RentoMojo IPO Faces Legal Challenge Over Co-founder Fraud Allegations

Ajay Nain, co-founder and former COO of RentoMojo, has initiated a legal challenge against the furniture and appliance rental startup, alleging he was coerced into a misleading and undervalued share sale in 2023. The petition, filed before the National Company Law Tribunal’s (NCLT) Bengaluru bench, seeks to void his exit and halt RentoMojo’s impending Initial Public Offering (IPO) until the dispute is resolved.

Nain accuses RentoMojo founder and CEO Geetansh Bamania and other executives of fraud, misrepresentation, and misuse of control to force his minority shareholder exit. He is seeking the reinstatement of his approximately 9.41% stake in the company.

The legal battle comes as RentoMojo, which filed its Draft Red Herring Prospectus (DRHP) in late March, prepares for its public market debut. The company has declined to comment on the allegations, citing the matter as sub judice.

Key Allegations in Nain’s Petition

Nain, who co-founded RentoMojo in December 2014 and served as its COO until 2018, claims that in May 2023, Bamania approached him to buy out his remaining 2,223 shares. Nain alleges Bamania misrepresented the company’s financial health, suggesting severe financial distress and the potential worthlessness of equity in a liquidation scenario. He claims Bamania described the offer as a “golden chance” to exit and that the transaction would be presented to the board as an ESOP pool expansion rather than a secondary buyback.

In August 2023, Nain sold his shares to RM Employee Benefit Trust for approximately ₹1.5 Cr, at a price of ₹6,748 per share. However, Nain contends this valuation was artificially suppressed. He points to subsequent transactions where other employees’ shares were bought by the same trust at ₹22,160 per share just 40 days later. Furthermore, secondary market transactions in late 2023 and early 2024 saw shares change hands at prices ranging from ₹65,000 to ₹90,000. Bamania himself sold shares in February 2024 within this higher range.

Adding to the valuation dispute, RentoMojo announced a Series D and D1 funding round in February 2024, raising over ₹200 Cr. During this round, shares were issued at prices between ₹1.04 Lakh and ₹1.10 Lakh per share, over 15 times the price Nain received for his shares just months prior. Nain argues that this fundraising was being negotiated while he was led to believe the company faced imminent liquidation, with this crucial information deliberately withheld.

Broader Concerns Raised

Beyond the share sale, Nain has raised other concerns. He alleges that his access to internal company systems was cut off after he stepped down in 2018, and he was not kept informed of company affairs despite being a shareholder. He also claims that Annual General Meeting notices were sent with insufficient notice periods between 2019 and 2022, and requests for financial information were deflected.

Nain further alleges he was deliberately removed from the startup to prevent him from participating in a rights issue in 2025, which would have allowed Bamania to increase his stake cost-effectively. The petition also notes that the 2017 transfer of 447 shares from Nain was allegedly not recorded in the company’s annual return.

Additionally, Nain highlights an FIR filed in 2018 concerning the misappropriation of employee provident fund contributions, in which he was named. Although the FIR was quashed by the Bombay High Court in January 2024 and upheld by the Supreme Court in September 2024, Nain claims he was never informed of the proceedings, leaving him exposed to legal risk.

As RentoMojo prepares its response to the NCLT, the outcome of this legal battle could significantly impact its IPO plans, which include a fresh issue of shares worth up to ₹150 Cr and an offer for sale of up to 2.84 Cr shares.