Background

BharatPe is an Indian Fintech Company, founded in 2018 by Ashneer Grover and Sashvat Nakrani, and offers a wide range of fintech products. BharatPe has over 3 lakh merchants using its services across 150 cities and has raised USD 178 million in equity and debt, to date.

The Controversy

On March 1, BharatPe co-founder Mr. Ashneer Grover resigned from the company as its managing director and from the company’s board meeting, minutes after receiving the minutes of a board meeting, that included “submission of PwC report regarding his conduct and considering actions based on it”, scheduled to be held later that day.

Later Mr. Grover also held early talks with the investors to sell his stakes in the company, cutting off all ties from the company in the process. However, the talks didn’t end in any conclusion.

Where did it all start?

In Jan 2022, an audio clip, allegedly of Mr. Grover abusing an employee of Kotak Mahindra Bank went viral. The issue at hand discussed during the call was the Bank’s failure to secure funds to buy shares of Nykaa during the company’s IPO (Initial Public Offering).

In Dec 2021, Mr. Grover also appeared on a television reality show “Shark Tank”, which promoted entrepreneurship in India. The show gained massive popularity and this attracted greater attention to the leaked audio clip. Ever since the audio clip came to light, the company had been embroiled in a tussle with co-founder Mr. Grover.

The Investigation

BharatPe sacked Madhuri Jain Grover, wife of Mr. Grover and head of controls at BharatPe in February, on allegations of misappropriation of funds and using company money for paying personal staff and for funding family trips abroad.

This came after BharatPe had appointed risk advisory firm, Alvarez & Marsal, to conduct a corporate governance audit, whose preliminary investigation found out that payments were allegedly made to ‘dubious’ recruitment firms, with crores of rupees spent on ‘non-existing’ vendors and ‘questionable invoices’ being created to substantiate such spends. All these allegations were tied to Madhuri Jain Grover.

Post this, the company appointed PricewaterhouseCoopers (PwC), a Big 4 consulting, audit, and financial advisory firm, to investigate the complete financial aspects of the company like expenses and hiring, approval process, accounting, etc., and any possible financial irregularities.

Though the content of the inquiry report and findings submitted by PwC weren’t released on the grounds of confidentiality, the BharatPe board, after a meeting on the submitted report, stripped Mr. Grover of all titles and positions basis the report’s findings and his alleged “misdeeds”.

The decision to rope in an accounting Big 4 audit firm like PwC also indicated a step towards terminating the services of Mr. Grover and his wife, as they could only be ousted after a report by a Big 4 audit firm indicted them and provided a certificate that fraud has happened as per the Articles of Association (AoA) of the company.

Interestingly before the report came out, Mr. Grover also held early talks with investors to sell his 9.5% stakes in the company for a whopping cost of INR 4000 crore, making the company over-valued at a valuation of INR 42,105 crore or approx. USD 6 billion, since the actual valuation basis of the company’s last funding round held in Aug 2021 was at INR 21,372 crore, i.e approx. USD 2 billion. However, the company was looking for a new round of valuation in Jan at a revised valuation of USD 4 billion.

Post his resignation, Mr. Grover again offered to sell all his stakes, this time at a discounted cost of INR 750 crore, undervaluing the company this time at a cost of INR 7895 crore. However, even this offer was turned down by investors.

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Himanshu Joshi

Ye Sab Doglapan Hai! | The Ashneer Grover - BharatPe Controversy Case Study