BharatPe orders independent audit amid co-founder's audio clip controversy

Ashneer Grover recently went on a voluntary leave of absence till March-end amid backlash regarding him allegedly speaking in abusive language with a bank employee

Amid growing concerns over governance issues, fintech unicorn BharatPe on Saturday announced that an independent audit of its internal processes and systems is being conducted.

The development comes a few days after Ashneer Grover, co-founder and MD, BharatPe went on a voluntary leave of absence till March-end amid backlash regarding him allegedly speaking in abusive language with a Kotak Mahindra Bank employee. Grover’s wife, Madhuri Jain Grover, who is head of controls at BharatPe, was also part of the conversation. She has also reportedly gone on leave. An audio clip on Twitter showed the couple allegedly insulting the manager for failing to get an allotment and finance for Nykaa's IPO. Grover, in a tweet, initially said the clip was fake but later withdrew the comment.

BharatPe has appointed consulting firm Alvarez and Marsal to conduct an independent audit to strengthen internal processes and systems.

 “The Board of BharatPe is committed to the highest standard of corporate governance at the company and is doing an independent audit of the company's internal processes and systems,” said the company. “BharatPe, through its legal firm, Shardul Amarchand Mangaldas has appointed Alvarez and Marsal, a leading management consultant and risk advisory firm to advise the Board on its recommendations.”

Many in the industry say that, quite apart from the Kotak controversy, concern had been growing about the work culture at BharatPe receiving increasingly bad publicity, along with Grover’s presence on the popular start-up TV show Shark Tank when some of his comments while talking to entrepreneurs pitching for funds sounded rude.

According to other sources, BharatPe’s board of directors, including top bankers such as former SBI Chairman Rajnish Kumar and ex-Union Bank Chairman Kewal Handa and investors from Sequoia India, Ribbit Capital, and Coatue Management, have been emphasising for sometime now that Grover needs to leave.

“The Board strongly believes in protecting interests of all stakeholders, including customers, employees and partners,” said BharatPe. “We request the media not to speculate until audit findings have been completed."

According to Reuters, the audit will assess if BharatPe's senior executives are making proper internal disclosures about personal investments and check for conflicts, leading to a new code of conduct.

BharatPe has come under intense investor and media scrutiny after co-founder Ashneer Grover sought damages from Uday Kotak, head of Kotak Mahindra Bank, alleging that the bank declined financing for a personal investment, Reuters reported. The report said BharatPe has come under intense investor and media scrutiny after co-founder Ashneer Grover sought damages from Uday Kotak, head of Kotak Mahindra Bank, alleging that the bank declined financing for a personal investment.

Private sector lender Kotak Mahindra Bank, in turn, this month said that it was pursuing appropriate legal action in Ashneer Grover case. Grover who had sent a legal notice to the bank on October 30, 2021, for allegedly failing to provide initial public offering (IPO) financing in the IPO of FSN E-Commerce Ventures Ltd, or Nykaa, and to allocate its shares in the HNI/NII category.

“The (legal) 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,” said the bank in a statement.

Analysts said such developments are not good for the business of BharatPe, which has ramped up the reach of its PoS (point of sale) business (BharatSwipe) by 25x to over 250 cities in the past 12 months. Since the launch of its POS business in the second half of 2020, the company has deployed more than 125,000 BharatSwipe machines across offline shops. Achieving this feat in a short span of close to one-and-a-half years, BharatPe recently said it had done the fastest-ever scale-up on POS business in India.

BharatPe, which is now the No. 3 private PoS player in India, also said that the company has witnessed 200 per cent growth in the annualized transaction value from its PoS business, over the past 12 months. The segment now contributes about 25 per cent to the overall payments Transaction Processed Value (TPV) of the company. This growth can be attributed to the expansion of the company’s PoS business in non-metro cities, with more than 50 per cent of BharatSwipe machines being deployed in tier-2 and tier-3 towns and cities since 2021. BharatSwipe has been universally adopted by small merchants and retailers across categories including grocery, food & beverage, electronics and durables, among others.

“BharatSwipe has been the biggest growth story in India’s POS industry- from making a humble beginning with 10 cities in the middle of Covid in 2020, to processing $4 billion payments annually today,” said Suhail Sameer, CEO, BharatPe recently. “Over the course of last year, we have witnessed multi-fold growth in our POS business, led by our aggressive expansion plans in tier-2, -3 and -4 towns and cities.”

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Disclosure: Entities controlled by the Kotak family have a significant holding in Business Standard Pvt Ltd.