Inside The Legal Battle Between IPO-Bound RentoMojo & Cofounder Ajay Nain

Ajay Nain, cofounder and former COO of RentoMojo, has alleged in a petition before the NCLT’s Bengaluru bench that he was pushed out of the furniture and appliance rental startup through a misleading and undervalued share sale in 2023. 

Nain has accused RentoMojo founder and CEO Geetansh Bamania and other senior executives of fraud, misrepresentation and misuse of control to force a minority shareholder exit. 

He is seeking to declare his share sale void, reinstatement of his stake of about 9.41% stake, and blocking the proposed IPO of the startup until the dispute is resolved.

Inc42 has accessed the petition filed by Nain. RentoMojo’s DRHP, filed in late March, mentioned the petition in question.

RentoMojo declined to comment on Inc42’s queries on the allegations made in the petition, citing the matter as sub judice. Nain also declined to comment on the development. 

Nain, an IIT Madras graduate, joined RentoMojo in December 2014 as cofounder and COO. He led operations during the startup’s early bootstrapped phase, scaling its furniture and appliance rental platform across Mumbai, Pune, Bangalore, Hyderabad, Chennai, Gurgaon, Delhi and Noida. 

He stepped down as COO in October 2018 and as director in May 2019 but remained a shareholder. After leaving, he founded Gully Network, a B2B commerce startup.

Here are the key allegations made by Nain in his petition.

The First Stake Sale 

Nain held 5,286 equity shares in RentoMojo, representing 23.6% of the startup’s share capital, after its first institutional funding round in 2015. In 2017, he reduced his stake significantly via two transactions. He transferred 2,616 shares, roughly half of his holding at the time, to four parties – 785 shares to Bamania, 1,046 shares to employee Gautam Adukia, 523 shares to employee Achal Mittal, and the remaining shares to other employees of RentoMojo. 

He also sold 447 shares to funds linked to investor-directors Chiratae Ventures’ Venkatesh Ratnam Peddi and Accel’s Prashanth Prakash. These transactions left him with 2,223 shares, or 9.41% stake in the startup.

In his petition, Nain has characterised the share transfers as coerced, alleging that Bamania held his right to sell the 447 shares “hostage” to pressure him into gifting the larger block without consideration.

In the same period, a secondary buyout of 952 shares held by Bamania’s brother, Gaurav Bamania, was also arranged, including 317 shares sold to Shri Investments, using funds linked to the aforementioned institutional investors. Nain alleges this was done without his knowledge, despite him being a director at the time. 

Disputed Exit & Alleged Misleading Communication

Nain, in his petition, has said Bamania approached him to buy out his remaining 2,223 shares in May 2023. He has alleged that Bamania told him the startup was under severe financial stress, personal guarantees were at risk of being invoked, and that equity shareholders would likely receive little or nothing in a liquidation. 

Bamania allegedly described the offer as a “golden chance” to exit before the shares became worthless. Nain says he was also told the transaction would be presented to the board as an ESOP pool expansion, rather than a secondary buyback.

In July 2023, RentoMojo’s board passed a resolution authorising a loan of up to ₹2 Cr to RM Employee Benefit Trust, an internal employee trust, to fund the buyout. Through August 2023, Hakim Fakhruddin Ujjainwala, then a senior official in the finance department of RentoMojo, communicated with Nain over WhatsApp about the transaction. Nain alleges he was pressured to close the transaction quickly, with warnings that the deal would be withdrawn if there was any delay. 

Subsequently, Nain signed the share purchase agreement to sell his 2,223 shares to RM Employee Benefit Trust at ₹6,748 per share for a cumulative amount of about ₹1.5 Cr in August 2023. The consideration was paid on September 6, 2023.

The question before the NCLT is if Nain signed the agreement under duress or as a willing seller at a mutually agreed price.

The Valuation Dispute

RentoMojo’s FY23 numbers show ₹123 Cr revenue, ₹6.2 Cr profit, and a bank balance of ₹40 Cr. Nain argues this directly contradicts the financial distress narrative he was given at the time of his exit.

Within 40 days of Nain’s exit, RM Employee Benefit Trust bought out Adukia (898 shares) and Mittal’s (375 shares) shares at ₹22,160 apiece, 3.3X of Nain’s selling price. 

The Trust also bought back their unvested and unreserved shares. Secondary transactions in late 2023 and early 2024 involving funds linked to Peddi, Edelweiss Discovery Fund and ValueQuest saw shares change hands at a price between ₹65,000 and ₹90,000 per share. Bamania also sold 250 shares in February 2024 in the same range.

A few months after Nain’s exit, RentoMojo, in February 2024, said it raised over ₹200 Cr in its Series D and D1 funding rounds. While the startup issued shares to Edelweiss Discovery Fund at ₹1.04 Lakh per share, funds represented by ValueQuest Investment Advisors subscribed to shares at ₹1.10 Lakh apiece. The selling price was over 15X that of Nain’s selling price a few months ago.

The former COO has contended that this fundraise was being actively planned and negotiated while he was being told the company faced imminent liquidation, and that this information was deliberately withheld from him. 

He has argued that the big difference in the selling prices proves that his exit price was artificially suppressed.

It is pertinent to mention that startup valuations can change significantly between funding rounds depending on investor appetite, market conditions and financial performance. The NCLT will have to examine if the valuation at the time of Nain’s exit was legitimate or a deliberate misrepresentation.

Beyond The Stake Sale

Nain has also contended that RentoMojo offered employees ESOP buyback at ₹36,000 per option in March 2024, telling them the then recent funding took place at ₹72,000 per share – much lower than the Series D price of ₹1.04 Lakh per share. 

Besides this, Nain has raised several other concerns in his petition. He has alleged that after stepping down from his position in 2018, his access to internal systems was cut off and he wasn’t informed about company affairs despite him being a shareholder. 

He has said AGM notices between 2019 and 2022 were routinely sent with less than the legally required notice period and requests for financial information from shareholders were deflected verbally rather than being addressed in writing.

The former COO has claimed that he was deliberately removed from the startup to prevent him from participating in a rights issue the startup undertook in 2025, which helped Bamania increase his stake in RentoMojo at a minimal cost.  

The petition also says that the 2017 transfer of 447 shares from Nain was allegedly not recorded in the company’s annual return filed with the Registrar of Companies. It references a notice from creditor TradeCred alleging that Bamania declined to honour equity commitments once the startup’s financial position improved. 

Nain has also said that an FIR was filed at Powai Police Station in June 2018, naming him as a party in a matter pertaining to misappropriation of employees’ provident fund contributions of ₹37.23 Lakh. 

While the FIR was ultimately quashed by the Bombay High Court in January 2024 and the ruling upheld by the Supreme Court in September 2024, Nain alleges he was never informed of the proceedings despite being named, leaving him exposed to legal risk for years. 

Inc42 understands that IPO-bound RentoMojo is in the process of filing its response in the NCLT to Nain’s petition. As per its DRHP filed last month, the startup’s IPO would comprise a fresh issue of shares worth up to ₹150 Cr and an offer for sale of up to 2.84 Cr shares. 

Edited by Vinaykumar Rai

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