Bankerupt (Ravi Subramanian) (12 page)

Despite all this, Shivinder was worried. The receivables position was unnerving. They didn’t have any solution in sight. There was one, but Shivinder was not in favour of it. They could sell the stock which they had piled up in Narayanan’s Coimbatore warehouse to regular retailers and use the payments those retailers would make against that to offset the outstanding amounts. But the problem was that a given retailer would only buy a certain quantity. If they supplied most of that from the warehouse, supply from the genuine production line would come down considerably. It would eat into their regular sales, and consequently, the sales volumes that they would show in their regular financials would dip. They would again be forced to resort to fraudulently beefing up sales using the same method that they had used in the past. He was stuck with a problem that he didn’t know how to fix.

It was a rainy day in August. Shivinder and Deven Khatri were on a market visit. Strange for a CFO to go on a market visit, but Deven was seen as Shivinder’s shadow. Wherever Shivinder went, he took him along. This time they had come to the Snuggles store on Linking Road in Bandra—one of the first stores to be rebranded with the Snuggles logo and signage after the acquisition. Shivinder spent some time there talking to the staff. The franchisee owner was also present.

‘Mr Singh, when are you giving me the approval to open another store? I have just bought a commercial complex about half a mile down this road. Nike and Adidas have three stores each on the entire stretch of Linking Road, and we have only one. We are losing business.’

‘I know. As of now, we are not opening any more stores.’ Shivinder lamented the fact that they were not allowed to open new stores without the approval of the board. He had tried a couple of times, but the board had declined. Globally they were trying to acquire another footwear major. If that went through, it would give them access to another two hundred exclusive stores in India. Till that was finalized, the board did not want to go down the franchisee expansion route.

‘In fact, if you have that kind of liquidity, why don’t you pick up some more stock? The sales team can work out very good discounts for you,’ Deven added as an afterthought.

‘The store is right in front of your eyes. Show me an inch of space where I can stock more shoes. This store is maxed out. If you give me some more stores, I’ll be able to do better.’

‘It is difficult as of now,’ said Shivinder. ‘But I’ll keep it in mind.’ And he got into his waiting Mercedes with Deven and headed back to their office.

They were now passing through a crowded part of Linking Road—a half-mile stretch that had made it a popular shopping destination. The small 4-foot by 5-foot shops on the pavement sold every conceivable piece of clothing, jewellery, chappals and shoes, and catered to a wide female audience. There wasn’t a time of the day that could be called a lean period. Shivinder passed that stretch wondering how women are able to shop at almost any time of the day, and how they manage to find something to buy in almost any shop they enter. ‘Retail whores!’ he exclaimed to himself as he left Linking Road and entered S.V. Road on his way to his office in the Bandra Kurla Complex.

He was lost in deep thought about the receivables problem. Sixty-five crores of receivables had been cooked up. How was he going to plough the money back? A Nike store went by on the right. The store displays were brilliant. ‘That’s how we should do it,’ he pointed out to Deven. A little ahead, they crossed an Adidas store. He looked at it and said to himself, ‘How nice it would be if we could have multiple stores on this stretch.’

As if he was reading his mind, Deven commented, ‘Wish it was our store! Fabulous location.’

Shivinder smiled. Slowly the smile became wider. He looked at Deven, excitement palpable on his face. ‘It will be. Soon.’ And he turned away, his gaze firmly set on the shops which were speeding by.

He dropped Deven off at his office and drove straight to GB2. Aditya was in his room.

‘I need to talk to you.’

‘Dude, you should at least have called me. I am just heading for a meeting.’

‘Cancel it. We need to talk.’ He turned back, shut the door to Aditya’s cabin and added, ‘Now!’

Aditya knew that this was not just another meeting. He called his secretary and told her to reschedule his meetings and sat down on his chair. ‘Shoot!’

Shivinder started talking. He spoke non-stop for fifteen minutes. Finally, when he was done, Aditya stretched back, closed his eyes and rested his head on the headrest of his seat. It was beginning to fall into place.

‘Only if you help me through this will we be able to pull this off, Adi.’

Two weeks later

Deven dashed into Shivinder’s room with a big smile on his face. ‘Over twenty-five calls since morning.’

‘Only twenty-five?’ There was a hint of disappointment in Shivinder’s voice. ‘Twenty-five is not going to help.’

‘Shivinder, it’s 12.30 p.m. And we dispatched the letters only last evening. I didn’t expect even a single call today.’

‘Let’s see how many come our way.’

The previous evening, following Shivinder’s plan, Snuggles had invited applications for fresh franchisees. This was a closed-group invitation, sent out to four hundred existing franchisees of Snuggles, who were earlier with Step Up Shoes. But there was one change from the earlier times that Step Up Shoes had called for franchisee applications. This time around every franchisee application was to be accompanied by a non-refundable demand draft of ten lakh rupees—an amount which would be refunded only in case the application was turned down. Step Up Shoes had never done this. In the scheme document, it was mentioned as a Snuggles worldwide practice.

Shivinder had carefully planned it all. The franchisee enrolment scheme was sent out only to those retailers with whom Shivinder had a long history. They were people he had dealt with in the past and there was trust on both sides. Shivinder was doing this despite the fact that he had been prohibited from expanding distribution without board approval.

By the end of the week, they had received three hundred applications for opening up new franchisee stores. A ten-lakh-rupee deposit from each applicant meant a total collection of thirty crores.

Within the next three days, a new account was opened in GB2 for Snuggles. The Snuggles board had authorized Shivinder and Deven to open a bank account wherever they deemed fit. That board resolution came in handy. In any case, when the head of investment banking wants an account to be opened, there is little that anyone can do. All the franchisee application cheques were deposited into that account. GB2 was happy. It had acquired a current account with a huge balance.

‘It is all falling into place,’ Aditya told Shivinder one evening.

Shivinder smiled and cheerfully slapped him on the back. ‘I have signed off the appointment letters. We have approved these three hundred franchisees. No one in Snuggles will know that they exist. These franchisees will not exist in our global IT systems. Deven will track them separately.’

‘This was a brilliant one from you, Shivinder.’

‘Getting the sales head and logistics head to be on our side always helps. Right?’

‘Absolutely.’

‘Once we have recovered our sixty-five crore rupees from them, we will slowly regularize these franchisee appointments and bring them into the mainstream.’

‘We have already recovered thirty crores through franchisee fees. Only thirty-five more to go.’

Shivinder laughed. It was so loud that Aditya quickly looked around to see if anyone noticed. ‘Are you kidding me, Aditya? That money lying in GB2 is our money. Why would I ever use it to settle the shortfall in receivables.’ There was a glint in his eyes. A shine which told Aditya that there was more to it.

Aditya raised his right eyebrow. ‘What’s the plan?’ He knew Shivinder’s body language very well by now. Shivinder got up from his chair, turned around and walked towards the window. Aditya continued, ‘We have to offset the receivables, dude. Snuggles needs to get sixty-five crores for the shoes it was supposed to have sold.’

‘Snuggles will receive the entire money for the shoes it sold, Aditya. Now chill.’

‘But how?’

‘Aditya, for the last year or so, sixty to seventy crores’ worth of stock of Snuggles is lying in your father-in-law’s warehouses. This is the stock we falsely invoiced and shipped out of our factories but instead of sending them to stores, we sent them to your father-in-law’s warehouse. The stock left the factories and our vendors also got paid for having manufactured those shoes. Now they are just lying there rotting. When will that come in handy? We will just repackage that stock in new boxes.’ Shivinder continued, ‘Re-sticker them with current dates and supply them to these new franchisees. They will pay us for those and we will apply them against fraudulent receivables that we have shown in our books.’

‘Oh yes,’ Aditya remembered. He felt a bit stupid that he had not figured that out when Shivinder had recommended opening the franchisees. Shivinder was smarter than what Aditya had initially imagined. The franchisee deal was a masterstroke: issuing new franchisee licences to the same set of franchisees against whose names they had booked the fraudulent sales—the very same franchisees who swore by Shivinder because he had built them up from scratch when he was in Step Up Shoes—and also making more money than what either of them would ever have made in their lives.

By December 2006, the entire receivables problem was taken care of and the Snuggles balance sheet was sorted out. Sixty-five crores had gone into the account and the overdue receivables had been settled. The financials that Snuggles India would present for the year in April 2007 would be squeaky clean. The thirty crore rupees in GB2 was safe. It did not have to be touched. Shivinder and Aditya were happy and relieved.

A parallel infrastructure had been set up. The opportunity it offered them for making money was limitless. But the thing about greed is that once it gets you in its clutches, it doesn’t let go. The battle that day was won by greed. The war too had to go its way.

21

January 2007

Mumbai/Boston

Cardoza had just returned from his vacation. Like most other Americans, Cardoza too went on his annual jaunt in December. This time around, he had decided to camp in South Asia. On his way back, he had made a one-week stopover in India. A couple of lectures at the premier management institutes in Bangalore and Ahmedabad helped him pay for his trip. His prime motive though, was to spend a week with Cirisha and review the work she was doing in the field. He wanted to make sure that the grants were being spent in the right fashion. A fair bit of his time went into assessing the on-ground execution of his projects. The Bill & Melinda Gates Foundation had in principle agreed on a grant of thirty million dollars to MIT for research in the Asia-Pacific region and Cardoza wanted to make sure that they were geared up for it.

‘Young man, why don’t you too come to Boston? It’s a fine place. Great campus. You will have a fabulous life there,’ Cardoza said to Aditya, sipping on a hot cup of Americano. Aditya had driven Cardoza and Cirisha to the Barista Lavazza outlet in Bandra reclamation for a post-dinner coffee, a night before he was scheduled to fly out of India.

Aditya just smiled. ‘I have a reasonably good career going, Michael. I can’t just give it all up.’

‘I am sure America wants some good people to come there. In any case your bank is headquartered in Boston, right? Can’t you pull some strings?’

‘Sure. If things work out, why not? I would love to move. The family can be together more often.’ He looked at Cirisha as he said this. She just smiled, a bit confused whether Aditya said this out of sarcasm or really meant it.

In the next two days, Cardoza was back in his office, in time for the kick-off meeting of the Office of Sponsored Programs (OSP) at MIT in the second week of January. The OSP normally met once a quarter. This meeting, the first of the calendar year, was critical, for it was in this session that the OSP took stock of the research grants available and those in the pipeline, to draw up a timetable for the entire year. Cardoza was keen not to miss it. He was also MIT’s relationship manager for the Bill & Melinda Gates Foundation and was required to present a plan for the thirty million grant that they had at stake.

Presided over by the chairman of the grants committee, the OSP had six members, including Cardoza. Each of the six presented their respective research projects to be undertaken for the year and the grants they had managed to get commitments for, as also the deficit or the amount they would require from the overall grants made available to MIT by various governmental agencies.

The last presentation was Deahl’s. He got up, went to the head of the table and began speaking. ‘I have four research assignments lined up for the year.’ And he outlined in detail every single research that he was undertaking.

‘These three projects are backed by adequate grants from the industry. If everything goes well, I will not be digging into any of the federal grants that come our way.’