Saboteur

by RV Raman

  Investors, therefore, had to find another way of valuing e-tailers. One popular method was to use GMV – the Gross Merchandise Value – as the basis. GMV was the pre-discount, pre-cashback value of all goods sold by the e-tailer. An additional factor investors considered for valuation was how large the e-tailing industry was expected to be in five to ten years.

  ‘The industry size is outside our control,’ Nilay had responded. ‘But our own scale isn’t. Any measures other than GMV for scale?’

  ‘GMV is a key measure, along with customer base and transaction volume,’ Gautam had replied. ‘Different investors assign different weightages to each. Basically, the Enterprise Value is x times your GMV, where x is the GMV-to-EV multiple they assign, based on your scale and potential. I may be putting it crudely, but that is the essence of it.’

  ‘And profitability doesn’t figure in the equation.’

  ‘Nobody can be profitable at this nascent stage of the industry cycle, unless they sacrifice growth and scale,’ Gautam had declared. ‘It is almost as if the two are mutually exclusive – you must choose between profits and growth.

  ‘And if you don’t grow and build scale, you will be acquired or destroyed. Either way, you’ll be history. The big investors are clear on one thing – they will invest only where there is a strong growth potential. Some believe that if you are profitable at this nascent stage, you are not growing as fast as you should and they want no part of your business.’

  ‘That’s why our strategy is to build scale as rapidly as possible,’ Nilay had concluded.

  ‘Not just build scale, but also to break into the top three or four.’

  ‘Why does that matter?’

  ‘The GMV-to-EV multiple is not the same for all e-tailers,’ Gautam had explained. ‘The bigger you are, the higher is the multiple you attract for each rupee of GMV. The top three or four attract the highest multiples.’

  ‘Can you elaborate?’

  ‘Let’s say you are an e-tailer with a GMV of $250 million,’ Gautam had begun. ‘The multiple you get may be less than one, say, 0.5x. That means your valuation is 0.5 times 250 million, which is 125 million. But if your GMV is 500 million, the multiple may be close to 1x and your valuation may be 500 million dollars.

  ‘But if you are large enough to have a GMV of a couple of billion dollars, your multiple may be 2x or more, making your valuation zoom to over four billion dollars. The largest e-tailer who had a GMV of four billion dollars last year had a valuation of over twelve billion dollars – a multiple of over 3x.’

  ‘So based on your size, your GMV-to-EV multiple could be anything from 0.5x to 3x,’ Nilay had said, his eyes shining in the semi-darkness of the aircraft cabin. ‘The higher you are on the scale, the more each rupee of GMV is worth.’

  ‘Their logic is simple,’ Gautam had continued. ‘There is no question that a massive shake-out is inevitable in our industry. The chances that a small player will survive are far slimmer than the chances of a large one surviving. That makes larger players better bets. So investors are willing to pay more for them.’

  ‘And if you’re in the top three or four, they are willing to pay a hefty premium, right?’

  ‘Right. I can’t tell how many times I’ve heard that it is the top three or four in an industry who will rule the roost. Any industry, not just e-tailing. Investors feel their money is safer in the top three or four.’

  ‘That opens up an interesting opportunity for us, Gautam!’ Nilay had been visibly excited. ‘We are the sixth or seventh largest now, depending on which estimate you accept. Our GMV-to-EV multiple is what, around 1.5x?’

  ‘That’s about right.’

  ‘What if we acquire our smaller rivals?’ Nilay had gone on. ‘Let’s say we acquire an e-tailer with a GMV of 500 million dollars and a GMV-to-EV multiple of 0.75x. We can buy them at 375 million dollars. Once their GMV becomes our GMV, it will automatically attract our multiple, which is higher at 1.5x. The value becomes 1.5 times 500 million, which is 750 million dollars. Just by buying them and assimilating them into MyMagicHat, we double their Enterprise Value! We pay 375 million and get 750 million in return!

  ‘Well –’

  ‘And if we acquire sufficient e-tailers for our GMV to break into the top three or four, each rupee of GMV we acquire will automatically be worth 3x – over three times the price we paid!’

  ‘Now, now, Nilay! Don’t get carried away. The 1x, 2x and 3x I mentioned were just illustrative. I don’t know how steeply it climbs.’

  But Nilay wasn’t listening.

  ‘What if we buy three or four companies which when combined, will double our size?’ he asked. ‘In one shot, we could break into the big leagues.’

  Nilay pulled out a sheet of paper and wrote down a series of calculations. At the end of it, his maths was simple: by spending half a billion dollars in acquisitions and keeping the acquired customers for six months, they could potentially double their valuation from three billion to six billion.

  While the math was simple, there were problems in execution, not least of which was finding the half a billion dollars in an environment that was getting tighter by the day. Another challenge was to find suitable targets and quietly acquire them so that competitors didn’t get wind of it.

  The idea gradually grew on Gautam over the next two weeks and he broached it with his father on his next trip to Mumbai. Sashikant Puraria listened quietly, before asking him a string of questions.

  ‘I like your idea, Gautam,’ he said finally, smiling at his son.

  ‘It’s not my idea, Papa. It’s Nilay’s.’

  ‘It’s yours as far as I am concerned. It came from you.’ The smile had faded. Sashikant’s eyes were trained on his son in a glassy stare. ‘Don’t give away credit needlessly. Remember, you have a profile to build. If this works out, it’ll add to your stature.’

  ‘But Papa –’

  ‘No buts, Gautam. Be fair and kind to your employees by all means, but keep that within the walls of the company. When it comes to making a mark in our circles, this is your initiative. You are the leader, not Nilay.’

  The next day, Sashikant brought up the idea at breakfast with Gautam’s older brothers, Raj and Dilip.

  ‘So, if I understand it right,’ Dilip said, ‘it won’t require additional investment from us, right?’

  ‘Right,’ Gautam confirmed with a nod. ‘We’ll have to find investors to fund it.’

  ‘Can we sell a part of our stake to them?’ Raj asked. ‘It’s time we started taking our money out.’

  ‘Not yet, Bhaiya. Our agreement with FVG Tech stipulates that we give them the option to sell their stake before we begin selling ours. We can’t be the first to sell.’

  ‘Then why don’t we arrange for the new investors to buy some of FVG’s stake? That way, we would be free to sell – and recoup our investment – when the next opportunity arises.’

  ‘Good idea, Raj,’ Sashikant nodded. ‘Let’s do that. I’m sure FVG will want to sell. It’s been two years since they invested.’

  Ten minutes later, they had agreed that, in the interest of secrecy, Gautam would stay out of the initial discussions lest word leak out from MyMagicHat. None of the meetings would take place at the e-tailer’s offices.

  Over the next two weeks, when Gautam was back in Bengaluru, they appointed three separate intermediaries and mandated them to open discussions with three e-commerce firms code-named Ebony, Ivory and Mahogany – the three targets Nilay had identified. Ebony was a travel portal, Ivory a real estate marketplace and Mahogany was an online furniture and furnishing retailer. None of the intermediaries knew of the mandate to the others and each commenced discussions on a ‘no name’ basis, without divulging the identity of the potential buyer.

  Simultaneously, Sashikant and Raj began discussions with private equity players in Singapore and Hong Kong and on both sides of the Atlantic.

  Nobody, except Nilay and the Purarias, knew of the plan that had been code-named Project Iskan �
� a truncation of Alexander the Great’s Persian name, Iskandar. Just as Alexander had conquered several nations in quick succession, Raj said, the Purarias would acquire three smaller rivals simultaneously. More, if needed.

  It was a first-of-its-kind deal that eventually came to involve not just Kantoff Capital, but a consortium of four private equity firms led by Kantoff. The deal, when consummated, would be the biggest in the history of Indian online retailing. The consortium was preparing to invest over a billion dollars in the unicorn.

  Chapter 5

  Dhruvi Kishore, one of the younger Inspectors at Bengaluru’s Crime Branch, triumphantly tossed the morning newspaper aside and leapt up from bed. She had just improved her personal record for a five-star – the highest difficulty rating – Sudoku puzzle by seven seconds.

  A leftie, she hurriedly ran her comb through her short curly black hair and swore heartily as a couple of its teeth snapped, making it the latest victim of her exasperation with the stubborn dark coils that covered her scalp and framed her dark-skinned face. If there was one part of her that never cooperated when she was late, it was her hair which topped a lithe frame supported on legs that seemed a little too long for the rest of her body. Wearing her hair short and having it trimmed every couple of months didn’t seem to help in keeping it tamed to her satisfaction.

  She flung the comb back on her cluttered dressing table and snatched up a brush, her bright, wide-set eyes darting to the wall clock. She had better leave quickly if she were to beat the traffic today. Dressed in her customary civvies of dark trousers and light top, she quickly raked the brush through her tangled crown with her left hand, as the right groped for her motorcycle keys on the dresser. As most of her work involved investigations where a uniform could attract undue attention, she ended up wearing civvies eight out of ten days.

  As soon as she had brushed her hair into a semblance of submission, she picked up her bag and made for the bedroom door. Just then, her cell phone rang.

  A quick glance at the caller’s number turned into a surprised blink as she realized that the call was from Mumbai. When was the last time her mother’s brother had called her? She couldn’t remember. Perhaps, never? As far as she knew, her uncle didn’t even have her number. If he had taken the trouble to get it from her mother, the call must be an important one.

  ‘Hello?’ she said cautiously.

  With this uncle of hers having migrated to Mumbai decades ago, she met him – a, severe, short-tempered man – only at family functions or on the occasions he visited her mother in Bengaluru. She was always unsure about how to deal with him.

  ‘Dhruvi?’ a woman’s gentle voice murmured hesitantly.

  ‘Mami!’ Dhruvi responded in instant recognition. The picture of a smiling, roly-poly lady sprang up in her mind. ‘How are you?’

  This was a person she was undoubtedly fond of, despite not meeting her very often – soft-spoken, kind-hearted and always calm, the perfect foil for her irascible husband.

  ‘How are you, Dhruvi?’ the elderly lady asked and continued, before her niece could answer, ‘I hope I am not disturbing you?’

  ‘No, Mami. I was just about to leave for work. I can talk. I hope you are well?’

  ‘Oh yes, I am. But I have a favour to ask of you, Dhruvi. I wouldn’t have troubled you unless it was urgent. Your being with the Bengaluru police is a blessing.’

  ‘Tell me, Mami. What can I do for you?’

  Dhruvi knew of no connection between her aunt and Bengaluru.

  ‘My nephew – my sister’s son – had gone to Bengaluru for a few days,’ the lady went on. ‘You may remember him too. His name is Puneet.’

  Dhruvi cast her mind back to the family weddings on her mother’s side that she had attended. With a little effort, she recalled a thin, serious-looking man a couple of years older than her.

  ‘I think I remember someone by that name, but I can’t be sure. He preferred an NIT over IITs, because he wanted to study computer science, didn’t he?’

  ‘What a memory you have! It’s the same boy.’

  ‘Okay. What about him? You say he’s in Bengaluru.’

  ‘Yes, Dhruvi. But they can’t trace him since last night.’

  ‘Can’t trace him?’

  ‘He apparently left the office where he was working, but didn’t reach his hotel. Someone from his office called his house to ask if they knew where he was. They obviously didn’t. In fact, nobody seems to know where he is.’

  ‘His mobile phone –’

  ‘Switched off. They’ve been calling him every ten minutes.’ Her voice dropped conspiratorially. ‘I’m at their place now. His mother is terrified, imagining all sorts of disasters. They don’t know what to do. I called your mother to get your number. Can you help find him?’

  Dhruvi fell silent for a moment. As an Inspector at the City Crime Branch, she didn’t get involved in finding missing persons or other run-of-the-mill matters, unless her squad was specifically called in. Besides, there had been instances of Inspectors from police stations resenting the CCB’s unsolicited involvement. Finding missing persons was a matter best left to local police stations.

  ‘Have they informed the local police?’

  ‘They have, but the local police don’t seem to be taking it seriously. Wait for a day or two, they keep saying. He will, most likely, show up.’

  ‘That’s actually true, Mami,’ Dhruvi told her aunt. ‘Most people who go missing reappear in a day or two.’ Some, of course, reappeared in the form of a corpse, but that was not something she could tell the distraught lady.

  ‘Besides,’ she added, ‘there are so many such complaints that they don’t take them seriously unless it involves a child or a woman or it appears to be a case of kidnapping.’

  ‘But Puneet is a very decent boy! And very responsible too. It would be very unlike him to disappear without a word. See what you can do, no, Dhruvi?’

  How many boys whose mothers considered them decent and responsible were neither decent nor responsible, Dhruvi mused. Only when an incident occurred – often related to alcohol, women or drugs – did their mothers confront the nasty truth. But this was not something she could tell her aunt, even if she empathized with the men at the police station who had to deal with such matters every day.

  ‘Okay,’ she heard herself say, ‘I’ll see what I can do. Can you give me some details?’

  ‘God bless you, Dhruvi! I’ll hand over the phone to your Mama. He will share whatever details we have at our disposal. Do what you can to find the poor boy, won’t you?’

  A couple of minutes later, Dhruvi was staring at a sheet of paper containing the few details her uncle had provided. He hadn’t known which police station or police officer the case had been assigned to. All he could offer was the name of the five-star hotel where Puneet had been put up, the name of the office where he had been working and the mobile number of his boss who was staying at the same hotel. Fortunately, the hotel was a short detour from the route she took on her way to work.

  She locked her front door, strode up to her marine blue Royal Enfield Thunderbird 350 motorcycle, threw a long leg across it with ease, started it and rode off. The big bike thrummed through the streets of Bengaluru, turning heads of pedestrians and drivers alike as it went. A woman riding a motorcycle was unusual enough. One straddling a Royal Enfield Thunderbird was a rarity.

  In the past, Dhruvi would have loved to ride helmetless, if only to feel the cool air streaming through her short hair. But the biking accident that had given her the scar across her eyebrow had changed that. Though she was a police officer now, and could get away without wearing a helmet, she had made it a habit to wear one. But for that protection, she was sure, she wouldn’t have been alive now.

  Fifteen minutes later, the young woman sporting dark glasses was attracting curious glances as she thrummed her way into the hotel’s parking lot on a muscular-looking bike. Dhruvi swept off her glasses and tucked them away. She took off her helmet, secured it to the
bike and made her way to the reception.

  ‘Yes, madam?’ the clerk began with a tone of patronizing indulgence at the sight of a simply dressed, dark-skinned woman whose face was bare of make-up. It quickly turned to courteous, even deferential, attention as she produced her police ID and enquired about Puneet.

  ‘If you will come with me to the manager’s office, please?’

  The office turned out to be a small square room, with a couple of chairs facing a desk behind which sat the manager, a man little older than Dhruvi. He was happy to provide all the details he had with him.

  ‘Mr Vikram Deswani, who is Mr Puneet Kaul’s boss, asked the reception this morning whether they knew when Mr Kaul had returned last night,’ he explained. ‘Since guests have their key cards and come and go as they please, we didn’t have this information. We asked the security men if they had seen him, but they weren’t sure, as a large number of guests pass through our doors every evening.

  ‘We called his room several times, but got no response. We then decided to use a master key card and enter his room. We found it empty. The bed had not been slept in. Housekeeping had completed the turndown service last evening –’

  ‘What time?’

  ‘The turndown service? Around 8.15 p.m.’

  ‘What do you do during a turndown service?’

  ‘We remove the bed cover and turn down the top blanket so that the bed is ready for use. We also draw the curtains and check if the drinking water in the room needs to be replenished.’

  ‘The guest was not in the room then, I suppose?’

  ‘That’s right, he wasn’t.’

  ‘Okay. Go on.’

  ‘That’s all. We knew nothing more about it till 9.30 this morning, when Mr Deswani approached the front-desk staff. We checked the restaurant and room-service orders and found that Mr Kaul had not ordered anything all day.’

  ‘You mean, he had not charged anything to his room? He could have had dinner and paid by credit card.’