BharatPe Board chairman Rajnish Kumar on February 5 said the board will launch “corrective action” based on the outcome of an audit report by risk advisory firm Alvarez and Marsal that examined corporate governance issues mainly concerning personal investments by co-founder Ashneer Grover.
“Of course, there will be corrective action depending on what the report says,” Kumar, the former boss of State Bank of India, India’s largest lender, told Moneycontrol in an exclusive interaction.
These were Kumar’s first comments on the raging controversy in BharatPe, which is under intense investor scrutiny over alleged corporate governance lapses and a bitter internal tussle between Grover and the board.
BharatPe, a payments company that services shop owners with QR codes, engaged Alvarez & Marsal to launch an independent governance audit. On February 4, Moneycontrol accessed the report that suggested inconsistencies in dealings with vendors. The report highlighted deals with vendors and payments to consultants that are non-existent.
BharatPe also roped in consultant PwC for a full-scale investigation into the company’s practices, including accounting, approval processes, expenses, and hiring.
Report not received yet
Kumar, a veteran banker, said the board is yet to receive the report by Alvarez and Marsal. He joined the BharatPe Board as chairman in October 2021.
BharatPe together with Centrum Financial Services promotes Unity Small Finance Bank, which has acquired crisis-ridden co-operative bank Punjab and Maharashtra Cooperative (PMC) Bank. The amalgamation process, which came into effect on January 25, is still half way.
Asked how the larger corporate governance issues in BharatPe were ignored or left unnoticed despite having banking experts such as him, Kumar said, “I joined the board in October 2021.” This is an apparent reference that issues at BharatPe have been brewing for several months.
To a question on whether he will order a probe on the alleged irregularities in BharatPe, Kumar said he will take a call after the Alvarez and Marsal report is received by the board. “Let’s see,” said Kumar.
Kumar’s comments are significant as BharatPe is facing a raft of issues, including a severe dent in image.
BharatPe counts Tiger Global, Sequoia Capital and others as marquee investors.
Key findings
According to the Alvarez and Marsal report, BharatPe claimed to pay recruitment fees to hiring consultants for the employees they recruit. Alvarez and Marsal could confirm that some of the employees, as claimed to be hired through consultants, were brought on board.
However, the said employees have revealed that they had no interaction with any consultants in the process and have no knowledge of their existence.
Also, in three instances of payments made to these consultants, the report finds that Madhuri Jain Grover (married to Ashneer Grover) herself received invoices for payments and forwarded them to the accounts team.
These invoices were created by Shwetank Jain, who is the brother of Madhuri Jain Grover, according to the report. The vendors who received payments as recruitment expenses do not have any web pages or portals and the invoices provided by them too have similarities.
The report pointed out that all these invoices had the same typeface, similar email and physical addresses and even the same bank branches in some instances. "All of them, except one, have a Panipat connection. It may be mentioned that Madhuri Grover is originally from Panipat," the report flagged.
On February 4, Moneycontrol reported that the Reserve Bank of India (RBI) too is looking into any possible instances of corporate governance lapses at the startup.
BharatPe, in a statement issued on February 4, said Board is yet to receive an interim or final governance review report and that it has followed due process.
The statement comes after BharatPe Managing Director Ashneer Grover told Moneycontrol in an interaction that the board was arm twisting him into exiting the company.
"We are deeply pained that the integrity of the BharatPe board or individual board members is being questioned time and again through misrepresented facts and baseless allegations. The board in all its actions has followed due process in the best interest of the company," the company said in a statement.
Grover has accused CEO Suhail Sameer of siding with the investors to oust him from the company.
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