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Journalism of Courage
Payments allegedly made to “dubious” recruitment firms, expenses said to be running into crores of rupees spent on “non-existing” vendors and “questionable invoices” created to substantiate such spends — these are learnt to be among the findings made by an independent advisory firm into fintech firm BharatPe’s corporate governance practices.
All of these anomalies, per the audit’s findings, allegedly involve the company’s co-founder Ashneer Grover’s wife and the firm’s head of controls till recently, Madhuri Grover.
The findings of the independent audit come weeks after the controversy involving Ashneer and Madhuri Grover erupted in the wake of a leaked audio clip, where the former was allegedly hurling abuses at a Kotak Mahindra Bank employee for presumably not being able to secure shares of e-commerce company Nykaa during its IPO. Soon after that, Ashneer Grover went on a two month leave of absence.
Amid the controversy, BharatPe commissioned risk advisory firm Alvarez and Marsal (A&M) last month to audit its internal processes and systems and overall corporate governance. Sources said A&M concluded an interim investigation into the firm and prepared a report on January 24.
However, when contacted, BharatPe claimed its board is yet to receive an interim or final review of the independent audit. A spokesperson said, “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 PRESS & Media, to show restraint and allow the governance review to take place in a thorough manner. The Board is yet to receive any interim or final report of the review.”
The board includes co-founders Ashneer Grover and Shashvat Nakrani, CEO Suhail Sameer, Sequoia India’s Harshjit Sethi, Coatue Management’s Rahul Vijay Kishore, Ribbit Capital’s Meyer Malka, former State Bank of India chairman Rajnish Kumar, and former Union Bank chairman Kewal Handa. Sequoia India, Ribbit Capital and Coatue Management are among the investors in the loss-making fintech firm, valued at about $3 billion.
Sources close to the developments said that Ashneer Grover, in a letter written to the board on Wednesday, had also called for the removal of its CEO Suhail Sameer.
A&M’s report, as per sources, testified to the company paying fees to HR consultations for recruiting employees, and there being procedural inconsistencies. It claimed that these recruitment firms had nothing to do with hiring and had a link to Madhuri Grover.
First, A&M reviewed the invoices of fees paid to these consultants and spoke to the employees that had joined the company as per the invoices. The employees confirmed their date of joining as stated in the vendor invoice, but allegedly denied being recruited through the stated consultants or any knowledge of them. In at least three instances, A&M said it reviewed emails where Madhuri Grover “directly received” invoices from these firms and forwarded those to the accounts team for payment.
A&M said that these firms appear to be sole proprietorships rather than being established companies. They also shared certain commonalities, A&M found — they had similar email addresses, physical addresses and bank branches among other things. All these recruitment firms, barring one, the A&M report said, had a “Panipat” connection, while noting that Madhuri Grover is originally from Panipat. Detailed queries sent to the Grovers and A&M did not elicit a response until publication.
Aside from inconsistencies in payments made to these questionable recruitment firms, A&M’s probe claims it found that over Rs 50 crore was paid to 30 vendors who appeared to be “non-existent”.
Sources suggested that in its probe, A&M also found that in October 2021, the Directorate General of GST Intelligence (DGGI) conducted a search operation at BharatPe’s head office and summoned the company’s authorised signatory to appear before them. It also asked the company to produce bank statements from July 2018 till date reflecting payments made to these vendors.
BharatPe then chose to pay Rs 11 crore in dues along with penalties, per A&M’s report. The risk advisory firm said it was difficult to assess why BharatPe was dealing with such non-existent vendors and why it decided to settle the matter which resulted in the loss of this Rs 11 crore without any legal representation or making efforts to recover the money from the vendors.
In a letter sent to the DGGI last year after its search operation, the company communicated to the DGGI that the vendors “do not exist or never operated from their principal place of business”, A&M’s report found. This letter was signed by Deepak Jagdishram Gupta, who A&M said is the brother-in-law of Madhuri Grover. Gupta also requested the DGGI to waive off the showcause notice issued to the company.
