Bharatpe- The Fintech Unicorn of India!

1. Overview

Imagine your life a few years back, say early 2000 when digital payments had not been in the picture. People had to stand in long queues in banks and move from one ATM to the other which was again a long & tedious process. Therefore, with the introduction of QR-based digital payments a huge amount of ease and convenience in our lives to a level that we cannot imagine our lives without it. Such digital payments are facilitated by various start-up businesses such as Paytm, PhonePe, BharatPe, Trupay, etc.

BharatPe is a one-stop shop for all digital payments for offline businessmen and retailers and allows them to accept UPI payments for free through the BharatPe QR code, which is hugely beneficial for smaller businesses like retail Kirana stores for their convenience.The tagline states “BharatPe Lagao, Dhandha Badhao” and Accepting Payments Made Easy, Simple & Free! Apart from digital payments, BharatPe is also responsible for starting India’s first UPI Bahi Khata for merchants.

Founded by three co-founders namely Ashneer Grover, Bhavik Koladiya, and Shashvat Nakraniaround in 2018, it has met with tremendous success and popularity among the masses despite it being a late-comer in the fin-tech industry. While it is primarily headquartered in Delhi, it maintains offices in five cities in the country. After raising a sum of $370 Mn in a Series E equity round led by Tiger Global at the valuation of $2.85 Bn, it joined the list of coveted unicorn clubs in India being the 19th unicorn of the year. Read further to find out more about BharatPe, how it works, Growth& Challenges, controversies, funding & acquisitions, and many more!

2. BharatPe –Story of Inception

Shaswat Nakrani, a then student at IIT Delhi met Ashneer Grover with his start-up idea to launch a UPI payments business to get business investment. Ashneer Grover felt that UPI will become a force across India and it was a good angel investment opportunity for him, he decided to join the team full-time as Co-founder & CEO of the business. India’s digital payment market is expected to ramp up to $10 trillion by 2026, according to the latest study made by the leading digital payments firm PhonePe and Boston Consulting Group (BCG).

BharatPe is one of the largest players in the digital payments & fintech industries with tough competition from businesses like PhonePe, Paytm, etc.However, due to a series of controversies, Ashneer Grover, ex-MD & Co-founder of BharatPe resigned from his position in Feb 2022. But, months after his resignation and removal from the BharatPe board, some key responsibility managers namely, Satyam Nathani (Founding member) Nishith Sharma (ex-Chief revenue officer), and Chandrima Dhar (ex-Head of institutional debt partnerships) have also resignedfrom the company as on June 2022, citing personal reasons for the same.

3. BharatPe- Products & Services Offered

For any successful start-up business, it is necessary to ensure that the products being offered are innovative & sustainable. In other words, the products being offered should be able to offer a reasonable solution for a bigger problem and should be worthy to earn consumers’ patronage for a longer period.

BharatPe is an Indian QR code-based payments aggregator business that allows its customers to transfer/receive payments directly in their bank account without any charges/fee payments through a single interoperable QR system that supports up to 150+ payments apps such as PhonePe, Paytm, GooglePay, BHIM, FreeCharge, etc. with 7.5+ million active users.

Accordingly, Bharatpe has devised, designed, and offered products that never let the customers’ flow get down, which includes-

• BharatPe Merchant App-Bharatpe merchant App allows small merchants and Kirana owners to receive payments from their customers directly into their business accounts. But, how is it any different from the existing digital payment businesses? Well, other similar apps used to charge a certain percentage of transactional sum for the instant settlement, whereas, the BharatPe is offering free instant settlement instantly on a zero commission.
• BharatPe Swipe Machine-BharatPe swiping machine is the second legend product of the BharatPe business model.But do you know why? Actually, before the advent of BharatPe swipe machines, whenever customers made payments by swiping any debit/credit card, the merchant received lesser of its profit margins due to the transaction fee charged by the Swiping Machine Business.So, if the margin of the merchant is 15%, then he will receive only 13% because 2% is charged by the card swapping Machine Company. Whereas, BharatPe swapping machines allow payments machines at 0% commission, fees, or charges.This product proved to be a turning point for merchants ultimately leading to a three-fold rise in customers in retail stores and other commercial merchants have installed the BharatPe swapping machines, and this figure is rising more than ever.
• 12% P2P Club-The BharatPe 12% Club is yet another innovative product being offered to consumers. The 12% Club offers its audience to invest their money on the return interest rate of 10% on daily basis, without any time-bound or time block involved. In other words, whenever any member of the club wishes toinvest the money, he can, and when he wants to withdraw the money, he can withdraw instantly as well without any processing fees. It also offers loans up to 10 lakhs rupees without any collateral at an interest rate of 12%.Interesting right?
• BharatPe Xtra Income Card- The BharatPe Xtra Income Card is the next exciting product of the BharatPe, which is the first Credit-cum-Debit Card, that allows guaranteed 1% cashback on every transaction made by the customers with a credit limit of 1 Lakh without any annual charges or application fee.Now, to get this 1% pay, you need to pay some commission to it, so BharatPe receives a lump sum of 4%-5% cashback from the online company from which it is giving you 1%.
• BharatPe Credit Card-Though there are several fin-tech businesses offering credit cards to their customers, it is only at BharatPe which offers 30 days of interest-free borrowing up to Rs. 10, 00,000/-In 2020, BharatPe also launched Gold Loan facilities & Digital Gold product that offers gold loans upto the value of 20 Lakhs and totransact for 24-carat vaulted gold with 99.5% purity.

4. Bharatpe- Founders & the Team

BharatPe was founded by its co-founders namely- Ashneer Grover, Bhavik Koladiya, and Shashvat Nakrani in 2018. However, after the resignation of Ashneer Grover on February 28, 2022, BharatPe lists Bhavik and Shashvat as its Co-founders.

Ashneer Grover

Ashneer Grover initially joined as CEO  & Co-founder of BharatPe and later as the MD & Co-founder of BharatPe until he resigned from his position on February 28, 2022. He completed his graduation from Indian IIT Delhi and IIM Ahmedabad.Before starting the Bharat Pe he worked in crucial positions for companies like Kotak Investment Bank, Grofers, PC Jeweller Ltd and American Express.He had to exit BharatPe by resigning from his position due to a series of controversies that took place in 2021 & 2022.

Shashvat Nakrani

Shashvat Nakrani is the other co-founder who started Bharatpe with Ashneer Grover in 2018. He belongs to Bhavnagar, Gujarat, and completed his graduation in Textile Technology at IIT Delhi

5. BharatPe –Business & Revenue Model

BharatPe has a unique business model as it operates on a B2B2C model facilitating payments for customers as well as smaller business merchants who need to do transactions frequently daily by leveraging UPI to enable free transactions at a time when no other business was offering lesser than 1.5 percent charges of the transaction valuewhich turned out to be a great strategy as businesses were already struggling at the times of COVID pandemic causing an instant liking and following from merchants and vendors.In the words of Ashneer Grover, “Firstly, the profit margins were already lower in retail and again the shopkeepers did not want to pay for the services”, but they were ready to pay interests on loans. It is when we decided to do something in the fin-tech space, with merchants being our core focus.

These retail merchants would make around 15% and the takeaway profit would be around 6-7% after deducting their overheads. The problem faced by them was the applicable MDR (Merchant Discount rate) of 1.5%. Particularly on a digital platform like PhonePe, Google Pay, or Paytm, it is due to the MDR their profit margin reduces from 6-7% to 4.5%, which is discouraging for any merchant using these apps for transaction purposes and further the QR code operators operated only in a closed-loop.

Considering the financial difficulties of smaller vendors and merchants, BharatPe provided this service for free and made the interoperability of QR code easily accessible which pulled the other players to become interoperable and keep the MDR at 0%. Further,it took quick steps todevise & offer collateral-free business loans at rates lesser than prevailing in the market by partnering with NBFCs. In the words of Ashneer Grover (ex-MD& Co-founder) of BharatPe.“Though small shops in India solve hundreds of problems, still, the shopkeepers have to rely on family/friends or loan sharks for funds as banks do not give them loans with no papers”.

Therefore, BharatPe has enabled artificial intelligence (A.I.)-based system for offering business loans that detect certain attributes of the borrower such as the type of transactions a shopkeeper does, their use of other products on the platform,etc., and informs BharatPe about the cash flow of their company. Later, such information is combined with the merchant’s lending history and credit score to make a loan offer to these small vendors & other businesses. The whole process is completely digital without any hassles and no need for collateral.

Additionally, vendors accessing the platform can explore other products apart from the facilitation of faster payment transactions through QR such as 12% Club, Xtraincome card, Gold Digital & Gold Loans, etc.

BharatPe Revenue Model

BharatPe essentially recognizes itself as an alternate lending company as compared to just a payment aggregator business. Since payments are facilitated for merchants and customers for free of cost with an intent to become an integral part of the merchant’s business through their visibility in cash flows and wherever required offer them lending products through its digital platform at cheaper rates. BharatPe counts on the interdependent cyclical connection of credit and application usage to boost its revenue on its platform.

Its key offering is the QR Code for merchants to accept UPI payments which make up 80% of its $16 billion annual total payment volumes (TPV) in the business, but since there are no charges for QR-based transactions they do not contribute much to revenue. It is the lending products offered to the customers that are the primary revenue generators.

Ashneer Grover who worked with a series of banking and investment firms, that the merchants did not want to pay for the facilitation of digital services, but they were ready to pay interest on loans for expanding their business. However, it was difficult to access loans due to great deal of paperwork involved.

Thus, BharatPe decided to fill this gap through its unique business plans by offering loans to merchants or local shopkeepers for generating revenues. Apart from business loans other products such as person-to-merchant (P2M) payments while holding a market share of 8-10%. Similarly, BharatPe BNPL product PostPe of `BharatPe became an instant hit and even clocked a TPV of $321 million within three months of its launch in October 2021.

Additionally, BharatPe keeps track of the periodical transactions made by the customer while using its products like Xtremecards and assesses their ability to return the loan, and provides solutions to serve the pain points of small businesses.

6. BharatPe- Funding & Acquisitions

BharatPe has successfully raised a total of $720 Million over twelve funding rounds from noteworthy venture capitalists funds such as Tiger Global Management LLC,Dragoneer Investment Group, Coatue Management, Ribbit Capital, and Sequoia Capital. After raising a sum of 370M from a group of investors on Aug 4, 2021, its valuation reached $2.85 billion, thereby becoming the 19th unicorn of 2021 and one of the top Five valued Fintech Start-ups 2021’ in India.

The latest tranche of investment came through debt financing on October 25, 2021, where BharatPe raised investment worthRs 100 crores ($13.32 million) from MAS Financial Services Pvt Ltd.

Furthermore, BharatPe is planning to raise a sum of around $250 million worth of funds through debt financing by the end of FY22.BharatPe plans to use these funds to reinforce its merchant lending business vertical.

Apart from its funding, BharatPe has acquired 100% ownership of PayBack India, a digital payments app and a multi-brand loyalty program, from American Express and ICICI Investments Strategic Fund for a sum of $27M that it announced on Jun 10, 2021.

Here is a list of particulars of BharatPe funding rounds that have taken place to date-

• Seed Funding Round– BharatPe announced its seed funding rounding on October 1, 2018, which involved six investors with lead investors like Beenext Capital and Sequoia Capital India who contributed a total sum of $2M.
• Series A Funding Round-The Series A funding round was announced on February 21, 2019, for a sum of $14.5M from four investors -Sequoia Capital India, Insight Partners, and Beenext Capital.
• Series B Funding Round– The series B funding round of BharatPe took place on June 4, 2019, that involved five investors namely- Ribbit Capital, Steadview Capital, Sequoia Capital India, Insight Partners, and Beenext Capital who contributed a total sum of $50M towards BharatPe business.
• Series C Funding Round-BharatPe completed its fourth round of investment in the Series C funding round that was announced on February 24, 2020, and received $75M from its lead investor Coatue Management and other investors including Ribbit Capital, Amplo VC, Insight Partners, and Steadview Capital.
• Debt Financing- BharatPe raised a sum of $2.5B from four investors through the Debt financing round on January 6, 2021. The lead investors for this funding round are Alteria Capital, Innoven Capital, and Trifecta Capital Advisors.
• Series D Funding Round-The Series D funding round was announced by BharatPe on February 11, 202. This round witnessed investments for a sum of $108M contributed by seven investors with Coatue Management.
• Debt Financing Round-BharatPe announced the second debt financing round in the same year on May 10, 2021, from the sole investor namely Northern Arc, that solely invested a sum of $500M into BharatPe business.
• Series E Funding Round- BharatPe Series E round of funding took place on August 4, 2021, generating a sum of $350M from a total of 8 investors whileTiger Global Management was the lead investor in the round. This round finally helped BharatPe to make to the list of start-up unicorns in the year 2021. Additionally, BharatPe also announced secondary market funding for a sum of $20M for the BharatPe business on August 4, 2021.

7. BharatPe-Business Marketing Strategies

BharatPe has grown and expanded tremendously by making its reach to customers and small businessmen despite being a latecomer in the fintech business. BharatPe has been successful in becoming the 4th largest player in the UPI portion after Google Pay, PhonePe, and Paytm, and owns 8-10% of the fin-tech market share in the digital payments business.

Currently, BharatPe it’s the Now, the QR code payments are available in more than 220+ cities across India by achieving 2x growth from the last fiscal year and has already onboarded more than 8 million merchants as compared to 5 million merchants in FY21 and has already grabbed the third position in POS category.

It has also been successful in launching useful & innovative products that helped it to widen its consumer base such as business loans, digital gold investments & Gold loan products on its platform. For instance, BharatPe launched a secured gold loans segment by announcing the launch of gold loans for its merchant partners on March 14, 2022, in collaboration with RBI-approved NBFCs such as Safegold that will offer gold loans to merchants & vendors up to a value of Rs. 20 lakhs at competitive rates of 0.39%. BharatPe has already started disbursing its gold loan services merchants in major cities like Delhi NCR, Bangalore, and Hyderabad and aims to extend its operations to more than 20 cities by the end of this year.

Likewise, BharatSwipe was a disruptive card payment acceptance machine with 0% fees or any charges that received an overwhelming response right from its inception.Since its inception, the POS business network has grown 25X and has been made available to over 250 cities in the last 12 months, as confirmed by a BharatPe in March2022.BharatPe has also claimed its success in the deployment of more than 1.25 lakh BharatSwipe machines across offline shops.

On Aug 21, 2021, BharatPe also announced its strategic alliance with India’s third-largest private sector bank Axis Bank to expand its merchant acquiring the business of the bank. It will help BharatPe users to have a better user experience through faster payment processing, a more secured and simplified platform along with other features for BharatPe POS merchants by leveragingthe best-in-class technology platform offered by Axis Bank.

Unique Marketing Strategy of BharatPe

BharatPe has met its goals and has achieved its feat in a short span of 1.5 years, which is praiseworthy and can be hailed as a remarkable scale-up of the POS business. It is interesting to note that BharatPe has managed to do all of this by incurring even lesser costs than its competitors like Paytm & PhonePe. Indisputably, a large share of credit goes to the innovative products and efficient services, but the unique marketing strategies of BharatPe have a lot to do with it too. In the words of Ashneer Grover, “The sole reason for BharatPe to become No. 1 even against the competitors, in my opinion, is due to our customer-focus services. BharatPe is on the customer’s side and only helps in offline transactions”.

The Co-founders happened to observe the fact that most popular digital payment applications had their main focus on consumer-based services, without any special facility for smaller retail merchants. They tapped on this opportunity to offer India’s first digital payments services with Zero Fee, no transaction charges, with no rental.

Thus, BharatPe was launched as an app that could facilitate the merchants to receive payment from all different apps or UPIs through one common QR code.  BharatPe app which is a merchant payment and lending service provider is fully focused on a merchant with a razor-sharp approach.

Despite its late entry, BharatPe is beating the stronger rivals, because it has unique business and marketing strategies.BharatPe launched two marketing campaigns as part of its advertisements& promotional activities namely-

• Ek Bharat, Ek QR

According to the approach, the BharatPe digital payment app will provide a common QR code that will receive payments for more than 150+ digital payments applications directly into their bank accounts, ultimately the merchants and customers to use the BharatPe app to replace all other QR codes with the BharatPe QR code only.

• Team BharatPe

The founders knew and understood the kind of popularity cricket has in India and how the cricketers are religiously worshipped by their fans, especially during IPL seasons. Thus, they onboarded cricket players like Rohit Sharma, Jasprit Bumrah, KL Rahul, Mohammed Shami, Ravindra Jadeja, Suresh Raina, Shreyas Iyer, Prithvi Shaw, Sanju Samson, Yuzvendra Chahal, and Shubhman Gill, etc. as BharatPe brand ambassadors in 2021.

8. BharatPe- Breakdown of Expenses & Revenues

Though the Covid pandemic affected businesses deeply, however despite this BharatPe has recorded impressive growth in FY21 with a revenue of Rs 119.1 crores from its business operations which were only Rs 5.96 crore in FY20, which is a 20 times increase from the previous year. Quite impressive, isn’t it!

However, as the business is in expansion mode, so are the BharatPe business expenditures in FY21, the annual expenditures also reported around 895.3% jump reaching 462.03 crores in FY21 as compared to Rs 229.12 crore during FY20 and Rs 23.02 crore in FY19.The transaction processing charges are again the most significant cost centre for the company which swelled by 423.6% at Rs 97.50 crore, making for 21.1% of the annual costs of BharatPe in FY21.

9. BharatPe Financials in FY20 vs FY21

BharatPe witnessed promising growth in terms of its financials in FY21. It observed an improved EBITDA margins from – 915.51% in FY20 to – 141.01% in FY21. The fintech unicornhas grown four times in terms of its business income which has helped BharatPe to improve its losses which have grown to reach Rs 277.24 crore from Rs 206.81 crores.

10. BharatPe –Key Competitors

• Google Pay
• Paytm
• PhonePe
• Albo
• MobiKwik

11. BharatPe- Challenges & Controversies

• Exit of Ex-MD & Co-founder Ashneer Grover

All this controversy started when seemingly an audio recording between a Kotak wealth management employee and another person matching voice with Ashneer Grover, then MD & Co-founder of BharatPe talked to him in an abusive and threatening language over his failure to secure financing for Nykaa’s initial share sale. As a result of which, he had to go on a voluntary leave of absence from the BharatPe board for two months on January 19, 2022.

However, the telephone controversy hadn’t been over and a new controversy brewed when Ashneer Grover including his wife was associated with financial mismanagement or siphoning of business funds for personal purposes from BharatPe.

Madhuri Jain Grover, the wife of Ashneer Grover who was serving as the Head of Controls at BharatPe, was also terminated from her services due to financial irregularities on February 23, 2022. In pursuance of termination of her services, she had to bid farewell to her stakes in BharatPe businesses due to the same reason.

BharatPe decided to undertake an independent audit of the start-up’s internal processes and systems on January 31, 2022, for which the top risk advisory firm, Alvarez &Marshal was appointed. On the other hand, Ashneer Grover also sought legal aid fromKaranjawala & Co., a law firm from Delhi NCR to secure his position in BharatPe and keep his 9.5% shareholding intact. Later, he also demanded Rs 4000 crore from the investors to buy him out, which meant that if he needs to exit the business, either he should be paid a fair share of his stake in the business (9.5% stake in the company at a valuation of around $6 billion) or he will solely run the company. When the BharatPe shareholders denied it, he filed a plea to the Singapore International Arbitration Centre (SIAC) regarding this matter, which got rejected.

Accordingly, he had to resign from the position of Co-founder & MD of BharatPe, which according to the BharatPe board came just after few minutes after the receipt of the Board meeting’s agenda that also included the PWC audit report including the conduct of Grover and the actions that could be taken against him. Still, Ashneer Grover claims to be the “single largest individual shareholder” with a 9.5% shareholding in the BharatPe business.

• BharatPe Salary Payment Controversy

BharatPe was again hit by another controversy when Karan Sarki, a Senior Associate IT at BharatPe on April 6, 2022, provided on the LinkedIn app that the company had not been paying salaries to the employees, and the older admin staff of BharatPe had been terminated from employment without any reason and hadn’t even paid off. Ashneer Grover was quick to reply here while asking Suhail Sameer and Hersimran Kaur to look into the matter, which was eventually followed by Aashima Grover, sister of Ashneer Grover while calling BharatPe top management “a shameless bunch.”

Suhail, current CEO of BharatPe noticed this comment and responded to her claiming that her brother was responsible for this situation as he “stole all the money there was little available for the employees to be paid”. However, later he had to apologize for his earlier comment and clarify that the salaries to the employees had already started to be paid out in full and final, and the remaining employees will be paid out soon. He further requested the BharatPe employees to stay away from building stories.

• Exit of Key BharatPe Managers & Employees

Another challenge for BharatPe seems to be the exit of its Key Responsibility managers who played a significant role in the tremendous growth of the business in the last few years. Among them, Satyam Nathani was a key founding member and key strategist behind BharatPe QR codes, PostPe, and 12% Club. This was followed by the exit of other key responsibilities managers namely, Nishith Sharma(ex-Chief Revenue Officer, BharatPe) and Chandrima Dhar was the (ex-Head of the Institutional Debt Tem of BharatPe) whose exit was confirmed in the same month on June 2022.

Reports have suggested that not only key responsibility managers but also the employees of BharatPe are flooding out the job applications due to the lack of trust & business operational abilities and the loss of goodwill due to a series of controversies hitting the business.

• BharatPe Fined by the GST Directorate for Fake invoices to Fake Vendors

BharatPe was on the radar of theDirectorate General of Goods and Services Tax Intelligence (DGGI) for a while now, as the governmental agency was scrutinizing the financial data of BharatPe. BharatPe was fined for such financial irregularity in October 2021 by DGCI. However, BharatPe was fined again for an amount of around Rs 1.5 cr, as it was reported that the fintech unicorn generated invoices for non-existent vendors. The penalty was a total of around Rs 12.5 cr in total, and it was reported that BharatPe had to deposit Rs 11.5 crores as a penalty.

• Claims of Ashneer Grover Regarding Gold Loan Vertical being his “Brainchild”

After the exit of Ashneer Grover from BharatPe and his wife Madhuri Jain and the whole boardroom controversy debacle, there was another one forthcoming. It took place when BharatPe announced its plans for disbursing gold loans to merchants, under the guidance of its current CEO, Suhail Sameer.

However, this didn’t go well with Ashneer Grover, who battered the current CEO, Suhail Sameer, maintaining that it was his idea to launch a gold loan vertical, and the current CEO was being wrongly credited for the same. He also said that it was he who brought Nikhilesh, who used to be his colleague back in Kotak and PC Jewellers, to help BharatPe foray into the gold loans segment one year before.

Furthermore, Grover also added that there was also an array of other products including-

1. Merchant Stock Option Plan – This was initially decided to be made live by January 2022, but hasn’t been launched by BharatPe yet.
2. Three Month customer interest-free EMI product – BharatPe had planned to launch a “three-month customer interest-free EMI product”, that could help BharatPe to replace existing products in the market like ‘UNI Cards,’ which could help the start-up to help merchants sell items to customers on EMI without the need for a PoS machine.
3. UNITY small finance bank for depositors – Grover also stated about there was aUNITY small finance bankto be offered to depositors for a digital interfacein the absence of which they are impeded from accessing their funds. None of these products have been announced by BharatPe yet.

12. BharatPe- Future Plans

BharatPe has come a long way since its launch and has gained popularity, especially among merchants. Despite the controversies that happened earlier this year,  BharatPe has managed to hold its position firmly in the market and desires to expand its reach in the future.BharatPe aims to expand its business operations to more than 80 cities in India by the end of FY23.

In the coming years, BharatPe plans to aggressively expand its merchant base by making its app more user-friendly for which it has disbursed around Rs 140 crores already.Alternatively, BharatPe is looking on to improve its revenues for which it has already set targets for the coming years. Bharatpe has already known to achieve a 4x growth to $100 million and is looking forward to reaching a revenue exceeding $300 million in revenue by FY23 end from various business products and verticals. It plans to reach an AUM of $100 million and a lending AUM of $50 million from the 12% Club by the end of FY22.

Similarly, as BharatPe is the third-largest POS solutions provider, it is planning to aggressively scale the business. After crossing the $14 billion mark in annualized total payment value, as reported in Oct 2021, it is working to reach up to $30 billion TPV by March 2023. However, BharatPe has admitted to the fact that there has been no development in the loan demands from merchants recently, therefore BharatPe is looking forward to scaling up its lending business aggressively to achieve around 10x growth in lending by FY23.In the words of Suhail Sameer “Our next plan lies in building a lending book of around Rs 40,000 crores ($5 billion) in the next five years”.