New Delhi: Ashneer Grover, co-founder of financial technology firm BharatPe — and perhaps better known for his thrusting remarks to contestants in India’s version of the American TV show Shark Tank — is now embroiled in a battle with the board of the very company he launched in 2018.
Media reports have claimed that Grover — looking to exit the firm amid allegations of financial fraud against him and his wife, Madhuri Jain Grover — is scouting for investors to buy his 9.5 per cent stake in BharatPe that he values at Rs 4,000 crore.
But what has pushed the board to oust the man who built the firm in the first place?
Who is Ashneer Grover and what is BharatPe?
A graduate of the Indian Institute of Technology, Delhi and the Indian Institute of Management, Ahmedabad, Grover is a co-founder and the managing director of BharatPe. The firm caters to small merchants and convenience store owners by offering them QR codes that they can use to accept payments digitally through the United Payments Interface (UPI).
Before founding BharatPe, Grover’s longest professional stint was with Kotak Mahindra Bank, where he started his career. After this, he worked with American Express, the online grocery delivery platform Grofers (now blinkit), and PC Jeweller.
Grover then co-founded BharatPe with Shashwat Nakrani in 2018, with its headquarters in New Delhi. Last year, it secured an in-principle approval from the Reserve Bank of India to establish a small finance bank with Centrum Financial Services Limited. The fintech firm has a network covering 100 cities of India, and in June 2021 acquired multi-brand loyalty platform PAYBACK India from American Express and ICICI Investments Strategic Fund.
The firm’s valuation scaled to almost $2.85 billion within four years of its launch and it raised more than $600 million in funding by selling stakes to top financial funds such as Sequoia Capital India, Insight Partners, Dragoneer Investment Group, Steadfast Capital and Tiger Global. Its competitors include payment platforms such as Paytm and PhonePe.
Industry watchers believe Grover has “God Syndrome”, having single-handedly driven BharatPe’s growth over the past four years.
Also read: UPI payments grew 200% annually over last 5 years, says National Payments Corp global arm CEO
What is Grover accused of?
Known for his reportedly impolite behaviour with the company’s employees and on the reality show Shark Tank India, Grover has been accused of routing the firm’s money through human resources (HR) consultants known to each other, and through his wife Madhuri’s brother, Shwetank Jain. Other, more serious accusations include inflating the value of transactions of various merchants through fake invoicing.
Grover’s alleged misbehaviour came to light last month when an audio tape was leaked on a social media platform. In it, he was allegedly heard hurling abuse at an employee of Kotak Mahindra Bank, as the bank was unable to provide him funds to invest in the initial public offer (IPO) of the cosmetic firm Nykaa. While Grover first termed the clip a fake made by “some scamster” trying to extort money, he later deleted the tweet in which he claimed this.
The reports about his misbehaviour with his employees and conducting false transactions surfaced after this. But what eventually raised eyebrows was when Grover went on leave in January, followed by his wife a week later as BharatPe decided to order an independent audit by the firm Alvarez & Marsal.
Screenshots of the audit firm’s preliminary investigation report, leaked on social media, suggest that payments were made to vendors who did not exist, and that BharatPe had paid consultants to hire employees who never joined the firm.
Last year, the Directorate General of Goods and Services Tax Intelligence (DGGI) searched BharatPe’s premises and found invoices worth Rs 50 crore to non-existent vendors.
Grover denies all allegations
In an interview with financial news portal Moneycontrol last week, Grover said that BharatPe’s investors had arm-twisted him to go on leave amid the allegations of financial irregularities. He denied every allegation levelled against him.
He claimed that people in the industry were jealous of him, because BharatPe had brought the merchant discount rate (MDR) down to zero. Before BharatPe, firms in the payments business were making huge revenues through MDR, he alleged. This is the rate levied on merchants for payment processing services through UPI, digital wallets, debit, and credit cards.
“That jealousy has unfolded into this large conspiracy,” he said.
The government eventually did away with MDR on UPI and Rupay transactions altogether in January 2020.
BharatPe’s response to Grover, alleged financial irregularities
In a statement released last week, BharatPe said, “We are deeply pained that the integrity of the BharatPe board or individual board members is being questioned time and again through misrepresentation of 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.”
According to a report, BharatPe’s board is setting the stage to terminate Grover’s and his wife’s employment under “cause” provisions of the company’s Articles of Association (AoA) to buy back their shares at a fair market value.
One of the definitions of “cause” is “gross negligence or wilful misconduct by such founder, as determined by a Big 4 Firm, which does not have any relation with the company, after which the Board shall, through a simple majority, take a decision on such Cause event based on the report shared by the appointed Big 4 Firm after following principles of natural justice”.
The Big 4 Firm PricewaterhouseCoopers (PwC) is currently investigating the alleged financial irregularities.
(Edited by Rohan Manoj)
Also read: Why Kotak Mahindra Bank is taking legal action against BharatPe founder Ashneer Grover & wife