Exclusive: BharatPe board united on Ashneer Grover’s issue, reviewing internal governance processes across the business: CEO Suhail Sameer

Given that he was a key man of the business who was also front-ending all relationships with the investor community, what will be the impact on business if Ashneer Grover cannot return to the company?

Ashneer Grover has been central to getting us this far. There is no shying away from that. But any company does not run solely on one individual. We built a very strong leadership team. We have 15 CXOs in the company who are all celebrated and come from large multinationals.  I think it was always the board’s vision, including Ashneer’s, to build a leadership team which is not dependent on one person. And I think that’s where we are and we will see how this unfolds. But any company is sort of a culmination of the full leadership team and that’s what we’ve implemented so far. We’re very confident the company will continue to do well. We’ve come on the back of our best year, 8x in the payments we processed, and the company management in the CXO group will continue to sort of keep at it and keep growing at the rate we have been growing.

There has been a lot of criticism about the leniency by the BharatPe board in terms of taking action. Did the board ask Grover to go on leave of absence? Why is there no investigation or a public apology demanded by the board?

I will not comment on his personal matters but this came from Ashneer that he should sort of take a leave of absence and the board was…fully supportive of this decision. As I said, the board is looking at it and we will decide what is in the best interest of the company and, most importantly, our customers and employees. Anything beyond that is sort of stepping outside my mandate. The discussion at the board, I’m not at liberty to get into.

Is the board united in the decisions on this particular matter?

Yes, absolutely. We have a stellar board, as you know. We have some of the veterans of the industry and we have some of the best investors in the world on the board. And we have management on the board. So the board will deliberate and come to a unanimous decision.

There are reports of Grover’s worsening relationship with your single largest shareholder, Sequoia. Is there a larger investigation on the conduct of the founder now?

No, the board is looking at the full governance side and we’ll see what (comes of it). Right now it’s too premature to come to a conclusion on what the board is thinking and I am not the full board, so it’s unfair for me to talk on this. I think we will come back with a collective answer. This is not a review of Ashneer. This is the board reviewing internal governance. So that’s sort of the full picture.

Do you think Grover is in sync with the way the board is moving on the corporate governance issues or do you foresee a retaliation from the founder if the board takes any action?

Ashneer is fully in line with the board so as far as we are talking about the governance review. It is a company Ashneer has built so no reason for him to not be aligned with the board. Ashneer is fully supportive.

What are the steps Grover is taking for reconciliation with Kotak? Because his return to BharatPe is also dependent on that particular matter being resolved at a personal level.

I’m doing my duty and the board is doing their duty in doing the governance review. I think how Ashneer is dealing is with the sense of the best interests of the company.

So is March 31 the deadline for Grover’s reconciliation and the internal governance review?

We thought March 31 was sufficient time to come to the conclusion and look at the way forward. And right now there is no reason to leave, as I said, we just started the review and Ashneer has just gone on leave of absence, so it is too premature to say whether this time is sufficient or not. We believe 31st March is sufficient time for us to come on a common path.

Depositors of Punjab and Maharashtra Co-operative Bank (which the Reserve Bank of India has merged with Unity Small Finance Bank, in which BharatPe is a partner) may move court against the resolution plan. What are the steps taken in this regard?

Anytime there is reconstruction there are obviously some people who are not necessarily fully satisfied with the answer. What we’ve done is with the support of the RBI. We have jointly prevented the bank from going into liquidation, which was a real possibility. Ninety-six percent of the depositors are going to get 100 percent of their money back in the next 90 days. That’s sort of a large victory. This has been ongoing for two and a half years. The remaining larger investors also have a potential equity upside apart from getting their money back over a period of time. We’ve jointly ensured all PMC employees that they won’t lose their jobs, which was an important consideration in this, and all…branches of PMC continue to operate, and we’ll convert it into Unity over the next few days. We have put in capital to enable this to happen.

How much of the total liability is owed to those 4 percent of the depositors who may not get their money back?

 The exact numbers are still being worked out because this is also interest accumulated over time, many people have joint accounts, and many people have multiple accounts. Besides large corporations, individuals who will not get their full money should be less than 10 percent of the total deposit base. Large institutions and corporates are integrating equity in the new bank as an upside. We are only talking about a small number of individual depositors who have more than Rs 5 lakh invested into this, they will only get part of their money right now. They will also get 100 percent of their principal back over a period of time. So I think the last thing which we are doing to make the deal attractive, or help out people who are suffering for the last couple of years is if any one of them decides to continue banking with the Unity Bank, the new bank PMC is getting merged with we will offer them attractive rate of interest. So we’re talking about 3-4 percent in terms of number of people and probably less than 10 percent in terms of cap.

What is the total liability and the period over which you have to pay?

The total liabilities is the full deposit which is upwards of Rs 10,000 crore. A large chunk of it, as I said, will get paid out right now. The remaining will get paid out on a yearly basis in year two, year three, year four, year five, and a very small portion of it for very large depositors that we left for later.

What does this licence and amalgamation mean for the company?

Unity Bank will also build its own network of consumers, merchants, small businesses, which will hopefully be customers of the bank. Unity will also really be able to retain a portion, if not a very large portion, of existing PMC customers. We think of the BharatPe network as equally important. Think of that as a ready-to-process network for you. We want to build our own bank architecture which can go out and do partnership with multiple other fintechs in the market, both on the liability side or the deposit side, or on the asset side, or on the payment side. We’re trying to build a sort of bank which can work with a series of fintech and financial institutions and SMEs (small and medium enterprises).

What will be the game changer for you because there is big competition from other fintech players as well as the large banks in a similar space?

I think the big disruption or the big sort of game changer or competitive advantage, whatever the term you want to use, will be technology. It’s very easy to say every bank is going the tech route. We sometimes use the word super app for all banking needs.

Your cost of customer acquisition, your technology platform costs as well as the spreads that you get, because of the deposit taking ability—are these the main points that you’re banking on here?

Yes, tech, ability to access that large customer pool which exists, ability to partner with fintech, ability to reduce the customer acquisition cost on the back of the existing network.

The RBI has proposed to ban FLDG (first loan default guarantee). Fintech is also on the radar of the central bank and there could be much stricter regulations. As a fintech player, how will you tide over many regulatory changes?

 The RBI has always done a great job of letting innovation happen. When that innovation becomes large enough and systematic enough, there have to be regulations put in place to control risks to retail investors. I’ve seen some of the draft recommendations and many of them are welcome steps. I do expect some of these regulations to come into force over the next one year and I generally believe they’re good for the industry.

Does the Ashneer Grover situation and the leadership crisis stunt your ability to raise funds and are there any plans for an initial public offering (IPO)?

We don’t need any funds right now. We still have 80 percent of the capital we raised over a period of time. We have money that can last us for six to seven years. We can look at an IPO in two-three years’ time. That depends a bit on the market.