BharatPe's co-founder and MD Ashneer Grover and wife Madhuri Grover sent a legal notice to Kotak Mahindra Bank's managing director and chief executive officer Uday Kotak, one of India's top bankers, and his senior management, accusing the bank of failing to secure financing and allocation of shares in an IPO launched by beauty firm Nykaa.
The notice was sent on October 30, 2021, but assumes significance after a leaked audio call that has Grover allegedly abusing and threatening a Kotak employee on this issue, went viral. The case pits Grover, one of India's most successful new-age entrepreneurs, against one of its wealthiest and most respected, Uday Kotak.
The notice was also addressed to Oisharya Das, CEO of Kotak Wealth Management, Shanti Ekambaram, Kotak Mahindra Bank's Group President for Consumer Banking and KVS Manian who heads Corporate, Institutional & Investment Banking.
The notice has sought damages for the gains Grover and his wife would have made after subscribing to shares worth Rs 500 crore in the company besides Rs 1 lakh towards the cost of the legal notice.
Moneycontrol has reviewed a copy of the notice sent by Sumit Agarwal, Partner and founder, Regstreet Law Advisors on behalf of Grover and his wife.
Grover declined to comment. In a late evening response, Kotak Mahindra Bank responded to Moneycontrol's queries confirming that this notice was received by the bank.
"This 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," the statement by Kotak read.
So far, Kotak Mahindra Bank had refrained from commenting on the conversation between Grover and the Kotak executive. However the bank has now said that it has placed on record objections to inappropriate language used by Grover as per the statement.
On January 6, Grover had claimed that the viral audio clip was “fake” adding that it was a “scamster” who put it out.
“Folks. Chill. It’s a fake audio by some scamster trying to extort funds (US$ 240K in bitcoins). I refused to buckle. I’ve got more character. And Internet has got enough scamsters,” Grover tweeted.
As it happens, Grover subsequently deleted the post where he claimed the audio is fake. The audio too has been taken down.
The statement by Kotak now raises questions over Grover's claims that the audio clip was fake.
The statement further read, "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."
The legal notice also mentions the name of a Kotak executive Rohit Mohan who was also briefly mentioned in the audio clip that went viral last week. According to the legal notice, while Kotak had informed Grover and his wife that the subscription formalities for the Nykaa IPO was done, they were soon informed that it would not be able to provide the IPO financing due to ‘erratic FII movements’ and ‘very high lending rates’.
"Kotak’s refusal to provide IPO financing to our clients at the eleventh hour has completely crippled our clients’ ability to participate in the Nykaa IPO and deprived them of a business/investment opportunity about which they had informed Kotak more than a month in advance of the launch of the IPO. Had Kotak informed our clients at the very beginning that it would be unable to provide IPO financing for the Nykaa IPO, our clients would have approached other financiers who were ready and willing to provide IPO financing to our clients for this IPO," says the notice.
"Kotak’s refusal to provide IPO financing to our clients for the Nykaa IPO constitutes a blatant violation of its legal obligations owed to our clients as their wealth managers. It is also contrary to the repeated representations made to our clients regarding Kotak’s ability to provide IPO financing for the Nykaa IPO (including on the day on which the IPO opened to the public for subscription)," it adds.
Ironically, the notice also mentions that while Kotak said that it did not provide IPO financing to any individual for the Nykaa IPO, it actually did so to Suhail Sameer who happens to be the chief executive officer of BharatPe.
Grover has been associated with Kotak for over 15 years. According to his LinkedIn profile, he was the vice president of its investment banking division for seven years starting 2006. He later chose Kotak for managing his personal wealth as well.
According to the notice, Grover used Kotak's services to invest more than Rs 100 crore each in the IPOs of Zomato and CarTrade through IPO financing.
Grover’s fintech company BharatPe, which he co-founded in 2018, became a unicorn last year.
On the other hand, Uday Kotak-led Kotak Mahindra Bank is India's third-largest private bank by market capitalisation, after HDFC Bank and ICICI Bank. The bank's subsidiaries include Kotak Wealth Management, Kotak Asset Management, Kotak Securities among others.
Grover's BharatPe also forayed into banking in 2021 after bagging the beleaguered Punjab and Maharashtra Co-operative (PMC) Bank in a joint venture with Centrum Financial Services. The JV received a small finance bank license from the Reserve Bank of India (RBI) in October last year.
In November 2021, Grover also ruffled feathers after he criticised Paytm chief Vijay Shekhar Sharma’s decision to “misprice” the fintech firm's public offering, adding that a lukewarm response to the listing ends the frenzied cycle of IPOs in India in an interaction with Moneycontrol.
According to sources, Kotak had also sent a counter notice. However, Moneycontrol couldn't immediately ascertain the details of the same. Kotak is being represented by law firm Khaitan, the source said.