Payments allegedly made to “suspicious” recruitment firms, crores of rupees spent on “non-existent” vendors and “doubtful invoices” created to substantiate such expenses – these are among the findings made by an independent considered to be one of Advisory firm in Corporate Governance practices of Fintech firm BharatPe.
According to the audit findings, all these discrepancies allegedly involve Madhuri Grover, wife of the company’s co-founder Ashneer Grover and until recently, the firm’s controlling head.
The findings of the independent audit come weeks after it began in the wake of a leaked audio clip of a dispute involving Ashneer and Madhuri Grover, where the former allegedly enabled an employee of Kotak Mahindra Bank to secure shares of E- Was abusing me for not being there. Commerce company Nykaa during its IPO. Soon after, Ashneer Grover went on leave for two months.
Amid the controversy, BharatPe last month appointed risk advisory firm Alvarez & Marsal (A&M) to audit its internal processes and systems and overall corporate governance. Sources said A&M completed an interim probe into the firm and prepared a report on January 24.
However, when contacted, BharatPe claimed that its board is yet to receive the interim or final review of the independent audit. A spokesperson said, “The Board has followed due process in all its actions in the best interest of the Company. We would urge that the confidentiality and integrity of Governance reviews and Board meetings be maintained by all. We, including the press and media Request everyone to show restraint and allow the review of governance to take place in its entirety.The Board is yet to receive any interim or final report of the review.
The board includes co-founders Ashneer Grover and Shashwat Nakrani, CEO Suhail Sameer, Sequoia India’s Harshjit Sethi, Kotu Management’s Rahul Vijay Kishore, Ribit Capital’s Mayor Malka, former State Bank of India chairman Rajnish Kumar and Union Bank’s former chairman. Includes only Handa. Sequoia India, Ribbit Capital and Cotu Management are among the investors in the loss-making fintech firm, which is valued at around $3 billion.
Sources close to the development said that Ashneer Grover, in a letter to the board on Wednesday, had also sought the removal of its CEO Suhail Sameer.
According to sources, A&M’s report testified to the company paying fees for HR consultations for recruiting employees and having procedural discrepancies. It claimed that these recruitment firms had nothing to do with the hiring and had links with Madhuri Grover.
First, A&M reviewed the invoices for the fees paid to these consultants and spoke to the employees who joined the company as per the invoices. Employees confirmed their date of joining as stated in vendor invoices, but denied being recruited through alleged consultants or any of their knowledge. In at least three instances, A&M said it reviewed emails where Madhuri Grover received “directly received” invoices from these firms and sent them to the account team for payment.
A&M said these firms appear to be sole proprietorships rather than being established companies. They also shared some similarities, A&M found — they had similar email addresses, physical addresses, and bank branches, among other things. All these recruitment firms, except one, had “Panipat” connections, the A&M report said, noting that Madhuri Grover is originally from Panipat. Detailed queries sent to Grovers and A&M did not elicit any response till publication.
Apart from discrepancies in payments made to these dubious recruitment firms, A&M’s investigation claims that it found that over Rs 50 crore were paid to 30 vendors who appeared to be “existent”.
Sources suggested that in its investigation, A&M also found that in October 2021, the Directorate General of GST Intelligence (DGGI) conducted a search operation at the head office of BharatPe and called the authorized signatory of the company to appear before them . It also asked the company to furnish bank details showing the payments made to these vendors since July 2018.
As per the A&M report, BharatPe then chose to pay Rs 11 crore along with the penalty. The risk advisory firm said it was difficult to assess why BharatPe was dealing with such non-existent sellers and why it decided to settle the matter, resulting in no legal representation or effort to recover money. This caused a loss of Rs 11 crore. sellers.
The A&M report found that in a letter sent to DGGI last year after the search operation, the company told DGGI that vendors “do not exist or have ever operated from their principal place of business”. The letter was signed by Deepak Jagdishram Gupta, who was identified by A&M as Madhuri Grover’s brother-in-law. Gupta also requested DGGI to waive the show cause notice issued to the company.
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