingo’s creditor Zorro Assets Ltd, provided a $40 million mezzanine loan facility in 2021. In March, Verde and Indies told the firm it was in default of its loan agreement, citing a wide range of issues. Ordering it to stop drawing on funds, including audited filings from fiscal year 2020 and fiscal 2021, for documents not yet provided to it. By May, he decided to withdraw the loan.
Verde declined to comment and Indies Capital did not respond to requests for comment.
Zilingo’s board said on May 13 that it has appointed an independent financial advisor to explore the company’s future options.