Bankerupt (Ravi Subramanian) (5 page)

The left-side door opened and Shivinder got in. ‘Come, let’s go somewhere and get a drink. I’m really pissed off. If this guy felt that we are demanding too steep a price, why did he even agree to meet us?’

‘Shivinder.’ Aditya cut him short. ‘There is a problem. I am advising you not as your investment banker, but as a friend.’

‘What’s the problem? Don’t we have a balanced and sustainable business model?’

‘Yes, your model is fine. But your growth has been too slow for anyone’s comfort. The valuation of two hundred and fifty crore rupees that we have demanded is not cheap by any yardstick. Our valuations are based on forecasted profitability of twenty crores, a profitability number that you expect to reach three years from now.’

‘Yes. I am aware. We are asking for a valuation of Step Up Shoes at a multiple of twelve times the projected earnings. Which isn’t excessive. I was initially hoping to get up to fifteen times the projected profitability, but we have climbed down from that stance. Don’t people even go up to a valuation of twenty times the projected earnings?’

‘Yes, they do. However, that’s not the problem. The disconnect is not in the profit multiple that you are demanding, it’s in your business plan. Your numbers have been projected to grow at 30 per cent for each of the next three years. However, you can’t ignore the fact that your growth has been in single digits—nowhere close to what we are projecting. Our projections are sounding very fanciful.’

‘So what are you saying?’

‘Nothing. Come, let’s talk over a drink.’ And he turned into Turner Road en route to his house in Pali Hill.

Once they had reached home and after he had poured his first peg of Laphroaig, Aditya started off. ‘Look, Shivinder, as the CEO, you own 3 per cent in this company.’ Shivinder nodded.

‘Your profit last year was roughly eight crores. How the hell will you get to twenty crores in three years? In 2007?’

‘We have a business plan, a well-articulated strategy. If we execute it properly, we will get there.’

‘Cut the crap, Shivinder. For meeting your planned numbers three years from now, you need to get to an annual turnover of over six hundred crores. You seem to be woefully short. Worse, in the first six months of this year, you have shown a de-growth.’

‘OK. So?’ There was a tinge of disappointment in Shivinder’s voice. He didn’t like Aditya showing him the mirror.

‘If I take a multiple of fifteen times the earnings, instead of the twelve that we have demanded, the company, based on this year’s financials, is worth a bit over a hundred and twenty-five crores. Nothing more. And for the valuation to get to two hundred and fifty crores—the price we are asking for—we need to do something dramatic. Business as usual won’t get you there.’

‘So conjure up something dramatic. Who is stopping you?’

Aditya thought for a minute. ‘I have a plan. It’s not too difficult, if we figure out how to execute it.’

‘What plan?’

‘Look, there are two ways in which companies can build valuations. One, top-line growth, or, simply put, sales growth. Companies with higher sales figures are valued higher than companies with not-so-high sales. Two, profitability growth. In a country like India, most investors fall for top-line growth. The assumption is that if we grow the top line, the bottom line will automatically grow. If not now, then definitely at a later date. If not today, it will happen tomorrow.’

Shivinder had been in the trade long enough to know this. ‘The challenge is, how to grow either of these.’

‘It’s possible.’

Shivinder looked at Aditya, surprised. ‘Look, Aditya. Growing the bottom line is difficult. Growing the top line is a lot easier if we are willing to compromise on our margins.’ And after a pause, he added, ‘And compromising margins is something we have never done as a business strategy. Step Up Shoes has never been in the discounting game.’

‘If your projections for the next three years are based on revenue growth, sales have to happen. Top-line growth has to come.’ And then he walked closer to Shivinder, put an arm around his shoulder and spoke softly. ‘By hook or by crook.’

‘I have no idea what you are referring to.’

‘Chill. There is a way out. But for that we need some help.’

‘Like what?’

‘Wait.’ Aditya picked up the phone and dialled a number. ‘Hi! Aditya here.’ He walked into the next room, gesturing to Shivinder to get himself a refill. In a few minutes, he was back. ‘OK. Deal done.’ Seeing Shivinder’s raised eyebrows, he explained, ‘Look, your turnover needs to go from four hundred crores to six hundred crores in three years. This year, if you grow by seventy crores, it should be fine. You figure out a way to increase your turnover by fifty crores, I will get you another twenty crores.’

‘When will you bankers stop talking in Greek and Latin?’ Shivinder rolled his eyes and went back to his drink.

‘See, dude. It’s not as complicated as you make it out to be,’ said Aditya and proceeded to outline the entire plan. By the time he was done, Shivinder’s eyes were wide open. The effect of four Laphroaigs disappeared in a jiffy. He could never have thought of this plan. ‘Is it safe to do this?’

‘Shivinder, every company that we have dealt with does things to beef up valuations. What I am proposing is nothing compared to what others do.’

Shivinder walked up to the bar, pulled out a vintage 21-year-old Glenlivet bottle and smiled at Aditya. ‘We must open a bottle for this momentous occasion.’ And he poured out two large pegs.

It took them three months to put the plan into motion.

‘The CFO is on our side now.’ It was early February, and Shivinder and Aditya were having a mid-afternoon snack in the former’s office. ‘The billing and invoicing clerk is in place and so is the logistics manager. They are all guys who have worked with me for over a decade. I can trust them.’ After digging into the samosa, Shivinder asked Aditya, ‘Would you want to meet the CFO? Just to make sure that he is a guy we can back.’

Aditya thought for a moment. ‘OK. Call him in.’ After a pause, he added, ‘One day you are going to get me into trouble.’

Within the next few minutes, a middle-aged man of medium build, about five foot seven, walked into the room. Most of the hair on his head had disappeared and his round Gandhian spectacles gave him a very down-to-earth, sober look. ‘Meet Deven Khatri. Our new CFO,’ announced Shivinder. ‘He joined us two weeks ago.’

‘Hello Deven. Good to see you.’ Aditya welcomed him into the room. ‘Shivinder has some really nice things to say about you.’ The handshake was warm and firm. He took an instantaneous liking to the guy.

‘Deven has been briefed, Aditya.’

Aditya looked at Deven. The latter didn’t look too comfortable. The shifting of weight from one leg to the other was an indication. Was it a good idea to go ahead with their plan with a shaky and uncertain CFO?

7

February 2005

MIT, Boston

A spine-chilling cold had gripped the East Coast. There was a blanket of snow on the MIT campus. Everything looked and felt gloomy.

Cirisha was too busy to be bothered; she was in the final phase of her research project. Set in Vuyyuru, a small town thirty miles from the eastern coast of Andhra Pradesh, it was aimed at measuring the impact of the availability of credit on the choice of crops grown by farmers. She had spent months working with farmers in a belt that grew rice. A shift to sugarcane cultivation would mean more returns. However, it required more seed investment, a reason that prompted most of them to continue with rice cultivation. As part of the research, Cirisha had tied up with sugar manufacturers to offer financial assistance to farmers with a back-to-back captive arrangement for sugarcane purchase. The idea was to see whether farmers would shift to sugarcane if monies were easily available in their ecosystem.

She glanced out of her window. The sun was about to set. A few students were walking past the Academic Block towards the car park on their way to the dorm. To get there, one had to cross the car park and walk for half a mile. Straining her neck, she looked up. It was beginning to get dark. More snow had been forecast for later that night. She had better get going, else she would not be able to reach the parking lot without getting soaked. From the stiffened posture of people scurrying on the path below, she could make out that it was beginning to get really chilly.

A knock on the door distracted her. Even as she shifted her glance hurriedly towards the door, her brain registered something strange. Hadn’t the person standing beneath the street light, pretending to talk on the phone, been waiting there for the last two hours? Was he a student? Another member of the faculty? Who was he? More importantly, what was he doing there, standing in the snow for so long? She ignored him and walked up to the door. It made her uneasy.

‘Hi Richard! What’s up with you? How come you are still at work?’ Standing at the door was her colleague in the Social Psychology department. Richard Avendon had joined the institute a few years before her. Like her, Richard too was an assistant professor. At five foot three, he was only a little taller than Cirisha. However, his muscular gym-toned body made him a hit with most women around campus. With deep intriguing eyes, he was quite a Casanova, or so everyone thought. In the Academic Block, Richard’s cabin was right above hers, on the second floor.

‘I was finishing my research paper. Due for submission in three weeks.’

‘Where are you getting it published? Have you started work on that front?’

‘Yes. I’m trying for the
Journal of Personality and Social Psychology
. Looks like they will accept it.’

‘Really?’ Cirisha beamed. ‘That would be wonderful.
PSP
is the best journal in its category. Is James helping you on that one?’

‘He better! After all he is my mentor on this research. He was the one who raised the grants.’

Cirisha smiled. ‘Helps to have a powerful mentor, doesn’t it?’

‘I just got lucky that I was picked by him. He was the one who brought me up from an adjunct faculty wanting to get tenured, to this tenure track position. Anyway, how’s yours coming along?’

‘Same story. Struggling with deadlines.’ Cirisha did a mock-frown.

‘How many papers more to go for you to be considered for your tenure?’ Richard asked Cirisha casually.

‘At least four research papers more.’

‘Four more? That will take you another four years at the minimum, right? Assuming that you complete a research paper a year and each one of them gets accepted.’

‘Guess so.’

‘Are you willing to wait that long?’

‘Do I have a choice?’

Richard thought for a moment. ‘Yes, you do.’ Cirisha was visibly excited to hear this.

Becoming a tenured faculty was the Holy Grail for most American academicians. In a way it guaranteed the right to academic freedom. The key benefit tenured professors got was permanency of appointment. It protected them against adverse action in case they openly advocated their opinion, which could be at variance with the institute’s thought process. It also gave them the freedom and the ability to research topics that might not be interesting to the public at large, but were of significant impact for policymaking.

Tenures were normally granted on the basis of published research, demonstrated ability in raising research grants, academic visibility and teaching background. A tenured professor was clearly the upper caste in the polarized academic community in the United States of America. Granting of tenure, often a subject of intense political battle in any university, was a long-drawn-out process involving reviews by external parties, peers, department seniors, the dean and often the executive committee of the university.

‘How would that be?’ A conversation with Richard was always exciting, and when it was about her tenure, it was even better. She had been conscious about her tenure eligibility ever since she completed her doctoral research three years back. But she had never obsessed over it. When Richard said that she had a choice of not waiting another four years, it caught her attention.

‘Can I come in and then discuss that, if it is OK with you, Madam Cirisha?’ Cirisha was embarrassed that she hadn’t even moved away from the door to let him in.

‘Sure, sure. I am so sorry!’ She blushed as she turned and walked back to her desk. When she walked past the window, she instinctively glanced outside. The man below the lamp post was still there. The only difference was that this time around, he was looking up and his gaze was fixated on something that sent shivers down Cirisha’s spine—he was looking in the direction of her room.

‘Look, Cirisha,’ Richard began, ‘I have one research paper to go before I become eligible to be considered for a tenure.’

‘Which you are publishing in the next three to four weeks. Right?’

‘Yes. My tenure interview is coming up in the April–May cycle. However, there is a small problem. It is a bit of a risk going to the tenure granting committee after having completed just the bare minimum.’

‘Why? Despite James Deahl’s backing? I thought he was one of the most powerful guys on campus. The only other guy who is in the same league as Michael Cardoza.’