We've moved away from being a founder-run company: BharatPe's Suhail Sameer

In a Q&A, the firm's CEO asserts that the company is now professionally run and is focused on being IPO ready

The Ashneer Grover saga is behind him, governance issue is something that he wants to put a lid on, and going public is clearly on the agenda. In an interview with Subrata Panda and Shivani Shinde, BharatPe CEO Suhail Sameer asserts that the company is now professionally run and is focused on being IPO ready. Edited excerpts:

What kind of an impact did the Ashneer Grover saga have on the business? Also, what has the progress been on the governance issue?

There was zero impact on the business. The beauty of the company is that it's a tech-run outfit. Through all the chaos, the business kept growing 10 per cent month on month. Last August, our annualised revenue was $50 million and today it is $240 million. On the people front, there was a 2–3-month period during which the team was asking us on what was going on, but we couldn't tell them then. Of course, that incident should not have happened. But did we do the right thing eventually? I think people give us very little credit for calling it out.

We have since strengthened our board since, set up controls in places where there was no control. We have an external audit firm, and now we have set up an internal audit team as well. We are hiring an internal audit person. This we had to do anyway because we are crossing the Rs 200-crore revenue threshold. We have also hired a chief financial officer and a chief human resources officer. So, we have essentially plugged the loopholes. We feel very confident that we will have one of the best corporate governance structures in India.

We have also moved away from being a founder-run company. We are now a professionally run firm. Shashvat (Nakrani) is now the only remaining founder. We have also reclassified him and he is no longer a promoter.

What role did the investors play during this whole saga?

I think they all were on the right side. There is too much at stake for them to say that let's brush this corporate governance issue under the carpet. So, they were fully supportive through the process and are very supportive now. Most of them came back and said that if you need more money, we are ready to put in. But we have enough money to last the next decade. We have been worthy of that trust by growing the business.

You have indicated that you will go public in the next 18-24 months…

I want the company to be IPO-ready. To go to the public market or not is a structural call we have to take based on where we think we will get good valuations–a public market or private market. To me being IPO-ready means the merchant business is scaled and profitable, consumer business is at some scale where it has a great operating matrix and if it is losing any money, it has to be only on customer acquisition, and the bank is up and running with all the good products a bank should have. The merchant business should be profitable in 3-4 months. It would have been profitable in the next three months had the digital lending guidelines of the Reserve Bank of India (RBI) not taken away some of the tech bandwidth in solving the operational issues. In the consumer business, as soon as the operational issues because of the digital lending guidelines are solved, we will cross the Rs 1,000-crore mark, which will make us the third-largest private player in the credit card space.

As for the bank, it is live for all purposes but the digital products will go live around March-April. If these three things are done, I think we'll be IPO-ready. Once we sort these things out, we will then take a call whether to be public or private. If we want to be public, our current thought is around June–July, 2024. So, the decision to go public or not will be taken by June 2023. But that conversation is only viable if I am IPO-ready.

Is public listing a good idea for companies such as yours?

I think public markets are smarter. I want to be profitable first. IPO valuations do not matter much. Valuation comes into play when you are selling. My bias to go public rests on the fact that I don;t think India has a deep enough private equity market where you can be a $100 billion private firm. Therefore, an IPO is the right step forward.

By when will the company be profitable?

If I am breaking even on the merchant side in 3-4 months, then in the next 7-8 months this business will be churning at least $1 million a month, so that on an overall basis I am breaking even. The consumer business I want to run at negative $1 million a month. Whatever profit I make on an operating basis, that plus $1 million I will redeploy to grow the business. Today the cash burn is not much. In the merchant business, we lose $1.5 million a month. It was $8 million six months back. And this is not because we have done any cost cutting, but because the business has scaled.

What impact have the digital lending guidelines had on the company?

We were a payments company, so a lot of the things that the guidelines had mandated, we were already doing. For us on the merchant side, the money flow has to change. When we disbursed a loan, the money would come from an NBFC to a BharatPe-designated account and from there it would go to the merchant account, but now it has to go directly to the merchant account.

Operationally this isn't a big concern, since this it be solved through APIs with 10 people from the tech team working for three weeks. We used to charge 2 per cent processing fee to the consumer. Now, the consumers will pay it to the NBFCs, who then will pay it to us. There are 6-7 money flow-related changes that we have to make, which will consume half of my tech team for the next two months. And that is why we do not have time for growth related activities.

On the card side, there is a lot more work to be done but thankfully it is not a large chunk of our business. For us it impacts 20 per cent of our consumer business. So, we will come up with co-branded credit cards and we are working with multiple banks such as Bank of Baroda, Union Bank of India, Yes Bank, and Kotak Mahindra Bank.

Eventually, Unity Bank will also be a partner but it will be a second or third bank partner. There is lots of interest from banks because the business has done well. RBI has given time till November 30 for the guidelines to kick in. Ideally, we would want the partnership to be live within that time but if it doesn’t happen then when we are onboarding a customer, we will give them all the options and say “credit card coming soon”.

What is the status update on Unity Small Finance Bank?

PMC Bank depositors have gone. About Rs 1,400 crore has come back as they chose to invest it in the bank. The existing book of Centrum has moved into the bank. The business has scaled in the past two quarters. The bank has become profitable on an operating basis. However, on an EBITDA basis, it is still loss-making. But the thinking is that over the next two quarters, everything except the Rs 4,000 crore provisioning to pay DICGC will be taken care of and in the following two quarters, hopefully it will turn EBITDA positive. So far, the bank is running ahead of plan. The technology onboarding will go live in January or February of next year. Once the bank goes live, the bank can be one of our partners on loan book, liabilities like many other partners of ours. This is long-term thinking but that will happen at an arm’s length.