Why Are Ashneer Grover And Kotak Caught In A Battle?

A few days ago, an anonymous Twitter handle released an audio clip recording allegedly featuring BharatPe co-founder Ashneer Grover and an employee of Kotak Wealth Management.

The audio clip features two male voices, alleged to be that of Grover and the bank employee named Sushrut, and a female voice, allegedly that of Grover’s wife. One male voice in the clip, which the handle claimed was Grover, threatens to have the employee of the bank killed. Apart from the threats to kill, the male voice is heard using abusive language against the bank employee.

The heated exchange quickly went viral, with many criticising the unicorn founder for the language used in the clip. It is yet to be known whether the clip is authentic. Grover claimed on social media that the clip was a fake one, created to extort money from him by an account named Unicon Baba. However, the tweets were later deleted by Grover.

Grover had sent a legal notice to Kotak Mahindra Bank’s management long back in October 2021. On Sunday, 9 January, Kotak Bank released a statement saying that they were pursuing appropriate legal action after receiving a notice from Grover. The relationship appears to have soured after the Nykaa IPO. The notice addressed Uday Kotak, the founder of Kotak Mahindra Bank as well.

The main issue pertains to the allocation of Nykaa’s Initial Public Offering (IPO) shares, and financing for the IPOs. In the viral clip, the male and female voices are clearly upset about not receiving an IPO allocation through Kotak. It appears that Grover had applied for the Nykaa IPO, but was denied IPO funding, causing him lose out on an equity allocation and the post-IPO gains.

Grover had earlier said that he would be investing in the IPOs of several new age technology companies by using his own funds of around $100 million. He had applied for shares worth Rs 150 crore in the Zomato IPO. Given the high demand for the Nykaa IPO, Grover stood to make a handsome profit had he been allotted stocks.

The reason behind the inability to get an allocation in the IPO is attributed to Kotak withdrawing funding for the IPO at the last moment. According to the legal notice, high lending rates, and erratic FII (foreign institutional investor) movements were cited as the reason for curbing funding. As a result, Grover’s legal team alleges, the Grovers were deprived of an investment opportunity.

High net-worth individuals (HNIs) are provided with IPO financing, that is, loans are extended by financing companies to apply for larger IPO allocations. HNIs receive proportionate allocation of shares, making IPO funding a safer bet for lenders.

The investor must pay an upfront margin, and interest on the loan amount taken through IPO financing. If the IPO is successful, the interest is paid out of the listing gains of the IPO. However, like all forms of financial leverage, in case the IPO is unsuccessful, the investor would have to pay the interest out of his own pocket.

With no financing, Grover did not get the allocation he was aiming for, resulting in the notice to Kotak’s management. The notice alleged that the bank had continually promised to provide IPO financing for Nykaa, but ultimately failed to do so.

Kotak said that it had replied to the notice by Grover earlier, and is pursuing appropriate legal action. Ashneer Grover received more public recognition after appearing in Shark Tank India.