Despite BharatPe’s revenue from operations doubling to nearly INR 300 Cr in FY22, the startup’s loss more than tripled to around INR 5,000 Cr, sources said
While BharatPe Chairman Rajnish Kumar was looking for a new CEO for a while now, the rise in loss and 30X YoY surge in expenses in FY22 hastened Suhail Sameer’s exit: Sources
In a statement, BharatPe said that Sameer would transition from the role of CEO to strategic advisor effective January 7, 2023, but didn’t give any reason for the change
Update | 4th January, 12:20
The article body and headline have been updated to include BharatPe’s detailed response on FY22 financials
Fintech unicorn BharatPe’s CEO Suhail Sameer stepped down amidst the company reporting a 3x rise in its losses in FY22 to more than INR 5,000 CR including a 30x rise in expenses.
Despite BharatPe’s revenue from operations doubling to nearly INR 300 Cr in the financial year 2021-22 (FY22), the startup’s loss more than tripled to around INR 5,000 Cr from INR 1,619 Cr in FY21, the sources told Inc42.
The latest financials were presented during BharatPe’s Annual General Meeting (AGM) held on December 31, they added. However, Sameer, Kumar, and various independent directors and major investors were not present at the AGM.
According to a BharatPe spokesperson, In FY 21-22, BharatPe revenues grew 169 percent to 321 crores from PY 119 Cr. driven by the payments volumes on PoS and lending referrals.
“While our Total loss for FY22 is 5594 crs, it includes an extraordinary item pertaining to loss in change in fair value of Compulsory convertible preference shares amounting to 4782 crs. This is not an operating loss but only a change in the fair value (PY 1342 crs). Excluding this operating loss is 811 crs (PY 277 crs). This item is one-off and shall not be there from next year as we have now reclassified the compulsory convertible preference shares from liability to Equity,” the company said in a statement.
“In addition, as a four year old start up, BharatPe continues to invest in new businesses. Some of these businesses like PostPe (Started 2nd half of FY 22) and scaling up of Swipe business, which started a year earlier, are still on an investment phase and therefore impacted the short-term operating performance,” as per the BharatPe spokesperson.
” We were facilitating Rs 350 crore a month disbursals on an average in last fiscal, and today, our monthly disbursal is at around Rs 1,200 crore across all the products. We facilitated disbursals of around Rs 4,500 crore in 2021-22 and are on track to do Rs 15,000 crore across the merchant and consumer side this year and remain on track to be operationally positive in the next few months,” it added.
It must be noted that earlier today, BharatPe announced that Sameer would transition from the role of CEO to strategic advisor effective January 7, 2023. However, the statement didn’t mention any reason for the change in leadership.
The fintech unicorn said that the current CFO Nalin Negi has been appointed as an interim CEO while the board of directors have “retained a leading executive search firm to assist with succession planning and the critical CEO search”.
“The Company’s Annual General Meeting (AGM) was conducted in full compliance of applicable laws and customary procedures on December 31st. Any suggestion to the contrary is false. Mr Ashneer Grover and his wife, Mrs Madhuri Jain Grover, joined the AGM with the clear intent to disrupt the proceedings,” the company spokesperson said in a written statement when questioned about the AGM.
The spokesperson further added, “Throughout the three-hour long meeting, Mr Ashneer Grover exhibited unruly, intimidating and threatening behaviour towards the authorised representatives and employees of BharatPe who were doing their best to fulfil the statutory obligations of the Company. It is evident that these are retaliatory and diversionary tactics being resorted by him and are likely a response to the criminal complaint and civil suit filed against him and his family members for various financial improprieties.”
Surge In Expenses Hastened The Exit
During the AGM, shareholders raised questions on the rising expenses of the fintech startup. Its expenses soared 30X year-on-year (YoY) in FY22 despite the startup not raising any new funding, the sources said.
This might have played a role in the startup announcing the change in leadership. Although, the search for a new CEO was on for some time now. “Rajnish Kumar has been looking out for a new CEO for a while now. Suhail was asked to step down. Purely a matter of company not growing,” one of the sources said.
BharatPe, which has been involved in a legal dispute with its former MD and cofounder Ashneer Grover over a bitter public dispute, spent INR 35 Cr on auditor and legal fees in FY22, as per the shareholder presentation seen by Inc42.
During the AGM, the shareholders also raised questions on the allotment of ESOPs worth INR 315 Cr to Kumar, general counsel Sumeet Singh, Sameer, and co-founder Shasvat Nakrani.
BharatPe is yet to file its financial statements for FY22 with the Ministry of Corporate Affairs.
Sameer joined the company in August 2020 as Group President. Later, in August 2021, he was appointed as BharatPe CEO when Grover was still the MD of the fintech company and there was a shift in the business focus from B2B to B2C vertical. It also acquired an NBFC licence during this time.
Mint was the first to report about Sameer stepping down from the role of CEO.
Top Level Exits Add To Woes
Sameer’s exit from the company comes in the backdrop of multiple top-level executives quitting the startup. BharatPe CTO Vijay Aggarwal, PostPe head Nehul Malhotra, and chief product officer for lending and consumer products Rajat Jain quit the company last month.
Besides, the exits of Bhavik Koladiya, who cofounded BharatPe in 2018, and other members of founding team, including Tanmay Sagar and Satyam Nathani earlier, have created a leadership crisis in the company already involved in a legal tussle with Grover.
Notably, Koladiya, Sagar and Nathani have now founded a SaaS platform, OTPless.com
“This is a clear indication of the high-profile investors sitting on the board, including the likes of Sequoia, Tiger Global as well as Ribbit Capital, coming down hard on the CEO for the rising attrition levels at top levels as well non-delivery of targets…nothing new in the industry currently. Suhail’s job was highly monitored over the last one year after Grover’s departure from the company. The aggressive growth the company was projecting from March 2022 onwards unfortunately hasn’t convinced its investors enough,” a Bengaluru-based venture capitalist said.
He cited BharatPe’s sky-high valuation of over $3 Bn within two years of its incorporation as one of the reasons for the current challenges. “The company hit the right chord initially when it launched its B2B business, onboarded merchants on the platform, introduced the first-ever interoperable QR code, a territory where PhonePe, GooglePay and Paytm were not existent. But somewhere in its journey, although it raised money on its B2B model, the foray into B2C business hasn’t delivered on expected lines,” the fintech investor said.
At least two former executives of BharatPe, who were with the company till last year, said that the ambitious BharatPe 2.0 project highlighted by Sameer on social media since last year set new targets for the company’s consumer lending, PostPe (BNPL business) and insurance businesses.
However, the company failed to achieve these targets. “This was an internal vision document that the management was tasked to work on. However, BNPL business has been collapsing and the lending business was the mainstay,” one of the employees said.
Despite the faltering growth leading to Sameer’s sacking, BhartPe has been publicly boasting of a strong growth.
After Grover was shown the door by the company’s board in February last year, Sameer, in a Linkedln post, said that BharaPe clocked its highest growth across verticals in March 2022, facilitating loans worth INR 800 Cr with its NBFC partners.
The startup also said that it facilitated loans worth INR 3,600 Cr in the first quarter of FY23, recording a 112% quarter-on-quarter growth. BharatPe hit an annualised total payment volume (TPV) of $18.5 billion in Q1FY23, a growth of 50% over Q4 FY22, as per the company.
“We are on track to achieve our target of $2 Bn in loans facilitated (through our NBFC/ bank partners) across both consumer and merchant business by the end of FY23 as well as scaling payments TPV to $30 Bn by March 2023. Additionally, we will continue to explore partnerships with banks to launch new-age fintech product,” Sameer said in a statement then.
In these circumstances, only the company’s financial statements for FY22 will be able to give a clear picture about its performance under Sameer.