Clairvest Group Inc. (TSX: CVG) has announced that Head InfoTech India Pvt. Ltd., along with other online rummy companies in India, are challenging in the Indian courts the validity of the Ordinance that was issued by the Telangana (India) state government which made it illegal to operate an online gaming platform within the state.
While final resolution of the court challenge is still pending, on June 28, 2017, he High Court for the State of Telangana made an oral observation that serving customers outside Telangana should not entail any violation of the Ordinance.
Accordingly, Head InfoTech has resumed operations for customers outside of Telangana. Revenue from customers outside of Telangana represented approximately 60% of Head InfoTech’s overall revenue.
Clairvest Group said there is no assurance that Head InfoTech will ultimately be successful in its court challenge or that interim relief will be granted following next week’s court proceedings.
On April 28, 2017, Clairvest together with limited partnerships controlled by it, made a US $73.7 million investment in Head InfoTech.
Clairvest’s portion of the investment is approximately US $40 million or $56 million. Following the issuance of the Ordinance, Clairvest disclosed its $56 million exposure to the investment, on a pre-tax basis, is equal to 11% of Clairvest’s most recently disclosed book value. The negative impact on the value of Clairvest’s investment in Head InfoTech from this development is currently uncertain and potentially material.
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