Explained: Ashneer Grover resigns from BharatPe, is it the end of the corporate battle? - Times of India

Explained: Ashneer Grover resigns from BharatPe, is it the end of the corporate battle? – Times of India

[ad_1]

Amidst an ugly corporate tussle with the company’s board, Ashneer Grover, the embattled founder of fintech unicorn BharatPe, has resigned as the managing director and a director. Grover, in an email sent to the fintech’s board, said that he had been ‘vilified’ and treated in the ‘ most disrespectful manner’ since the beginning of the year.
Grover’s resignation comes days after Singapore International Arbitration Centre (SIAC) rejected his emergency plea, against the ongoing ‘governance review’ within the company. Earlier this month, he had filed an arbitration plea to stop a probe into alleged financial mismanagement in the company. He is also seeking indemnity against future action by the company through the plea.
The corporate drama began two months ago after an audio clip surfaced online where Grover allegedly abused a Kotak Mahindra Bank employee.
“I write this with a heavy heart as today I am being forced to bid adieu to a company of which I am a founder. I say with my head held high that today this company stands as a leader in the fintech world. Since the beginning of 2022, unfortunately, I’ve been embroiled in baseless and targeted attacks on me and my family by a few individuals who are ready not only to harm me and my reputation but also harm the reputation of the company, which ostensibly they are trying to protect,” Grover wrote in his resignation letter.
“From being celebrated as the face of Indian entrepreneurship and an inspiration to the Indian youth to build their own businesses, I am now wasting myself fighting a long, lonely battle against my own investors and management. Unfortunately, in this battle, the management has lost of what is actually at stake – BharatPe,” he said. “So when do we end this? We end this now. While I maintain that you will not find a single act of impropriety against me, I will not be participating in your charade. Since you clearly believe you can run this Company better without me – I am leaving you with this challenge. Build incrementally even half of the value I created so far – I am leaving you with three times the funds I’ve utilized till date. I hereby resign as the Managing Director of BharatPe, effective immediately,” the letter added.
Grover had announced on January 19, that he was taking “voluntary leave” of absence , until the end of March, 2022. His resignation comes amid talks to settle the matter by buying out Grover’s stake in the unicorn. Grover’s stake of 9.5 per cent in the company was worth Rs 1,915 crore based on the last funding round in August 2021, when the company was valued at $2.8 billion. But Grover had asked for Rs 4,000 crore to buyout his stake, a demand that has reportedly been reject by the board and its investors.
Madhuri Jain sacked
The corporate battle had taken a turn for the worst last week after the sacking of Madhuri Jain Grover, Ashneer’s wife and head of controls at the company, over allegations of misappropriation of funds.
The board has also cancelled her stock options, following which Jain posted severalf video clips of office revelry on Twitter and alleged that the company’s top brass indulged in “drunken orgies”, termed the company’s board as “chauvinistic”, said she has been treated like an object. She also labelled the ongoing governance review in the company a ‘witch-hunt’.
Jain’s name cropped up during an ongoing independent audit of BharatPe’s internal processes and systems by Alvarez and Marsal, which was roped in by the Tiger Global-backed startup. While the full report is yet to be submitted, Madhuri Jain Grover allegedly used company funds for personal beauty treatments, buying electronic items and family trips to the US and Dubai. She also allegedly paid her personal staff out of company accounts and produced fake invoices, reported Press Trust of India, quoting sources. Ashneer Grover, who is also the co-founder of BharatPe and is on a three-month leave, has denied all allegations.
BharatPe, which allows shop owners to make digital payments through QR codes, came under intense investor scrutiny ahead of its Initial Public Offering, after Ashneer Grover sought damages from Uday Kotak, the head of Kotak Mahindra Bank. Grover has alleged that the bank turned down his request for Rs 5 billion to invest in the IPO (Initial Public Offering) of online beauty products company Nykaa at the “eleventh hour.”
We explain in detail what has happened so far and why the battle between the board and Grover keeps getting uglier:
What is Bharat Pe?
BharatPe, which competes with apps such as SoftBank’s Paytm and Google Pay in the country’s booming payments market, is valued at roughly $3 billion and is hoping to file for IPO within 18 months The company lists Tiger Global, Sequoia Capital and others as “marquee investors”. And Sequoia Capital India, Coatue Management and Ribbit Capital are the three largest shareholders of BharatPe which hold the right of first refusal (rofr) on founder’s shares and tag along rights.
BharatPe was founded in 2018 and offers a range of fintech products that cater to small merchants and also helps them accept digital payments. . BharatPe has faciliated the disbursement of loans totalling over Rs 3,000 crore to its merchants since its launch.
Grover had spent his initial years as an investment banker at Kotak and later served as the chief financial officer at delivery service Grofers. Coming from an investment banking background, Grover scaled his fintech’s valuation to almost $2.85 billion within four years of launch and raised more than $600 million in equity funding from top funds, including Sequoia Capital India, Coatue Management, Insight Partners, Dragoneer Investment Group, Steadfast Capital and Tiger Global. BharatPe has also got an in-principal small finance bank licence, through a joint venture with Mumbai-based Centrum Financial Services, to take over the cooperative lender Punjab and Maharashtra Cooperative Bank and relaunch a small finance bank.
So what really happened?
It all began with an audio leak
On January 19, Ashneer Grover, cofounder and managing director of BharatPe, took voluntary leave until the end of March. The voluntary leave came two weeks after after a recording of a phone conversation was leaked online in which a man, alleged to be Grover, could be heard abusing and threatening an employee of Kotak Mahindra Bank after missing out on the IPO allotment for Nykaa’s initial public offering despite being promised one. While Ashneer first termed it as a “fake audio by some scamster trying to extort funds, he later deleted the tweet. Kotak Mahindra Bank is now pursuing legal action against Ashneer over “inappropriate language” used against their employee. The bank had acknowledged that Grover and his wife had in October sent a legal notice to it, without elaborating on the reasons for the same.
Toxic work culture
Industry experts were quick to point out that apart from the Kotak controversy, concerns were growing about the toxic work culture at BharatPe, along with Grover’s presence on start-up TV show Shark Tank when some of his comments to entrepreneurs pitching for funds sounded rather rude and harsh. Reports also said that due to his headstrong personality, he was made to step back from his role as the CEO and made the MD. Some media reports also suggested that due to foul and aggressive language becoming the norm at BharatPe, there was an exodus of top-level talent from the company.
God syndrome
Industry experts call this the ‘ God syndrome’, when one man is single-handedly driving a company’s growth and arrogance gets the better of him. “What happens is that whatever they (founders) want should happen — and it does (happen) many times. But when it doesn’t, it comes out as extreme anger and frustration.… Ashneer’s alleged remarks over the call are a typical example of this,” the founder of a leading startup was quoted as saying by Economic Times.
“Grover has been allowed to get away with this so far. As long as he was getting new investors at a higher valuation, the board ignored everything else. It all boils down to money,” a VC who wanted to invest in Bharat Pe but backed out in the last leg of due diligence told ET.
In August 2020 Grover also had a spat with Harshjit Sethi, a managing director at Sequoia Capital India, which holds more than 19% stake in the company after BharatPe’s Series B funding was delayed due to Sequoia not committing to the round. Sequoia had also raised concerns about Grover wanting to partially sell shares in a secondary transaction.
“Messages and threats from you (Grover) over the last few days and months have been hurtful and disappointing… Specifically we have heard your message of not wanting us on the cap table […] We need to have a decisive conversation about how the relationship between Sequoia and BharatPe changes going forward,” Sethi wrote in a mail to Grover in August 2020.
The financial irregularities angle
About a week after Grover went on leave, his wife Madhuri Jain Grover – who also works with the company – followed suit as the firm decided to take an independent audit of its internal processes and systems. . Madhuri had the designation of Group Head – Controls at BharatPe. The company appointed Alvarez and Marsal to conduct the independent audit after Bharat Pe came under intense media scrutiny , signalling bigger problems surrounding the board of directors and the founder.
Allegation 1: BharatPe routed money through fake HR consultant firms linked to each other and to Madhuri Jain’s brother Shwetank Jain.
Allegation 2: BharatPe inflated transaction values by some merchants and that some of these vendors may even have been fake.
Select screenshots of Alvarez and Marsal early reviews that were leaked on social media show inconsistencies in dealings with vendors and have flagged payments to vendors and consultants that are non-existent. The screenshots show that payments of Rs 53.25 crore were made towards vendors that do not exist and the company incurred a loss of Rs 10.97 crore in these dealings. The report also states that BharatPe claims to pay recruitment fees to consultants for the employees they recruit for the company. Although Alvarez and Marsal could confirm that some of the employees, as claimed to be hired through consultants, were brought on board, the said employees have revealed that they had no interaction with any consultants in the process and have no knowledge of their existence.
The report mentions Madhuri Jain received at least three of these invoices herself and forwarded them to the company for payments. The invoices were created by Shwetank Jain, Jain’s brother.
The review also found spends of Rs 3.77 crore on vendors with a connection to Panipat, which is Madhuri’s home town. These vendors all had commonalities such as similar email addresses, similar physical addresses, similar formats, same bank branches, etc. and were all based in Panipat.
This is not the first instance of financial irregularity
BharatPe’s dealings with non-existent vendors were also highlighted after an investigation undertaken by the Directorate General of GST Intelligence (DGGI) in 2021 when it conducted a search operation in the company’s head office on October 21, last year. At the time, DGGI found close to Rs 51 crore was paid to 30 non-existent vendors. It issued a summons to a BharatPe official on November 1, 2021 on this matter, to which the company responded with a request to waive the show cause notice in lieu of paying the dues and necessary penalties. This letter to DGGI was signed by Deepak Jagdishram Gupta. The Alvarez & Marsal report says Gupta is Madhuri’s brother-in-law.
In addition, to correct its accounts post DGGI’s investigation, BharatPe reversed input credit of Rs 9.54 crore and additionally paid a penalty of Rs 1.54 crore. One of the questions raised in Alvarez & Marsal’s report is why BharatPe settled this matter, causing a loss of Rs. 10.97 crore, without legal representation. A&M also recommended to the board that this requires a deeper probe as to why the company was dealing with ‘non-existent vendors’.
What did Bharat Pe have to say about these leaks?
On February 4, BharatPe issued a statement saying it was yet to receive a final report from Alvarez & Marsal.
“We are deeply pained that the integrity of the BharatPe board or individual board members is being questioned time and again through misrepresentation 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. We request everyone, including the media, to show restraint and allow the governance review to take place in a thorough manner,” it said in a statement.
What does Grover have to say about these financial irregularities?
Reports suggest that Grover could be asked to leave the company permanently, and hence it is not surprising that he has hired lawyers too. In an interview with moneycontrol, he claims “What am I scared of? I am the only startup in India which has built $6 billion of value by spending less than $150 million. Forget the audit, forget the allegations, just put the numbers of Razorpay, Paytm and CRED, any fintech which is valued higher than me. How much money have they spent and what’s the value being created? So by that logic, anyone who spent more money than me has done a fraud.”
He also claimed that the company board is trying to ‘arm-twist’ him to negotiate and take lesser money for his shares. “If you don’t need me, I don’t want to make value for you either. I have created two unicorns already, I have the capacity to create three more. So make me an offer, I’ll move my way, you move yours,” he said. Grover also alleged that the company’s board has pursued tactics of “corporate intimidation” through the appointment as well as introduction of law firm Shardul Amarchand Mangaldas in board discussions.
Grover seeks removal of CEO Suhail Sameer as battle gets uglier.
Grover had written to board members on February 2, asking them to remove CEO Suhail Sameer from the board.
In fact the same day, it was revealed that Grover had written to board members on February 2, asking them to remove CEO Suhail Sameer from the board. Sameer was hired by Grover in 2020. He was appointed as CEO in August 2021. Around the same time, Grover assumed the role of managing director at BharatPe. Grover’s attempt to oust Sameer signals strained relations between the two amid the two.
A week later, on February 10, Madhuri, wrote to Alvarez & Marsal (A&M), questioning the consulting firm about recent media leaks. Jain’s letter said that she was considering legal action against the firm, and has demanded an internal how the contents of the probe undertaken by A&M were allegedly ‘leaked’ Jain said that the fact that the findings of the report were leaked to the media makes her “firmly believe” that the “enquiry” was aimed to solely “tarnish” her reputation.
The next day BharatPe chief executive Suhail Sameer told employees that findings of an ongoing governance review of the Delhi-based firm will be shared with the board in a couple of weeks while assuring them that the fintech firm has sufficient funds to tide over the crisis. He also said that the company is “under constant scrutiny and spotlight” and “what is being written is nothing but unsubstantiated rumours.”
A week later, Grover sought protection from any future action against him as part of his settlement and also filed an arbitration plea in Singapore, looking to protect his 9.5% stake in the company. The company and Grover are reportedly in parallel talks to settle the matter through a buy-out. Grover’s stake of 9.5 per cent in the company was worth Rs 1,915 crore based on the last funding round in August 2021 when BharatPe was valued at $2.8 billion. But Grover has said that he will leave the company only if he is paid Rs 4,000 crore, valuing the company at $6 billion.
The Madhuri Jain termination:
On 23 February, BharatPe sacked Madhuri Jain, the company’s controller and Grover’s wife, on charges of misappropriating funds. Jain had been in charge of BharatPe’s finances since October. The removal of Jain from BharatPe comes against the backdrop of Ashneer launching an attack on an investor in BharatPe Rajnish Kumar. After being fired, Madhuri Jain posted an audio clip on Twitter where Ashneer Grover and co-founder Bhavik Koladiya were allegedly heard talking about a meeting between them, including Kumar, that ended with abusive words. In the audio clip, Grover accused Koladiya of leaking probe information to the media, a charge Koladiya has earlier denied.
Now Grover, in a latest letter sent to the company addressing Kumar and co-founder Bhavik Koladiya, alleged that the internal governance review was biased. However, Kumar has dismissed these allegations and maintained that Grover is only spreading lies and there is no substance in his allegations of the probe being biased.
The company had earlier responded to Grover’s letter, saying: “You have been indulging in spreading false and accusatory information about the senior management of the company to the family members and/or spouses of the said members of the senior management.”
“Such abhorrent conduct on your part is completely unwarranted, and the company takes strong objection to the same. You are again called upon to cease and desist from spreading false and inflammatory content about the members of the senior management of the company. Your conduct in this regard is completely unbecoming of a managing director of the company,” BharatPe had said.
Grover’s resignation:
Grover resigned minutes after receiving the agenda for the upcoming board meeting which was to include the findings of the PWC report regarding his conduct and considering actions based on it. Grover said that he is now wasting himself “fighting a long, lonely battle” against his own investors and management. He called the entire episode a “battle of egos”.
Grover’s resignation comes a day after an emergency arbitrator in the Singapore International Arbitration Centre (SIAC) held that there was no ground to stop governance review at the fintech firm, in a massive blow to Grover who was fighting a boardroom battle to maintain his position in the company. The emergency arbitrator (EA) had rejected all the five grounds of his appeal and denied a single relief, it was understood. Grover had pleaded before the arbitrator that the preliminary investigation was invalid because it was in violation of shareholder agreement and articles of association and the company has no authority to conduct such an investigation.

10:47 AM (53 minutes ago)

to me, Indrajeet, Payal, Armaan, Kunal, Sumit

pls publish



[ad_2]

Source link

Leave a Comment

Your email address will not be published.