Can BharatPe Rebuild After Leadership Exodus, Ashneer Grover Saga?

For bharatpe, the year began with a rather innocuous-sounding controversy around a leaked audio clip featuring former cofounder and then managing director Ashneer Grover. But in today’s hyperconnected world, even minor controversies can blow up quickly, and as it turned out, much of the year for BharatPe has been spent in firefighting and damage control of the fallout from that incident.

Now nine months since the controversy erupted, BharatPe has a completely new look, with many of its key leaders and founding members now out the door (more on this later), it is staring at one of its biggest tests and looking to rebuild.

Here’s what’s happened in those tumultuous first few months of 2022:

The latest exit from BharatPe is founding member Satyam Nathani, who quit the company on the heels of the departure of cofounder Bhavik Koladiya in August.

Now, BharatPe is led by Shashvat Nakrani, who is now the sole founder in the company, with Suhail Sameer being the CEO, and a board consisting of many industry veterans. As it looks to move on from the controversy surrounding Grover, internal investigations and the fallout from these incidents, BharatPe is staring at a tough market.

It’s not just BharatPe but the fintech ecosystem as a whole, given the slowdown in funding, which has now declined to 2020 levels as per data for Q3 2022 after a record-breaking 2021. So how is  the once-celebrated startup looking to bounce back?

The Exodus At BharatPe

Founded in 2018, BharatPe began life as a payments service provider for merchants and small businesses, but has added several products to become something of a super app for merchants.

With services such as merchant loans, payments, peer-to-peer lending, gold loans and buy-now-pay-later, BharatPe has rapidly expanded its repertoire and across multiple funding rounds, it reached a valuation of $2.8 Bn in four years.

Having set a rapid growth pace, BharatPe was gaining momentum across segments in the SMB category, but the Grover controversy not only slammed the brakes on this momentum, but also resulted in many setbacks on the customer front.

In the aftermath of the Grover controversy, BharatPe saw public spats and criticism on social media. Plenty of questions have been asked in relation to corporate governance and due diligence issues, as well as payments to non-existent vendors and irregular payments to recruitment agencies in this tumultuous year.

Since January, Grover and his wife and BharatPe head of controls Madhuri Jain Grover have been dismissed, while other senior leadership have quit. The most recent high-profile exits have been those of cofounder Bhavik Koladiya, as well as founding member Nathani who had been with BharatPe since early 2018 — even before Grover came on board.

Besides this, another founding member Tanmay Sagar had departed in May 2021 to launch his own startup OTPLess. Nathani quit BharatPe at the end of July 2022 to join Sagar as the cofounder of OTPLess.

In addition, the former BharatPe head of compliance Sagar Satija has also left this year along with the former chief revenue officer Nishit Sharma, former head of institutional debt partnerships Chandrima Dhar.

Where Are Former BharatPe Employees?

Despite the exits of these key employees, BharatPe is confident of achieving sustainable growth in the current fiscal and in FY24, as per a recent ET interview featuring CEO Sameer. The interview was published a day after Inc42 had sent a detailed questionnaire to BharatPe about the leadership vacuum and profitability outlook for its key businesses.

The company did not respond to Inc42’s questions, but Sameer was bullish about the future of BharatPe despite the exits of Grover and Koladiya.

In the interview, Sameer claimed, “There’s no plan to hire any more CXO. There are plans to hire CXO, minus one level. CXO we had to only hire CHRO (Smriti Handa) and CFO (Nalin Negi). There is a plan to add one or two members to the board.”

In response to our questions, the company’s spokesperson pointed us to the recent press statements on the appointment of new independent board members, and sharper focus on internal governance in the wake of the various allegations this year, as highlighted in the timeline above.

Bhavik Koladiya — Former Cofounder Exits To Launch New Venture

BharatPe cofounder Bhavik Koladiya left the fintech unicorn to launch enterprise services company Finix Partners with wife Dharti Koladiya. And Koladiya has also joined SaaS startup OTPLess as a board member, as per his LinkedIn profile.

Having founded BharatPe along with Nakrani, Koladiya should have been one of the faces of the fintech unicorn, but instead, most did not even know about his cofounder status, which could be related to his past conviction in the US over a credit card fraud.

In 2015, Koladiya was convicted in a credit card fraud case in the US. His conviction and subsequent sentencing as time served is said to be one of the factors in his low profile at the company in BharatPe’s later years, where he was not named as a shareholder.

While Koladiya was said to not hold any shares directly, Nakrani is known to be holding his equity. Sameer confirmed the same in his recent interview and added that Koladiya is not a stakeholder directly.

Last month, BharatPe confirmed his departure saying the once-cofounder was “associated with BharatPe as an independent consultant, guiding our product and technology teams.” Koladiya’s contract with the fintech unicorn ended on July 31, 2022, as per the statement.

Besides OTPLess, Koladiya is associated with Finix Partners. Sources informed us that Finix will engage in business consulting and advisory services, and is more or less about Bhavik Koladiya leveraging his experience at BharatPe to guide new startups.

Bhavik Koladiya did not respond to queries by Inc42 on Finix or OTPLess. Our story will be updated as and when there is a response.

Ashneer Grover — Third Unicorn Dream

In March 2022, BharatPe accused Grover and his wife Madhuri Jain Grover of making payments to fake vendors, and syphoning money from the company and also making large commission payments to recruiters. The company also claimed that Grover ceased to be a founder and director in the company due to this alleged wrongdoing.

After his acrimonious exit, Grover has registered a new company called Third Unicorn Private Limited, which is speculated to be another fintech company. The new company’s business and revenue model are not yet revealed. As of now, the entrepreneur and investor holds 9,90,000 equity shares of Third Unicorn, while his wife Madhuri Jain Grover holds 10,000 equity shares.

As per the company’s MoA, it will be engaged in the business of designing, developing and distributing software for various purposes. Typically, such an MoA is used by B2C app development and B2B SaaS companies that are primarily developing software regardless of its end use-case.

Tanmay Sagar & Satyam Nathani — BharatPe To OTPLess

Operated under the company Otpless Solutions Private Limited, the startup is founded by BharatPe founding members Tanmay Sagar and Satyam Nathani, with Bhavik’s wife Dharti Koladiya also named as a director as per official Registrar Of Companies filings. Besides OTPLess, Dharti is also a director at Finix Partners.

Sagar and Nathani were both part of the founding team at BharatPe, having joined in early 2018. Sagar left BharatPe in May last year, while Nathani only exited in August 2022, along with Bhavik Koladiya.

OTPLess was registered in December 2021 and is also registered in Delhi.

Currently, Dharti Koladiya and Tanmay Sagar each own 50% of the paid-up share capital for OTPLess as per the company’s filings, with no shareholding stipulated for Nathani. This is set to change according to the source quoted above, with Dharti Koladiya expected to pass on her stake to Nathani.

The other BharatPe alumni at OTPLess include Sagar Satija, the former BharatPe head of compliance, who is OTPLess’ head of finance, as well as Chirag Bhadiyadra, who is leading product and growth at the company, having led growth at BharatPe.

OTPless claims to be a software company that develops SaaS products that enable businesses to implement a WhatsApp-based authentication system rather than relying on SMS gateways and one-time passwords or OTPs.

The Leadership Vaccuum 

While Sameer and BharatPe are confident that these exits will not slow down the momentum, worryingly for BharatPe, several of the key leaders who have now left the company were not only part of the founding team, but also leading vital divisions or projects.

Satyam Nathani, for instance, was involved in the setting up of Unity Small Finance Bank, which was formed after a joint venture between BharatPe and Centrum Financial Services.

The exits have come at a key time, when the company would be focussing on reducing its heavy losses in FY21. BharatPe’s losses grew 77% in FY21 even as the revenue surged by nearly 20x from INR 6 Cr to INR 119 Cr.

Its operational losses grew to INR 1,619 Cr though as expenses nearly doubled in the fiscal year, while the loss after tax and valuation adjustments grew to INR 2,961 Cr.

These departures have left a sizable hole in BharatPe’s ship which was already on choppy waters due to the major controversy surrounding Grover and current CEO Suhail Sameer. The duo even engaged in a public social media battle against each other as things came to a head.

In the past few months, the news trickling out of the BharatPe camp has been about appointments to the positions of independent directors. It appointed former Reserve Bank of India (RBI) deputy governor BP Kanungo and Zomato chairman Kaushik Dutta as independent directors to its board.

While CEO Sameer and cofounder Nakrani are the executive directors, former SBI chairman Rajnish Kumar serves as one of the non-executive directors and chairman of the board.

Besides this, the key leaders at the company are the CTO Vijay Aggarwal, chief business head Nishant Jain, product head Ankur Jain, and Dhruv Dhanraj Bahl is currently the COO. All three have been with the company for the past two years, replacing those who had been leading the company since 2018.

Sameer claimed in the recent interview that Grover’s exit is not a loss for the company, while Koladiya’s exit was a bigger setback. In the same breath, though, Sameer claimed that Koladiya did not know tech and only built the architecture for BharatPe’s tech stack, which was developed by others.

In a press release this week, BharatPe claimed that its point-of-sale business has turned profitable in two years, with an installed base of 2 Lakh devices and 20% share of all POS transactions.

Will Lending Bring BharatPe Out Of Red? 

The CEO also said the fintech giant is looking at becoming IPO-ready within the next year, but the actual public listing might be held back till after mid-2024. Even if the company is able to turn around its financial performance, the discrepancies that have come to the fore in 2022 will certainly come back to become a thorn in BharatPe’s side.

Then there’s the question of how much BharatPe will be able to capitalise on its existing customer base and, at the same time, attract new customers for its core lending focus right now. The likes of Pine Labs, InCred, Lendingkart compete with BharatPe in this segment directly, while Sameer hinted at term loans, home loans and auto loans, which will put BharatPe up against big bank competition as well.

While the lending opportunity is indubitably large, there are hundreds of players fighting for a pie, ranging from pure-play lending startups to BNPL offerings by payments platforms as well as traditional lenders.

Sameer believes that the BharatPe model is more cost-effective and it goes against the grain of traditional lending, even digital lending. “This is a different business. We consciously don’t hire someone with lending experience in a bank. If we have to, we look to hire from Bajaj Finance. Any guy who knows anything about lending will come and tell us that whatever we are doing is all wrong.”

But this approach can be a high-risk one where the rewards are not guaranteed. By Sameer’s admission, BharatPe has higher NPAs than Bajaj and others, so this could still be a problem in the long run.

The lack of news around Unity SFB is also concerning. The bank licence is seen as a critical piece in BharatPe’s portfolio, but this could also be in jeopardy if Ashneer Grover or other BharatPe directors come under SEBI or RBI investigations.

Unity SFB is heavily reliant on the experience of chairman Kumar and his expertise in India’s financial sectors and familiarity with compliance processes, but operationally, there’s a long way to go for Unity to move out of the shadow of the beleaguered PMC Bank whose licence it had taken over, as per a recent report in Mint.

Top level board appointments and sending the right message in the media, BharatPe needs a new infusion of capital as well as talent, but the controversial year so far — plus the funding winter — have seriously complicated any chances of a comeback. Will BharatPe prove the naysayers wrong?