BharatPe governance review: Here are the key takeaways from Alvarez and Marsal's preliminary report

BharatPe Managing Director Ashneer Grover.

Troubles are mounting for BharatPe Managing Director Ashneer Grover even as he claims that he is the victim of alleged conspiracies, and allegations against him are in fact fake.

Risk advisory firm Alvarez and Marsal through the findings of its governance audit, as accessed by Moneycontrol, has alleged inconsistencies in dealings with vendors and has flagged up dealings with vendors and payments to consultants that are non-existent.

This comes after BharatPe also roped in consultancy firm PwC as part of the ongoing investigation for a full-scale investigation into the company’s practices, including accounting, approval processes, expenses, and hiring.

Meanwhile, Moneycontrol also reported that the Reserve Bank of India (RBI) too is looking into any possible instances of corporate governance lapses at the startup.

Here are the highlights from the initial findings of Alvarez and Marsal's audit.

The case of the missing consultants

The report states that BharatPe claims to pay recruitment fees to hiring consultants for the employees they recruit for the company. 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.

In three instances of payments made to these consultants, the report finds that Madhuri Jain Grover (wife of Ashneer Grover) herself received invoices for payments and forwarded them to the accounts team.

Further, these invoices were created by Shwetank Jain who is the brother of Madhuri Jain Grover. 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 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.

Non-existent vendors

As per the report, the Directorate General of GST Intelligence (DGGI) had conducted a search operation at BharatPe's head office on October 21, 2021.

In response to payment remittance details sought by the DGGI, Deepak Jagdishram Gupta who happens to be the brother-in-law of Madhuri Jain Grover had said that the vendors on whom details are sought do not exist.

"We have come to know that our vendors, as informed by DGGI officers, do not exist or never operated the principal places of business," Gupta had told DGGI.

The report further says that a total expenditure of Rs 53.25 crore was made towards these 30 vendors that do not exist and the company incurred a loss of Rs 10.97 crore in these dealings.

According to the auditors, further investigation is required into why BharatPe was dealing with non-existent vendors in the first place and why did the company settle the matter for a loss without making any efforts to recover the money from any vendors.