To Ashneer Grover, BharatPe is a thing of the past. His LinkedIn profile, which is constantly being updated, says “Own Master” in his current occupation, with ex-MD and Co-founder of BharatPe also finding a mention. Even his harshest critics concede that he has a razor-sharp mind, but he will cross the line if he wants to.

The facts are indisputable. Founded in March 2018, BharatPe turned unicorn in less than four years. Unfortunately, after a series of events leading to Grover stepping down this March, BharatPe marks the first instance of a potentially huge financial fraud among India’s proud unicorn story. One has seen crises breaking out at ShopClues.com or Housing.com, but they were more about disagreements between promoters.

Unfortunately, that is not the case with BharatPe. One is staring at a mess of enormous proportions, which the start-up, once a darling of the investors, is looking to clean up. And there is a good chance that it will be a long haul. Several issues have cropped up, such as a leaked investigation report from consulting firm Alvarez & Marsal, which spoke of a recruitment fraud at BharatPe and fictitious payments (allegedly involving Grover’s wife, Madhuri Jain Grover, a NIFT graduate, who was head of controls at BharatPe). The company’s investors (and that list has some very eminent names) ought to have known what was going on. As things stand, there are far too many questions lying unanswered.

Last July, BharatPe did something quite extraordinary. It gave out high-end BMW bikes to new recruits or they could go for an expensive gadget, as joining bonus. Such bonuses are a norm in the industry, but not goodies of this kind. Grover’s personal life was no different. He owns at least three luxurious homes in the capital (valued at over Rs 20 crore each) apart from a car collection that has a Porsche Cayman, an Audi A6, a Mercedes-Maybach S 650 and also a Mercedes-Benz GLS 350. Pictures of him and his spouse are splashed liberally in social media. To at least one generation of Indians, Grover was a role model—the boy who grew up in middle-class Delhi and studied at IIT Delhi before going to IIM Ahmedabad. He was rich, owned a fancy fintech company, and was the person to emulate.

BharatPe, too, loosened its purse strings at the drop of a hat. In October 2020, the company launched the Team BharatPe television campaign. Directed by Punit Malhotra, known for Hindi movies such as I Hate Luv Storys and Student of the Year 2, it had 11 cricketers as its brand ambassadors—including Indian cricket captain Rohit Sharma, K.L. Rahul, Jasprit Bumrah and Ravindra Jadeja. A year earlier, it had popular actor Salman Khan as brand ambassador. With Grover, there was never a dull moment. Only one thing obsessed him—growth, at a frenetic pace.

In October 2018, BharatPe had just raised $2 million, with Beenext Capital and Sequoia Capital India as lead investors. It was not a huge amount, and it seemed like a good time for Grover to get in some more money. One venture capitalist (VC) Business Today spoke to, recalls meeting Grover during that period. Grover’s need was around Rs 3 crore. The VC recalls Grover liberally using Sequoia’s name to push BharatPe’s cause: “They are fully backing me. You will not lose your money.” Having seen many a business plan in his career, the VC asked for time to think. “I am giving you no more than two days to decide. Chinta mat kar, kyunki tere liye paise bana doonga (don’t worry, I will make money for you),” was the retort from Grover. It was “quite crazy”, the VC recalls. “We were extremely uncomfortable with that kind of aggression. BharatPe was a small entity, but Ashneer’s confidence bordered on cockiness, and we did not go ahead.”

Often, his brashness landed Grover in trouble. Top it up with an insatiable desire to be visible or even dominate, and you have a very potent concoction. Take the case of grocery delivery start-up Grofers, where he was the CFO. A former Grofers official says it hurt him that the founders—Albinder Dhindsa and Saurabh Kumar—were constantly in the limelight: “No one from the outside world knew Ashneer and he could not deal with that.” In his letter to the BharatPe board where he said he was resigning as MD and Director, Grover said he helped build Grofers from scratch. “That’s a bit strange since he was never a part of the founding team,” says the same person.

Equally confounding was the decision to move to PC Jeweller to take over as head of new business in November 2017, before moving out a year later to become CEO and Co-founder of BharatPe. His LinkedIn profile eloquently mentions “leading digital transformation and strategy at the second largest jewellery retailer in India”. Why he chose to join PC Jeweller, not really a big name, is hard to understand.

BharatPe followed right after. The company was actually founded by Shashvat Nakrani and Bhavik Koladiya in March 2018, before Grover entered the scene in October that year; Koladiya sold his stake to Nakrani and Grover, which made the latter a Co-founder. Nakrani remains in that position, but nothing much is known about Koladiya. His LinkedIn profile says “Unemployed” and based in the Greater Pittsburgh Region.

The VC community is rife with stories on how Grover “could not stand” Paytm’s Founder & CEO, Vijay Shekhar Sharma. “The difference is that Vijay always maintained relationships while Ashneer was quite the opposite. Even today, when the Paytm stock is floundering, Vijay has kept a low profile, while Ashneer is in a soup because he continues to rub people the wrong way,” says a VC who has known both of them. It was not just a question of running down Sharma in private, but also making harsh statements in public.

Neither Ashneer Grover nor BharatPe responded to Business Today’s detailed questionnaire.

The pace of events from the time BharatPe set up the first interoperable code in August 2018 to becoming India’s 19th unicorn last September was stunning, not just for the money raised but the unbridled expansion into new business areas. Grover often said in earlier media interviews that “the pace of growth is non-negotiable”. He most definitely kept his word.

Less than a year after the first QR code was launched, BharatPe was in the lending business. And in 2020, it was time to launch a card machine, BharatSwipe. The breakthrough moment came last October when the Reserve Bank of India issued a small finance bank licence to the consortium of Centrum Financial Services and BharatPe, to eventually unfurl an entity called Unity Small Finance Bank. Exactly four months earlier, the duo had acquired the troubled PMC Bank.

“Ashneer was moving too fast, with only valuation at the back of his mind. The train wreck was waiting to happen and the symptoms were clear to a lot of people except BharatPe’s investors,” says an investment banker closely involved in the start-up space. According to him, a large chunk of VCs are obsessed with growth and that is where the challenge exists. “Most of them have spent limited time in the business and often miss seeing the full cycle. Chasing growth is what takes away most of their time.” That approach comes with its own risk. “PE (private equity) funds are more focussed on issues around corporate governance or the appointment of auditors or putting processes in place. VCs do not necessarily have that level of involvement,” he adds.

For Grover, the rub was Sequoia. The VC firm’s relationship was always frosty with the folks at BharatPe, rather with Grover. In mid-2020, Sequoia India’s Managing Director, Harshjit Sethi, was at the receiving end of Grover’s ire and expletives were used during one conversation. One VC wryly remarks that in an entity like BharatPe with multiple shareholders (see A Lot at Stake), “a crisis is nobody’s problem and resembles the traditional Indian joint family”.

Before the crisis relating to alleged misappropriation of funds or other serious lapses in corporate governance actually broke out, it is hard to imagine that none of the investors knew what was going on. “The fact is, most start-ups where one individual is the face, regardless of prominent investors, function like a lala ka dukaan (mom-and-pop store). One may call them entrepreneurs, but the thinking is quite old-fashioned,” says the VC quoted earlier. Grover tried to make BharatPe a professional outfit by bringing in Suhail Sameer (as also former SBI Chairman, Rajnish Kumar), an old McKinsey hand, as Group President before making him CEO last August. Like Sequoia, this is another relationship that turned sour. Meanwhile, an email from Business Today to Sequoia met with a terse response—“We don’t have any comments to share.”

According to Shriram Subramanian, Founder and MD of InGovern Research Services, a corporate governance advisory firm, affected stakeholders due to fraud in an unlisted entity like BharatPe are largely the VC or PE firms. “Sometimes these firms may turn a blind eye to financial shenanigans as valuations take precedence over values. Corporate governance of unlisted firms is under the ambit of the Indian Companies Act,” he says, adding that when companies such as Zomato and Nykaa get listed, the nature of stakeholders changes and higher corporate governance standards are imposed.

It is gathered that the folks at Centrum, too, were not amused about Grover’s purported outburst against a relationship manager at Kotak Mahindra Bank after he did not get any shares during Nykaa’s IPO. A source familiar with the development says the worry was about the need to keep things low-profile in banking, especially when the project is just waiting to get off the ground. “It is a sector where one is constantly under scrutiny and this did upset a lot of people at Centrum,” he explains. Word got back to the BharatPe board and soon it transpired that the Kotak episode was just the tipping point, eventually leading to Grover’s exit.

Responding to a query from Business Today, a Centrum spokesperson said, “Our partnership with BharatPe is institutional. Ashneer Grover had no individual, executive or board role at Unity Small Finance Bank and its operations are not impacted. Centrum had no role to play in the issues involving BharatPe, its board and Ashneer Grover. This is their internal matter and does not involve or impact Unity Small Finance Bank.”

BharatPe is now a company without a visible co-founder and, given how inextricably linked Grover was with the entity, VCs think it is a bit of a challenge. Of course, there is many a legal implication that Grover will need to contend with. One potential danger is his decision to step down within 10 minutes after receiving the agenda for the board meeting. Arush Khanna, Partner, Numen Law Offices, says not only is the timing likely to be impugned but also the fact that Grover has not adhered to the provisions of the AoA (articles of association) as well as the SHA (shareholders’ agreement).

“The AoA states that if a founder terminates his employment without the approval of the board and the investors representing investor majority threshold, then the restricted shares (stock that cannot be sold, due to a limitation associated with it) held by such a founder shall be bought back by the company at the lower of the fair market value or the price paid by the relevant founder for acquisition of such restricted shares. A similarly worded requirement is also present in the SHA,” says Khanna. That’s not the end of the story. Khanna maintains it is quite likely that, with this as the backdrop, “BharatPe and/or its existing shareholders [can] trigger the buyback clause in the AoA as well as the SHA to the extent of restricted shares which constitute 1.4 per cent of the 9.5 per cent stake held by Mr Grover.”

Although Grover is out of the picture, there are potentially more nasty surprises. Khanna is clear that since the allegations mainly relate to fraud and misappropriation of funds, an application can be referred to the tribunal to direct the SFIO (Serious Fraud Investigation Office), through the central government to investigate into the affairs of the company. “If found guilty of fraud, Mr Grover or anyone from his family involved therein may be liable under Section 447 of the Companies Act and may have to pay up to three times the amount of money involved in the fraud/misappropriation. Additionally, a complaint may also be preferred before the Economic Offences Wing under Sections 405, 406 and 420 of the IPC for cheating and criminal breach of trust,” he says.

And what of BharatPe, the unicorn? Serial entrepreneur and promoter of bigbasket, Portea Medical and HomeLane, K. Ganesh, picks his words carefully: “Grover’s ouster/resignation would not impact the company operations or its execution plans, but there could be normal fund-raise challenges and valuation may get subdued in the near term.” To him, the distraction posed by the entire controversy or the lack of continuity and a face of the company are concerns for BharatPe. “However, a company of such a large scale and size should not have any problems with fund-raise in a few months from now if it is able to show its performance to the investors.”

A large chunk of industry trackers and VCs believe the way ahead will be arduous. “It will be tough for investors to commit capital,” says one VC. “Regardless of what people say about Paytm or the stock underperforming, investors are comfortable with Vijay Shekhar Sharma being around. The presence of a founder makes a huge difference.”

When one considers all factors, the past three months have been quite forgettable for Grover. It saw his reputation being blown away, as also his position from the company he helped build. The future of BharatPe is at best unknown and perhaps even dangerously poised. Its investors could lose a lot of the money they put in with the hope that Grover would build a large fintech firm. However, the reality is that the most prominent face of BharatPe is not there anymore. It is left to the board and its CEO, Suhail Sameer, to infuse confidence among investors and employees.

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