Forensic Audit: Findings Report

BHARAT PE

Report by – ABHINAV AGARWAL

M.No. – 445335

FAFD Batch No. - 52

Unauthorized Disclosure Prohibited

Note:

This Report is Strictly Private & Confidential; it is a mockup investigation into allegations of corrupt practices in
tender allocations and other frauds. The sole purpose of preparation of this report is to submit a sample Forensic
Audit Report to ICAI to obtain certification of Forensic Audit & Fraud Prevention. The relevant data has been
gathered from news articles, web portals, and other verified sources relating to corrupt practices revealed at
BHARAT PE and the investigation by various agencies in this regard, and the information cited in the report
purely for the research purpose. Fictional names and events have been used and does not bear any resemblance to
any living person; any resemblance shall be a mere coincidence only.
Contents
INTRODUCTION................................................................................................................................................................ 4
DCGI SEARCH OPERATION...........................................................................................................................................4
CONTROVERSY.....................................................................................................................................................................4
FORENSIC AUDIT REPORT FINDINGS...............................................................................................................................6
BHARAT PE ‘S GROWTH STORY........................................................................................................................................9
LIMITATIONS............................................................................................................................................................................... 10
INTRODUCTION

 BharatPe is an Indian fintech company that caters to small merchants and kirana

store owners in India.[2] The company offers a range of fintech products including
interoperable QR code for UPI payments, Bharat Swipe (POS machine) for card
acceptance, and small business financing.
It facilitates small merchants to accept payments via Unified Payments Interface (UPI) for
free, through BharatPe QR codes. It also offers merchant loans of up
to ₹7 lakh (US$9,200) for a duration of 3 to 12 months. [citation needed] The other products
include and a peer to peer lending product called 12% Club.[3] In 2020, the company
launched a new product, Digital Gold, which allows the users to transact for 24-carat gold
containing 99.5% purity.[4]
BharatPe denies reports of terminating Ashneer Grover
Bharatpe board conducts independent audit of internal processes

Alvarez & Marsal reports recruitment fraud, fictitious payments by co-founder, wife
 A preliminary report by international consulting firm Alvarez and Marsal (A&M) which had been
appointed to look into allegations of financial fraud by one of its co-founders & Managing Director
Ashneer Grover and his wife Madhuri Jain Grover has indicated that there were indeed financial
discrepancies. 
DCGI Search Operation 

The A&M report also noted that on October 21, 2021, the Directorate General of GST Intelligence
(DCGI) conducted a search operation at BharatPe’s head office and later also summoned the company’s
authorised signatory to appear before them on November 1, 2021. 

The company was asked to produce copies of purchase invoices along with transport documents with
respect to certain parties. In addition to this, the bank statement from July 2018 till date, reflects
payments to these vendors. 

BharatPe also sent a communication to DCGI on November 11, 2021, the letter was signed by Deepak
Jagdishram Gupta, who is also the brother-in-law of Madhuri Grover. “We have come to know that our
vendors as informed by the DCGI officers, do not exist or never operated at their principal place of
business, We do not want a Show Cause Notice from the department on this matter and request you to
waive off the SCN,” the letter signed by Gupta read.  

A&M has further noted that the matter requires further detailed investigation as it is difficult to assess
why BharatPe was dealing in purchases from non-existent vendors, why was the company unable to
provide proof of delivery of materials, and why did the company settle the matter causing a loss
of ₹10.97 crore without legal representation or make efforts to recover the same from vendors.   
CONTROVERSY

Ashneer Grover has been in the midst of controversy for an audio recording allegedly featuring the
entrepreneur bashing a Kotak Mahindra Bank relationship manager for missing out on Nykaa’s IPO.
Soon after the audio clip surfaced on social media on January 5, 2022, Grover put out a tweet claiming
that the clip is fake.  “Folks. Chill! It’s a FAKE audio by some scamster trying to extort funds ($240K
in bitcoins). I refused to buckle. I’ve got more character. And the internet has got enough scamsters,” he
said. However, the tweet was later deleted by Grover. 

Days later, the media reports confirmed that Ashneer Grover had sent out a legal notice to Kotak
Mahindra Bank on October 30, 2021, for allegedly failing to provide financing in Nykaa’s IPO. Kotak
Mahindra Bank also released a statement on January 10 and said, “the notice was received by us and
was replied to appropriately at the time, including placing on record our objections to inappropriate
language used by Mr. Grover. Appropriate legal action is being pursued. We would like to confirm that
there is no breach or violation by the Kotak Group in any manner whatsoever.” 

Amid increased media scrutiny, BharatPe announced on January 19 that Ashneer Grover will be taking
a voluntary leave of absence from BharatPe till the end of March 2022 and the company’s CEO Suhail
Sameer will continue to lead the team.  

On January 31 in an interview with a publication, Grover said that he expects to have an “amicable
conversation with BharatPe board” once the dust settles on the audio clip controversy. He added that he
was not seeking any damages from Kotak Mahindra Bank for the Nykaa IPO financing and alleged that
rival payment firms and other detractors were partly responsible for the matter becoming
disproportionately big. This statement by Grover was closely followed by reports of him hiring a legal
firm to protect his position and shareholding in BharatPe.  By now, BharatPe had started conducting an
independent audit of the company’s internal processes and systems by appointing Alvarez &
Marsal. Neither Ashneer Grover nor Bharatpe responded to specific BusinessLine queries  on the
topic .   
REPORT FINDINGS

The findings of the report by A&M, dated January 24, said the company (BharatPe) pays recruitment
fees to a number of ‘consultants’ for employees recruited through them. In five such cases, employees
have confirmed their joining date as the one mentioned in the vendor invoice but they had no
knowledge of being recruited or engaged through the said ‘consultants.’ 

Further, in three out of those five instances, Madhuri Jain Grover is said to have directly received the
invoices from the vendors and forwarded them to the accounts team for payment, according to the
report. On further examination of these invoices, the consulting firm found that the creator of all these
invoices originated from Shwetank Jain, who has been identified as Madhuri Grover’s brother. Madhuri
Grover was Group Head - Controls at BharatPe.  

The invoices of various vendors are also found to have certain commonalities such as same typeface,
similar sort of email addresses, similar physical addresses, formats and some even had the same bank
branches and other details. 
Moreover, the majority of the invoices appear to have a connection with Panipat, which is also the
hometown of Madhuri Grover. A review of the books of accounts showed that the spends on such
vendors in FY 2019-20 amounted to ₹3.77 crores.  
BharatPe on Friday though denied receiving any interim or final release of the independent review done
by Alvarez and Marsal (A&M).  

“We are deeply pained that the integrity of the BharatPe board or individual board members is being
questioned time and again through misrepresentation facts and baseless allegations. 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 media, to show restraint and allow the governance review to take place
in a thorough manner,” the company said in a statement.  

On January 29, 2022, BharatPe’s board had announced that they are conducting an independent audit of
the company’s internal processes and systems and had appointed Alvarez & Marsal to advise the board
on its recommendations. 

Even as the controversy continued to swirl, Ashneer Grover speaking to a website denied all allegations
and said that he was being arm-twisted by the board to exit the company. He was quoted as saying that
he would do so only if his 9.5 per cent stake was brought out at a $6 billion valuation indicating a pay-
out of Rs 4000 crore.   
Grover is also said to have written a note to the board members on February 2, asking them to remove
the CEO Suhail Sameer from the board.      
Neither Ashneer Grover nor Bharatpe responded to specific BusinessLine queries  on the
topic of whether the board was forcing his exit or any proposal to buy out . Sources in the company
indicated that Chairman of the company Rajnish Kumar – a former SBI chief and a highly respected
banker - was working ‘to resolve the issue and protect the interests of everybody concerned.’ 
BharatPe’s growth story 

BharatPe was co-founded by Ashneer Grover and Shashvat Nakrani in 2018 with the vision of making
financial inclusion a reality for Indian merchants. In August 2021, Grover was made managing director
at BharatPe, and the recent hire of the company Suhail Sameer took the role of CEO. BharatPe has
raised over $650 million in equity and debt, till date.  

The company’s list of marquee investors includes Tiger Global, Dragoneer Investment Group, Steadfast
Capital, Coatue Management, Ribbit Capital, Insight Partners, Steadview Capital, Beenext, Amplo and
Sequoia Capital. In terms of shareholding, Sequoia Capital (19.6 per cent), Coatue (12.4 per cent) and
Ribbit Capital (11.0 per cent) hold the largest individual stakes in the fintech start-up. 
In 2018, BharatPe launched UPI interoperable QR code, zero MDR payment acceptance service and
zero MDR card acceptance terminals BharatSwipe in 2020. Currently, the company claims to be
serving over 80 lakh merchants across 150 cities, processing over 11 crores of UPI transactions per
month (annualized Transaction Processed Value of more than $17 billion). BharatPe claims to have
facilitated the disbursement of loans totalling over ₹3000 crores to over 300,000 merchants, since
launch. Further, BharatPe’s POS business processes payments of over ₹1,400 crores per month.  

In June 2021, the company announced the acquisition of PAYBACK India, a multi-brand loyalty
program company with over 100 million members. In June 2021, BharatPe was also given in-principle
approval by the Reserve Bank of India to establish a Small Finance Bank, in partnership with Centrum
Financial Services Limited (Centrum), the NBFC arm of the Centrum Group.  
In August 2021, BharatPe forayed into the consumer space with the launch of its consumer investment
and lending product- 12% Club. Later in October 2021, the consortium of Centrum Financial Services
Limited (Centrum) and BharatPe, was issued a Small Finance Bank (SFB) license by the Reserve Bank
of India (RBI). BharatPe also entered the Buy Now Pay Later segment with the launch of Postpe in
October 2021. 
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