Financial irregularities found at BharatPe; followed process, says company 

BL Bengaluru Bureau | Updated on: Feb 04, 2022
Ashneer Grover

Ashneer Grover

Alvarez & Marsal reports recruitment fraud, fictitious payments by co-founder, wife

 A preliminary report by international consulting firm Alvarez and Marsal (A&M) which had been appointed to look into allegations of financial fraud by one of its co-founders & Managing Director Ashneer Grover and his wife Madhuri Jain Grover has indicated that there were indeed financial discrepancies. 

A copy of the report which was seen by BusinessLine indicates that the fintech firm was said to be paying recruitment fees to a number of ‘consultants’ for the employees recruited through them. In five such cases, employees have confirmed their joining date as the one mentioned in the vendor invoice but they had no knowledge of being recruited or engaged through the said ‘consultants.’ 

Further, in three out of those five instances, Madhuri Jain Grover is said to have directly received the invoices from the vendors and forwarded them to the accounts team for payment, according to the report. On further examination of these invoices, the consulting firm found that the creator of all these invoices originated from Shwetank Jain, who has been identified as Madhuri Grover’s brother. Madhuri Grover was Group Head - Controls at BharatPe.  

The invoices of various vendors are also found to have certain commonalities such as same typeface, similar sort of email addresses, similar physical addresses, formats and some even had the same bank branches and other details. 

Moreover, the majority of the invoices appear to have a connection with Panipat, which is also the hometown of Madhuri Grover. A review of the books of accounts showed that the spends on such vendors in FY 2019-20 amounted to ₹3.77 crores.  

BharatPe on Friday though denied receiving any interim or final release of the independent review done by Alvarez and Marsal (A&M).  

“We are deeply pained that the integrity of the BharatPe board or individual board members is being questioned time and again through misrepresentation facts and baseless allegations. The board in all its actions has followed due process in the best interest of the company. We would urge that the confidentiality and integrity of the governance review and board meetings is maintained by all. We request everyone, including the media, to show restraint and allow the governance review to take place in a thorough manner,” the company said in a statement.  

On January 29, 2022, BharatPe’s board had announced that they are conducting an independent audit of the company’s internal processes and systems and had appointed Alvarez & Marsal to advise the board on its recommendations. 

Even as the controversy continued to swirl, Ashneer Grover speaking to a website denied all allegations and said that he was being arm-twisted by the board to exit the company. He was quoted as saying that he would do so only if his 9.5 per cent stake was brought out at a $6 billion valuation indicating a pay-out of Rs 4000 crore.   

Grover is also said to have written a note to the board members on February 2, asking them to remove the CEO Suhail Sameer from the board.          

Neither Ashneer Grover nor Bharatpe responded to specific BusinessLine queries  on the topic of whether the board was forcing his exit or any proposal to buy out Sources in the company indicated that Chairman of the company Rajnish Kumar – a former SBI chief and a highly respected banker - was working ‘to resolve the issue and protect the interests of everybody concerned.’ 

DCGI Search Operation 

The A&M report also noted that on October 21, 2021, the Directorate General of GST Intelligence (DCGI) conducted a search operation at BharatPe’s head office and later also summoned the company’s authorised signatory to appear before them on November 1, 2021. 

The company was asked to produce copies of purchase invoices along with transport documents with respect to certain parties. In addition to this, the bank statement from July 2018 till date, reflects payments to these vendors. 

BharatPe also sent a communication to DCGI on November 11, 2021, the letter was signed by Deepak Jagdishram Gupta, who is also the brother-in-law of Madhuri Grover. “We have come to know that our vendors as informed by the DCGI officers, do not exist or never operated at their principal place of business, We do not want a Show Cause Notice from the department on this matter and request you to waive off the SCN,” the letter signed by Gupta read.  

A&M has further noted that the matter requires further detailed investigation as it is difficult to assess why BharatPe was dealing in purchases from non-existent vendors, why was the company unable to provide proof of delivery of materials, and why did the company settle the matter causing a loss of ₹10.97 crore without legal representation or make efforts to recover the same from vendors.  

The controversy 

Ashneer Grover has been in the midst of controversy for an audio recording allegedly featuring the entrepreneur bashing a Kotak Mahindra Bank relationship manager for missing out on Nykaa’s IPO. Soon after the audio clip surfaced on social media on January 5, 2022, Grover put out a tweet claiming that the clip is fake.  “Folks. Chill! It’s a FAKE audio by some scamster trying to extort funds ($240K in bitcoins). I refused to buckle. I’ve got more character. And the internet has got enough scamsters,” he said. However, the tweet was later deleted by Grover. 

Days later, the media reports confirmed that Ashneer Grover had sent out a legal notice to Kotak Mahindra Bank on October 30, 2021, for allegedly failing to provide financing in Nykaa’s IPO. Kotak Mahindra Bank also released a statement on January 10 and said, “the notice was received by us and was replied to appropriately at the time, including placing on record our objections to inappropriate language used by Mr. Grover. Appropriate legal action is being pursued. We would like to confirm that there is no breach or violation by the Kotak Group in any manner whatsoever.” 

Amid increased media scrutiny, BharatPe announced on January 19 that Ashneer Grover will be taking a voluntary leave of absence from BharatPe till the end of March 2022 and the company’s CEO Suhail Sameer will continue to lead the team.  

On January 31 in an interview with a publication, Grover said that he expects to have an “amicable conversation with BharatPe board” once the dust settles on the audio clip controversy. He added that he was not seeking any damages from Kotak Mahindra Bank for the Nykaa IPO financing and alleged that rival payment firms and other detractors were partly responsible for the matter becoming disproportionately big. This statement by Grover was closely followed by reports of him hiring a legal firm to protect his position and shareholding in BharatPe.  

By now, BharatPe had started conducting an independent audit of the company’s internal processes and systems by appointing Alvarez & Marsal. 

Neither Ashneer Grover nor Bharatpe responded to specific BusinessLine queries  on the topic .   

BharatPe’s growth story 

BharatPe was co-founded by Ashneer Grover and Shashvat Nakrani in 2018 with the vision of making financial inclusion a reality for Indian merchants. In August 2021, Grover was made managing director at BharatPe, and the recent hire of the company Suhail Sameer took the role of CEO. BharatPe has raised over $650 million in equity and debt, till date.  

The company’s list of marquee investors includes Tiger Global, Dragoneer Investment Group, Steadfast Capital, Coatue Management, Ribbit Capital, Insight Partners, Steadview Capital, Beenext, Amplo and Sequoia Capital. In terms of shareholding, Sequoia Capital (19.6 per cent), Coatue (12.4 per cent) and Ribbit Capital (11.0 per cent) hold the largest individual stakes in the fintech start-up. 

In 2018, BharatPe launched UPI interoperable QR code, zero MDR payment acceptance service and zero MDR card acceptance terminals BharatSwipe in 2020. Currently, the company claims to be serving over 80 lakh merchants across 150 cities, processing over 11 crores of UPI transactions per month (annualized Transaction Processed Value of more than $17 billion). BharatPe claims to have facilitated the disbursement of loans totalling over ₹3000 crores to over 300,000 merchants, since launch. Further, BharatPe’s POS business processes payments of over ₹1,400 crores per month.  

In June 2021, the company announced the acquisition of PAYBACK India, a multi-brand loyalty program company with over 100 million members. In June 2021, BharatPe was also given in-principle approval by the Reserve Bank of India to establish a Small Finance Bank, in partnership with Centrum Financial Services Limited (Centrum), the NBFC arm of the Centrum Group.  

In August 2021, BharatPe forayed into the consumer space with the launch of its consumer investment and lending product- 12% Club. Later in October 2021, the consortium of Centrum Financial Services Limited (Centrum) and BharatPe, was issued a Small Finance Bank (SFB) license by the Reserve Bank of India (RBI). BharatPe also entered the Buy Now Pay Later segment with the launch of Postpe in October 2021. 

Published on February 04, 2022
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