‘The Board Is Charting Out The Glide Path For BharatPe's IPO’

Ashneer Grover, co-founder and managing director of BharatPe, resigned on February 28 after he went on “voluntary leave” in January until end-March. This followed an expletive-laced tirade on Twitter. The alleged phone conversation, which happened in October, was with a private bank employee, regarding funding for buying shares of Nykaa during the beauty retailer’s initial public offering. He resigned after BharatPe sacked his wife Madhuri Jain Grover, head of controls at the company, over allegations of misappropriation of funds, and Singapore International Arbitration Centre rejecting Ashneer’s petition against the company for initiating an investigation against him.

In his first no-holds-barred media interview, RAJNISH KUMAR, chairman of BharaPe, tells TAMAL BANDYOPADHYAY about what went wrong with the company and the road ahead. 

Edited excerpts: 

It seems that the Ministry of Corporate Affairs (MCA) is looking into the conduct of BharatPe board — how it handled the Ashneer issue. What’s wrong with the board?

You are questioning me after reading a media report. But the company has not received any communication from MCA so far. It’s a private limited company. The board consisted of shareholders or their nominees like Ashneer (he has resigned), Shashvat Nakrani, Harshjit Sethi of Sequoia Capital. There was only one professional non-executive director Kewal Handa before I joined the board as non-executive chairman in October 2021. The proceedings of the board and the decisions taken by it have been recorded and any agency is welcome to see them. There’s nothing to hide.

Why did you join BharatPe when so many companies were wooing you to be on their boards?

It’s true many companies have approached me to join their boards. I have been very selective about accepting board directorship and have accepted board positions from highly reputed companies like HSBC Asia Pacific, Larsen & Toubro Infotech, and Hero MotoCorp, apart from BharatPe. 

I have always been an admirer of start-ups and fintechs because of innovation and the positive contribution these companies are making towards making India a new-age economy.

BharatPe is one of the most successful fintech companies. It is very innovative, with marquee investors backing it. My desire to be part of the emerging ecosystem had led me to accept the board position at BharatPe.

In view of the recent controversies, you must be regretting joined its board.

Whatever has happened is unfortunate and an aberration. The media glare on the company has also come as a surprise to me. I am not new to handling difficult situations. There is no question of any regret because I joined the company with a certain purpose and will make every effort to ensure it becomes a role model for start-ups.

Now both Ashneer and his wife Madhuri are no longer with the company. But she has alleged conspiracy and accused the board of male chauvinism and a biased attitude.

I would not like to respond to any individual. I can only say that the corporate governance review is being carried out by reputed firms like Shardul Amarchand Mangaldas & Co, assisted by Alvarez and Marsal (A&M) and PricewaterhouseCoopers (PwC). Do you want to say that these firms will join in any conspiracy, putting their independence and reputation at stake?

What is the future of BharatPe after the exit of Ashneer? He was the man behind everything the company was doing — in terms of products and processes.

Haven’t I already answered this? There is no denying the role of a leader in building an organisation. But it’s always teamwork that makes the organisation successful. We cannot belittle the contribution of other team members. 

BharatPe is a technology (tech) company. What about the contribution of the information tech team and its leader? This is just one example 

As far as the future of the company is concerned, the board and the management are aligned to the glide path for listing the company in the next 18-24 months. The company’s transition from an individuals-driven private form to a board-driven listed public one will be carried out in a well-thought-through and well-executed manner. 

What’s going to happen to Ashneer’s 9 per cent (or, is it 8.5 per cent) stake? He claims to be the single-largest shareholder in the company. Will existing investors buy him out? If yes, at what price? His resignation letter claims the company’s value is $6 billion. If not, is he free to sell it to whosoever he wants?

This is a matter to be dealt with under the shareholders agreement. The secondary sale of shares is allowed with the consent of existing investors whenever a fresh round of funding happens.

I am not aware of any plan of existing shareholders to buy out shares from Ashneer.

Is the board united in its agenda? How about investors? I believe they are a divided lot…

Let me repeat, the company is on a growth path with a time frame in mind to get it listed.

The board is completely aligned and committed to ensure a robust governance infrastructure, meeting the desired standards of listed companies well in advance, even if it's a private limited company and no public money is involved. 

The consultants are giving finishing touches to the governance review report after identifying the gaps that existed. It’s a comprehensive exercise and a blueprint will be ready in about a week. 

I don’t know where you have received information about investors being divided. All decisions are taken unanimously by investors and the board.

There have been reports that Ashneer doesn’t own the entire stake he claims to hold. Its original founder Bhavik Koladiya stake is part of his 9 per cent. How much stake do Ashneer, co-founder Nakrani, and Koladiya each hold in the company?

I have no idea where these reports have originated from.

Ashneer’s resignation letter talks about “baseless and targeted attacks” on him and his family by a few individuals. How do you react to it?

Do you seriously want me to react to it?

Are you convinced about his family siphoning off funds? What steps do you plan to take to improve corporate governance at BharatPe? What has gone wrong and who do you blame for it?

It’s not a question of me or anyone else being convinced. I have already said that firms like A&M and PwC are reputed, professional outfits and the board of BharatPe has no reason to not believe their findings. 

The process of improving the corporate governance structure, including reviewing and updating all policies, procurements, oversight by the internal audit, broad-basing the board, constitution of board committees (even if not mandated for private companies), and conducting related party transactions at arm’s length, etc, is progressing well.

I have seen in the past that when a business is on a growth path, there is little attention to the governance structure, and many businesses have failed eventually after showing good progress. BharatPe is no exception to this set of companies and this could be a problem with other fast-growing companies.

BharatPe is a big investor in Unity SFB. The fintech unicorn holds 49 per cent stake in it. Its current state of affairs must have an impact on Unity SFB and the regulator’s way of looking at it. Have you heard from the Reserve Bank of India (RBI)?

BharatPe is only an investor in Unity SFB and has made the required investment and is not a promoter. In my view, there is no regulatory challenge. It’s for the promoters and the board of Unity SFB to run the bank in compliance with the regulatory framework and expectations.

Rest assured that the relationship between BharatPe and Unity SFB will be conducted at arm’s length, protecting the value of stakeholders of respective organisations, and the RBI will have nothing to complain about. We have not heard anything from the RBI.

More importantly, what impact will it have on the fintech and start-up ecosystem and the flow of investments? Talking about investors, Ashneer has said: “You treat us founders as slaves, pushing us to build multi-billion-dollar businesses and cutting us down at will. Investor-founder relation in India is one of master-slave”.

The start-up and fintech ecosystem is being driven by venture capital and investors. It’s a high-risk, high-reward game. A lot of foreign capital has been attracted into India because of tech talent and high-market potential with a very supportive government. India is among the leading countries when it comes to digitisation and the new-age economy.

I have no doubt in my mind that India’s start-up ecosystem will continue to flourish and attract investment — both domestic and foreign.

A few aberrations cannot change the narrative. The relationship between founders and investors has to be one of mutual trust, with the core objective of creating value for all stakeholders. I don’t believe it’s a master-slave or any other type of relationship, but the will of the majority prevails. 

Ashneer also attacked you, saying you were leaking information about the ongoing review against him to the media. How do you react to it?

I wouldn’t like to comment on what an individual says. That’s beneath my dignity and ethics. I am a strong believer in transparency and openness. If I have to say something, I will say it openly. 

Questions are being raised about granting employee stock ownership plan (ESOP) and the compensation being paid to you… 

I have been appointed non-executive director, strictly in accordance with the relevant provisions of the Companies Act. The compensation structure, including ESOP, has been approved by the board. I can also mention to you honestly that BharatPe is not an outlier, compared to my other engagements.

As chairman of India’s largest lender, you were instrumental in rescuing YES Bank. After this, is BharatPe the second toughest assignment for you? Do you regret taking up the offer? Or enjoying this?

It’s not as tough as it seems to be. YES Bank was a much larger issue having implications for the huge number of depositors and the impact on the entire banking system and economy of the country. BharatPe is a relatively small entity getting disproportionate attention from the media. 

Having said that, I see a big opportunity where BharatPe can be a torchbearer for the entire start-up ecosystem and enhance investor confidence, benefiting innovators, young entrepreneurs, and the country’s reputation as the start-up capital of the world. 

The question of regret arises when you have done something wrong which you should have not done. 

Once the clean-up task is accomplished, will you step down? If yes, what’s the time frame you have in mind?

Why should I resign? I will be there for three years — which is my term. There is no fun if there is no challenge in life. Right?

In fact, at the first board meeting I chaired, I sensed that corporate governance is an issue in this company. I made it clear that the standards of governance should be the same as expected of a listed company and meet all regulatory expectations. I started taking steps that may have aggrieved a few. This has now become a mission I intend to accomplish before I step down.

This INTERVIEW first appeared in Business Standard