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Divakar Vijayasarathy (DVS Advisory Group) on Scaling Through Value Creation
85 Plays4 days ago
In this episode, Divakar Vijayasarathy shares his inspiring entrepreneurial journey, from overcoming early struggles to building a global financial powerhouse. Tune in for invaluable lessons on scaling businesses, mastering tax dynamics, and creating lasting value in the professional services sector.
Divakar is the Founder of DVS Advisory Group, a tax advisory, business advisory and PE firm that has grown to an annual revenue of $300mn and has 18,000 clients across 40 countries. He is a published author of 17 books related to Tax.
Akshay Datt, a serial entrepreneur who has run ventures in employability training and hiring, hosts the Founder Thesis podcast. He has interviewed 500+ founders to date.
Connect:
Divakar Vijayasarathy: https://www.linkedin.com/in/divakar-dvs/
Akshay Datt: https://www.linkedin.com/in/akshay-datt/
Founder Thesis: www.founderthesis.com
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Transcript
Crisis Management and Opportunities
00:00:00
Speaker
My partner sent an email saying he's not coming to employ, he's not coming back. We had to pay almost 60 people's salary for three months to tell them to not come to work. Lowest point in life, literally had no clue what was happening around in life. And then the YA cards engagement started to come, we started conversations with them.
Innovative Investments: Trans Kid as Investor?
00:00:19
Speaker
The first trans kid, as an investor, we signed the term sheet for 250 million dollars with them. What doesn't kill you only makes you stronger.
Entrepreneurial Insights: Navigating Government and Taxes
00:00:27
Speaker
So if you are an entrepreneur, rather than seeing what the tax laws say, understand what the governments want. Ask for a share in the value you have created with you. Anyone will be happy. No one has a problem sharing happiness. People have a problem sharing your sorrows.
Challenging the Big Four: New Competitor on the Rise
00:00:45
Speaker
In today's episode of the Found a Thesis podcast, we are speaking to a man who is building the next generation competitor to the big four.
00:00:54
Speaker
In case you don't know it, the big four are PwC, KPMG, Deloitte, and EY. And these are American tax finance accounting services companies, generally known as professional services or business services companies. um They do a whole host of work with large enterprise clients. But the surprising thing about the big four is that these are run as legacy businesses, and they're not even corporate companies some of the times.
00:01:25
Speaker
they are still run as partnership firms, believe it or not. And there is a reason why they are run the way they are. yeah But Devakar has a thesis that this model and way of doing business is not future-proof, and he's building something which he believes will be the future of professional services, business services space. You're listening to the founder thesis podcast, and I'm your host, Akshay.
Devakar's Journey: From Arts to Entrepreneurship
00:02:01
Speaker
Devakar, take me through your pre-entrepreneurial journey. you know like What's your origin story? How did you reach the stage where you took the plunge into entrepreneurship? What led up to it, like you know if you connect the dots? I mean, connecting the dots. It started when I was very young. So I come from a family of artists. So Fine Arts, my granddad, dad, myself.
00:02:28
Speaker
So my granddad ran. He was a cartoonist by profession. And when he was kicked out of job, he started India's first distance education by art distance education by correspondence in 1950s. And he passed away suddenly. So my dad took over when he was an engineer.
00:02:50
Speaker
He was an economics postgraduate, was working as an engineer in Ashok Leland. Overnight, we came an artist to take over his dad's business. And from 200 to 250 students per annum, he grew to 3,000 students. Wow. And when he in early 90s, mid 90s, when I was in my seventh age standard, my dad lost his vision, unfortunately. So suddenly being an artist at the peak of his career, he lost his vision.
00:03:20
Speaker
But we we used to have these three year programs. So the programs were continued, had to continue. We had to, you know, the tail had to be gradually shut. So when I was eighth, ninth and 10th, I was doing that part. I was running the institution, the academy. I used to be the chief artist. I used to do all what my dad was doing because when I was a kid, ah it's the same table, which I'm sitting in. So my dad would be sitting on this and.
00:03:46
Speaker
This is a fairly large one. His dustbin used to be below his legs and I'll be sitting next to the dustbin and whatever he doesn't want to do. That's how I got to understand, you know, what goes through that. And then my eighth, ninth and 10th, I was hands on. I used to work, I used to study the school, come back and act as a principal of the academy for the next three years. That shaped that really both in terms of going through the emotional challenge at home and also ah ensuring that when you are the most important thing in a business is how you come out of it. Because that that is much more important than how you run or how you start. So ah it really taught me. And we had offers to sell the business ah to people whom my dad believed would not take care of the business as well as ah he would have or my granddad would have. He said, let's allow it to die rather than seeing it being crucified for some cash.
00:04:46
Speaker
So these were, that was my instinct. And then I got into, imp I studied, I did my CA, I was a non-linear rancor at that time, did well, qualified in first shot. But why not, like like, did you have a taste for arts? Like, why not do arts? Why go into such a diametrically opposite field of becoming an account?
00:05:09
Speaker
Again, my dad could not finish his CA. So my brother and myself did absolutely no reason why I took up this profession. So I mean, in those eras, right? I mean, it's it's what your parents decide. so And he was weak ah physically also. So imagine he lost everything vision. He was better than for the last 10, 15 years of his life. And he was supporting the family by trading in the stock markets.
00:05:36
Speaker
That's how we survived until both of us finished education and got into employment. So he said, like, become a CA, you are at least secured for life, then do whatever crap you want. So that was the mandate given to given to both my brother and myself. So he's elder to me in the five years. So we both studied. And then got into oh college. He said, don't do foundation. Get three years of college life. You're never going to get back this phase of life. I mean, I'll never, I'm forever grateful to him for that advice. oh and And then did my three years of internship and CAA. Which city did you grow up in? All Chennai. I haven't seen the borders beyond Chennai for
00:06:24
Speaker
I would say early to mid 20s.
00:06:31
Speaker
yes and ah got into and My first employer was Bharat Patroliyu. I had three offers. One was BPCL, second St. Gobain and third was DCS. And BPCL was a phenomenal offer. They offered us some 10 lakhs in 2004. It was the highest in the campus.
00:06:55
Speaker
ah So, and the placement was in Mumbai. I quit in 25 days time. Even before the first paycheck I resigned, I was in their head office. I mean, they used to serve food five times a day here. And you know, you are in your early to mid twenties, you want to go and do something in the world. and I put on some 2-3 kgs in like the first two weeks. ah i know you You just felt that restlessness and then quit. Then I got then i had a break. with I didn't know what to do. Then I joined Starlight. There was a walk-in interview which came in Chennai. and then oh I didn't even know about the company. I just walked inside. I still remember Mr. T. Venkatesan was the president of Starlight.
00:07:47
Speaker
And then he asked me, when will you join? I said, I might need three weeks. He said, like, you're a youngster. You don't have a job. You're sitting at home. By that time I was doing, I was doing a gardening work at home. I said, like, I'll have to finish my gardening and then I'll come. He took it so offensive. He said, like, I don't know what you guys think.
00:08:08
Speaker
No, it was good. Anyway, I joined Starlight. I was there for about, again, three, four months. Then things got difficult at home. Dad's health was ailing, so I came back to Chennai. This was in Tautakur. And then I got into Kotak, probably my best employer, I would say. My salary, it was like consistent dips in salary. 10 lakhs between three and a half lakhs, three, three and a half lakhs. And Kotak was, again, similar, three, three, one, two, five lakhs per annum. But I enjoyed Kotak.
00:08:37
Speaker
It really fostered the entrepreneurial spirit. I mean, by far my best employer. I had great people to work with, especially my team in Mumbai. And in Kotak, I was in the lending industry. lending I was a credit manager for Chennai. So our job was to go understand entrepreneur businesses and understand the real cash flows. There'll be cash flow as per paper and the real cash flow, and we will fund on the base of real cash flows.
00:09:05
Speaker
So that was a business model. from quota I moved to Citi by which time I lost my dad at that time. So there was no reason for me to be in employment. So I quit six months into Citi was like my top class, ah great pay, everything was good. But somewhere you felt like caged. I really didn't want that to happen in life.
00:09:28
Speaker
Yes, quit and started from bedroom and I was sitting in my brother's home, nothing much on an Acer laptop. Two credit card swipes were still pending on that laptop. So it was good fun from there. Life began here. So that's the cycle.
Shaping the Industry: Professional Services and Purpose
00:09:44
Speaker
Connecting the dots, yes, very much always wanted to be a free person in life. Freedom was on top. I think everything else and curiosity. I think these were two things which drove me to start this.
00:09:55
Speaker
So you were doing a credit risk and writing kind of a role, though the business you started was not in that domain. How did you discover the space you want to operate in? See, I was always curious about ah doing something different. I don't know what it was. And you i mean I'm sure you would you would appreciate the CA as the last refuge for anyone who would ever want to do something different.
00:10:27
Speaker
So I was teaching tax because early 2000, until about the first 2000 to 2015, India was notorious for its tax amendments. We used to have 100 plus amendments every year. So the fact that things were new and dynamic attracted me towards the subject. So and I started teaching tax ever since I qualified.
00:10:49
Speaker
And the more I read the subject I was trying to, it was giving me it was just telling me that it is not a fiscal subject, it's more a behavioral science subject. You had the regulators on one hand, which was a bureaucracy. You had the government on the other hand, which wanted the not only money, but also wanted population to behave in a certain manner. And then you have the taxpayer who was paying either the bait He was the ultimate bait in the entire game. he would be He or she would be serving by cash for kind. But they were if they aligned with what the government wanted, they were only getting rewarded.
00:11:31
Speaker
Now, India was notoriously known for its aggressive bureaucracy at that time. I mean, the water phones of the world, the shells of the world, all those cases came to light. So I was, it was just curiosity which drove me to the subject. And the cross border, which was really new, i India was still evolving. The world was evolving to cross border tax. And I remember joining the first batch of international tax of ICAI as a student. It really opened my eyes up.
00:12:06
Speaker
so Yes, I mean, wanted to do something different. Subject was intriguing and dynamic. And yes, cross-border was opening up. It just became a straightforward offering. And ah I love reading. So my subjects were, I love geopolitics, but political economy, economics, history. So it was all like, you know, coming together sort of a moment. So I didn't have much reason to look beyond. ah When you say tax is a behavioral science, do you Does it mean that if you follow the intent of the law, ah you will be safe and to understand the intent of the law, you need some amount of behavioral science approach of looking at it? no see ah okay let's Let me not give you an example in the current conflict to make it really simple. Let's go back, ah say about 1000 years back when the Arab Islamic in rulers were conquering the Ottomans and
00:13:07
Speaker
all the empires. They had something called a jizya tax. Jizya as if, let's say the who the rulers would come and invade your territory and if you did not convert to Islam, you had to pay a jizya tax. Whatever would be the religion of all Christianity or Hindu, whatever.
00:13:33
Speaker
but
00:13:36
Speaker
If you, instead of paying tax, are willing to send people from your family to the military as soldiers, this tax was waived. So the Jizya as a tax was not brought into collect money. It was brought into Garner army soldiers for the army. Yeah. Right. right Okay. So you go, you now let's fast forward to today's terms. Right.
00:14:02
Speaker
Actually, tell me what is any any one interesting sector which the government is curious about? Semiconductors. Exactly. I mean, the whole world wants it, right? You won't find a single jurisdiction which does not give in tax incentives for semiconductors. You can't find a single country in the world. So be it for setting up the plant or operating the plant, not only for the main entity, the peripherals, service providers,
00:14:30
Speaker
So we have not changed. So if you are an entrepreneur, rather than seeing what the tax laws say, understand what the government's want. And if you do what the government wants, you are an ally to the government. You are not a rent seeker from the government. So the government is not just creating an infrastructure for you to make a merry out of it. Rather the government looks at you as someone who's creating the infrastructure together. Then you are never been less So this was the insight which was so stark and for whatever reason it's not been harnessed. well So ah that's where the real curiosity started in 2011-12 when this bulb came and from there the ah whole journey of looking at the regulations changed.
00:15:25
Speaker
Okay. ah So you quit Citibank, I guess, ah in 2007. How did the business start? what would Tell me the the business journey of ah DVS.
00:15:41
Speaker
hey Fascinating memories here. So when we started, yeah the first client, I remember Of course, when you are when you when you are an employment, you bounce off these ideas to your friends and everyone will say, I'll help you, I'll help you. It's only when you quit and then sit down, you will call and then none of those calls are answered or you know I'm sure all of us would have gone through that case. I mean, with good intention, but intent and outcomes are very different and in reality. So the first engagement we got was to do the accounting for a photo studio.
00:16:21
Speaker
in the suburbs of Chennai. Suburbs have meant like 40 kilometers from the city. 40 kilometers then, 70, 18 years back, is literally like somewhere. ah So i I was contrasting. In Citibank, our life used to be like we had we had to stay in Shangri-La or one of those good five-star hotels. The city had those classes. We had to fly either Kingfisher, Indian Airlines, or Jet Airways. No low cost airline. And all of a sudden,
00:16:50
Speaker
So I took the car and then we went to this photo studio. It was, I had a partner of the 10. It was in outskirts of city. And we met the promote pro promoter and he said, we have to get the accounts in order. And we had one employee, one staff at office. So I was like, okay, let's, can we have access to your books? So he showed us like three sacks. good have and He said like, these are, this is where we have.
00:17:21
Speaker
And then I said, okay, can you find, uh, he just opened one and showed, it was all like bundled up. Then, uh, okay. Can you ask someone to load it inside the car? He said, sir, all my people are busy at work. If you're okay, can we both carry the gunny bag and put it inside? And that's how it started with, uh, uh, with the game, but it was good. Uh, but my real breakthrough came, uh, for five months down the line when, uh,
00:17:52
Speaker
randomly out out of the blues, one of my friends called and she she did CA with me and she said like, my cousin is in Italy and he's from BCG and he has to do some transaction on international tax. I was thinking you would be a good person to advise him. So the meeting was set up on Sunday and it was a Friday ah evening she called. I was on the car. So straight, I went to the bookstore, picked up whatever book I remember. I picked up Roy Rohorgi's book on international tax.
00:18:21
Speaker
The next two days I was reading at least picking up the terms to not sound dumb. And and and then met up with a gentleman, very, very demanding guy. went up Met up with him. The conversation went on well. I got my first check of 10 lakhs at that time well in that assignment.
00:18:40
Speaker
ah Immediately went and bought my first car. Because out of that $10,800,000 was my expenditure. We had to spend abroad. But I just said, like let me go by to start feeling nice. So that's one thing actually I consistently realized. oh Maybe I'll share with you. In my second, like third bankruptcy, the first thing I did was to go and buy a brand new Mercedes. I'll cover that at a later point in time. But I started then.
00:19:14
Speaker
started feeling good. Then I traveled to Mauritius for the engagement, uh, met about a hundred or law firms and accounting firms in a span of one week, because those days it was only one flight from Chennai to Mauritius. It goes on a Tuesday morning and comes back on a Tuesday evening, the same flight. So I had to stay there, even though my work was only for two, three hours, I had to stay there, but that opened up my mind to possibilities because I saw like small offices, 10 by 10, 10 by 15 offices doing millions of dollars of turnover.
00:19:45
Speaker
And at that time in India, if you were doing like 80 lakhs, 1 crore revenue, you are like massive. And I was like wondering what is happening because our guys are far more adept. But how is it that a tiny island nation sitting in one corner of the world, professionals are making millions of dollars. It was just curiosity, absolute curiosity in terms of why it is happening.
00:20:14
Speaker
I realized internally in terms of there were reasons which came to me. I came back. The first thing I did was to surrender my license to be a CA. I said, I will not be a CA. I will be a free professional who understands the world of tax, helps businesses structure their, uh, movement and help businesses set it, set up their operations globally. And that was my real liberation moment. I felt educated that day when I surrendered my certificate of practice.
00:20:43
Speaker
ah Mauritius, there is a like favorable tax treatment for Mauritius and that's why Mauritius does so much business. right like ah So ah that's the outside world's interpretation of that. but what What is that favorable clause for Mauritius? India and Mauritius had a capital gains exemption treaty where if you were to invest into India through a company in Mauritius,
00:21:12
Speaker
the capital gains will not be taxed in India, it will be taxed in Mauritius and Mauritius had a zero rate rated capital gains tax. So that's why Hachison came into India via Mauritius and when they sold ah their operations to Vodafone, they sold their Mauritius company, they didn't sell the Indian company and there was no tax in Mauritius.
00:21:38
Speaker
so okay oh But the larger reason why people went to Mauritius was one predictability of regulations. See, if I were to enter a third country, there's already so much of uncertainty. And the last thing I want is regulatory uncertainty over my rights, over the underlying enterprise. There was predictability and there was a phenomenal treaty network, but the most important benefit which Mauritius provided was free capital convertibility. I could open bank accounts in
00:22:10
Speaker
Euro in dollars in so many foreign currencies and trading with Africa, trading with Europe, trading with India became a breeze sitting out of one location. Today, Dubai is doing that. Singapore is doing that. All these financial centers, Hong Kong, all these and they thrive on their the ease of doing banking. So these are the reasons why people actually started operating in Mauritius.
00:22:37
Speaker
But why firms became so successful is they could enter into partnership arrangements with multinational organizations. So as a CA, then you were not allowed to do that. You you had to get the approval of ICAIA and you know, I mean, that's a bureaucratic process and they'll ask, your font has to be this size, the name has to be put in this northeast corner of your room.
00:23:01
Speaker
So we just felt it's like, might tell what are we giving up statutory orders? Anyway, it was never not an exciting proposition for us at that time. A slight So what happened on the Hutchison Vodafone thing? I remember it was in the headlines for almost a decade. Oh, absolutely. I actually met with the Vodafone CEO at that time. And he was saying the only problem we have is the number of zeros in the transaction.
00:23:29
Speaker
time kick go ah But what happened is actually like, I want to wear one. Let's say Akshay, you are Hutchison and you have invested into India via Mauritius and there is an Indian company which owns all the telecom towers and all those things, licenses, spectrum. Vodafone entered into an agreement. Vodafone is a Netherlands-based entity.
00:23:58
Speaker
They entered into an agreement with Hutch, which is a Hong Kong-based enterprise. But the agreement was to buy shares of a Mauritius company. They had four or five companies in Mauritius. So hands changed at that level, three, four levels above India. The government of India said the underlying asset is in India, so you have to pay tax in India.
00:24:21
Speaker
but the fact that you end a capital gains tax. Hatch invested say 100 million, they sold it for 200 million. So that profit. Yes, that difference. And we're talking about a couple of billion of billion dollars in the game. Okay. But what was really instigating for the government is, Hatchison had named these companies NCGT, which means no capital gains tax. That was the name of these companies.
00:24:49
Speaker
Okay. I mean, it hits, right? of he sees And most of these companies in that layer did not even have bank accounts. It's like saying one, two, three, four, one will have a bank account, one will put money in four on behalf of two, two on behalf of three and three on behalf of four. That's how it happened. They didn't even have bank account, nothing. right so But anyway, the decision Mr. Kapadia, who was a judge at that time,
00:25:16
Speaker
achieved justice, he gave the verdict in favour of Vodafone. okay Though he somewhere felt to his conscience it was not ideal or whatever, he kept he had to justify it in every other conversation he had post the verdict. Unfortunately, he is no more with us. ah ah Yes, that that got some unwanted limelight for India, like what happened with the GST demand with Infosys recently.
00:25:47
Speaker
very similar, I think I believe there's a couple of billion dollar demand on. oh What is that demand for? again as was some no this I don't know the detail of the transaction, but it is about exports, GST on exports and a huge demand was raised on Infosys. I believe it's dropped silently because
00:26:12
Speaker
It's an issue against not only for Infosys for the entire NAS contract and a larger interest at stake. Is that Barish's loophole closed now? but who it is it is It is, absolutely. absolutely And it's now what I believe it's standard. See, no one came to, of course, there were a few people. See, actually today the capital gains taxes 10% in the long term. and and No one has a problem paying 10-15% tax.
00:26:38
Speaker
At that time it was higher, is it? It was similar with probably about 20% tax. okay But the challenge was Indian government went to US and did road shows, come to India through Mauritius, you don't need to pay tax. okay That was our marketing pitch to investors.
00:26:53
Speaker
okay okay okay okay so so i mean When we a ourselves went and did that and there was a board circular We had a Supreme Court decision before that. If I'm not wrong, it's Polanda Gan Chaitiar case. So all those things were there. So it it was sort of well set that you could come to India through Mauritius and not pay tax, capital gains tax.
00:27:16
Speaker
But yes, I think we are way past it today. So coming back to your story, so you surrendered your CA practicing certificate to build something big. You wanted to build like a like a professional services, like say an EY kind of a business. Was that the vision? See, oh the big four was always, a I would say an enigma from for anyone from outside in terms of how it operates on one On one side, you look at them as a corporate organization, but then you see people carrying the tag of a partnership. Yes, exactly. I've always wondered about that. Yes. So who owns Big Force? So my my real quest at that time was how to scale the services. And when I started to see the landscape, India was fragmented. I mean, brutally fragmented. I mean, you just take a grain of rice and pour it on the floor. I mean, how would dis put that's how the professional services industry went.
00:28:14
Speaker
and almost 90% were either sole proprietors or two member partnership firms. And even the larger partnership firms, when I say larger, at the time six to eight member firms, there were multiple firms operating independently with the same name, but they had separate HR practices, separate bank accounts, separate compliances, nothing standardized, nothing. Why is that? the i mean That's how the industry was.
00:28:39
Speaker
why not ah have like If the same partners are there, why not consolidate into one entity? Was there some like tax reason that if your turnover is above us? It's a mindset challenge. okay see again Actually, if you go back and see um in in your um'm sure all of us more or less similar age group, CA means what comes to your mind. What is the first thought which comes to your mind?
00:29:06
Speaker
a small office in a building with the like ah one CA sitting in a cabin and a few junior articles yes sitting outside. that That's what comes to mind. As a student, yeah that's what comes. That's typically the Indian version of what is the accounting firm is. But as a student, if someone were to tell you why you why not go and do CA, what is the first thought which hits you when we were studying?
00:29:34
Speaker
I did try to do CA. I appeared for the CA foundation exam, but I couldn't clear it. like Great for you in life. but Seriously, you are still smiling.
00:29:48
Speaker
the When we passed out, the past percentage of both groups in final was 0.3%. So which means 300,000 people will be clear. Yes, yes, yes. You are you have 997 out of every 1,000 who go out depressed.
00:30:03
Speaker
morals completely, what do you say at the prime age of their life, they've lost the morale. So the syllabus, I remember when I studied, even when I was writing my c final exam, my elder brother's engagement was, uh, before the exam and his marriage was after my results.
00:30:31
Speaker
Okay, so it was just one day before the exam. And when I was attending my brother's engagement, everyone used to come. Tomorrow you have examined yourself. The fear psychosis, right? What was being served to us was fear. Intimidating, absolutely. Intimidation, right? i mean See a final, you will see like books from the ground till here. Like seven subjects, each subject had two, three books. I mean, that's how the the entire the game was played on fear. so Professionals in Italy, CA's especially, feared partnership, feared collaboration. Will this guy take my client? Will this guy make me irrelevant if I join with him? Am I too small? am i You won't see that with lawyers because it's easy to enter and exit. in c it Since we have been served only fear all through,
00:31:27
Speaker
He's become the professional, he or she has become so much soaked in anxiety. Cortisol is what runs in their blood all through. And that was the biggest reason why accountants, especially in our country are so fragmented.
00:31:42
Speaker
so fragment And it's a mindset shift. Now, it's happening very slowly. I wouldn't say it's happening. There's a lot of noise happening. Of course, noise precedes action because currently the past percentage is from 0.3, 0.4 is now at 20, 25%. So there's a much higher probability of a huge probability, 100x probability of people clearing.
00:32:08
Speaker
right But we are still that's if to answer your question, first fear, second, we were always trained to compete and not collaborate. In the entire journey of education system, if you notice right from your CBA, CDA or whichever idea of study, you look at your a friend as a competitor.
00:32:31
Speaker
yes If that guy is good in math and I'm great in science, we don't look at how we can collaborate and build something with both our knowledge. We only looked at, okay, I should get better than him. it So that collaborative mindset is an educational challenge as a system which we lack. And that's why we are losing the art of association.
00:32:52
Speaker
The biggest challenge what we have is we don't know how to associate it with people. and Scale is all about association, data in the people driven business. yeah So true to true. Come back to your question, that's exactly where the the the missing link in the overall ecosystem was.
00:33:08
Speaker
ah I think most of these big four like EY Deloitte, KPMG, they came in through partnerships with domestic companies, right? Like yes I think Bartley Boy was like the SR Bartley, all those older firms which had been big. So what they did was they came in like franchises. So if you were running a firm which is large, say 100, 150 member team members, they will come and say, you joined the big four network. You joined, let's say the UI network. of Now you had to follow their SOPs. They'll have no, nothing to take away. They've run a phenomenal job in terms of positioning themselves. Marketing is an arena, which is people say Indians are bad. It is a subject which is alien to us. It's like learning Mandarin to us at this point in time. That's what marketing is.
00:34:00
Speaker
And they also have the bandwidth because I mean, capitalistic background, here i mean their ability to invest, we can never match at this point in time, which is what we are trying to rewrite as we are trying to evolve in DBS. But big four is at least in the professional services space was because eBay wanted to buy us out.
00:34:24
Speaker
um i'm I'm really grateful for the gesture from them because that really pushed me to really understand what is behind the big force. It's Indian brain, Indian client, Indian curriculum, but a foreign brand. Everything is Indian. The market is Indian, right? so But the foreign brand. So it was only about branding, which we lacked. But big four also is multiple clusters of partnerships.
00:34:52
Speaker
So an EY tax and an EY audit are different entities. ah okay Even the same city, forget it across cities. okay So it's all about this T-shirt, the same logo. I think that's where this, and of course you have your SOPs and standardized backend and other things, what they bring to the table. But what is lacking is it is not one organization.
00:35:19
Speaker
What does industry actually lacks is an ownership structure with a unified organizational existence where value can be created, decision-making can be centralized, at least the key decisions. Because what happens, it is now becoming a large firm with multiple partners, multiple independent partners. You effectively end up becoming decentralized autonomy.
00:35:47
Speaker
This is anarchy. Before we come to this, tell me how did this structure come into being? How did an EY become an EY? These also must have started the way Indian CA firms start, like small, yeah single, but person, and then 10 member, and then 100 member. How did they become like you know like hundreds of thousands of people in an EY?
00:36:12
Speaker
Then how did this industry evolve? See, EY at least is at the highest level. Let's get to something like a H and R block or an Intuit, which is the tax return filing preparation. So one thing about the West is the market is very clear. If I'm running a 10 member practice, I'm doing, let's say half a million, 1 million turnover. And let's say i'm I'm doing it in Boston. And then there is someone who's in Hartford, Connecticut, and he's doing say $400,000.
00:36:43
Speaker
I can always go to that person and say, well, come join my banner. So there is a mechanism to derive valuation of the enterprises. One time revenue, one and a half times revenue. There are one, two, it need not be precise, but by and large, you know, the indicator. Now that makes it easier for us to consolidate. And once you get to some size, 50, a hundred million dollars by doing multiples, a string of pearls kind of a situation, then you start to flex your muscle within your own geography. And after you've consumed your geography, you start doing it across geographies. That's the story. That's exactly the story. how And you need a capitalistic society to have the mindset of people already ingrained that M&A's in a service industry is absolutely fine. And in many ways it's better for the client rather than being detrimental. All right. Here in our country,
00:37:41
Speaker
A professional and his practice are like one and the same. And we've heard this concepts like he's an individual and an institution by himself. Right. I mean, so many, uh, when, when I used to be a speaker or a technical speaker, 10, 12 years before 2009, 10, 11, 12, the introduction used to be so flowery. One, you get embarrassed. Second, you feel bloated after that.
00:38:11
Speaker
And that's how the profession has been built across where we elevate individuals beyond their the than life kind of stuff. And that's the challenge, see which is why even today in Hollywood, good movies sell. In India, good heroes sell. It's the same, right? Even in the profession. So these are the reasons why an EY or a PWC or a H&R block or an Intuit was able to do very well and scale beyond borders. In QuickBooks could not succeed in India, of course, for a variety of reasons, but we are still like finding our feet, but there are some very good Indian firms who are now consolidating, growing as a partnership.
00:38:58
Speaker
Now, will they have the... This is the reason why like, EY has partners because it's essentially the legacy is that it's a string of acquisitions of partnership firms, so you come... A string of mergers, not even an acquisition, string of mergers with the same... See, last year EY did something called Project Everest. They wanted to do something very similar, what we are doing at DBS is move the attest out, all the consulting and tax under a public company.
00:39:28
Speaker
What is a test? The assurance audit where they're saying balance sheets, okay audit business. That's the high risk challenge. That's the high risk practice, which okay by and large, most people do not want to do if you're in the evaluation game, but you focus on consulting and tax.
00:39:45
Speaker
move that practice into a public company, raise private equity. In the US it's like big, it's massive. As we speak, ah and yesterday I was just reading, there was a CBIS, it's a multi-billion dollar merger which got concluded yesterday at the US. s So oh move all the other practices into one enterprise, make it public, create value for everyone. They wanted to do, unfortunately, 12,000 partners.
00:40:15
Speaker
Oh, 12,000 partners. Wow. Can you imagine building consensus on that scale? So that's a challenge. That's a real challenge. So it started off. ah The vision was brilliant. oh In many ways, what happened to Arthur Anderson? Thanks to WorldCom and Enron when they had to collapse.
00:40:38
Speaker
And that was the audit business like Arthur Anderson was once part of Big Four and they also had like audit and consulting characters. Correct. But the Enron, there was fraud in Enron which great for which Arthur Anderson was held responsible. Like why didn't you were the auditors, you were supposed to catch it. Why didn't you catch it?
00:40:59
Speaker
Then what happened? Like they were sued or? So many cases were filed, the firm literally went bankrupt and they had to disintegrate the entire enterprise. The shareholders of Iran would have filed these cases. There were no ah shareholders, the regulators themselves. Because this is a crime against the state, right? When you are not ah her doing a fiduciary responsibility. okay so But then Accenture was the baby which was born out of it.
00:41:28
Speaker
And today, Accenture is $230 billion in market. So the the consulting arm of Arthur Anderson became Accenture. Accenture, yes. okay yeah what is the What does the consulting arm do in like an EYK, in this big fold? What is the ah role of everything, right? I mean, right from your, um except signing balance sheet, everything from your automation to digital transformation, to create accounting, to staffing, you name it, they end up doing everything.
00:41:57
Speaker
Okay, any kind of B2B service basically, like almost any kind of B2B service. Yes, absolutely. absolutely ah okay okay okay okay so so That's picked up and ah silently they have built a 200 plus billion dollar enterprise without having to worry about all build consensus building, consensus so much of energy goes in consensus building.
00:42:21
Speaker
And which is the EY dream project? Every dream was this only to create an Accenture. Yes. Yes. Pin off the consulting business and make it ah into an Accenture kind of. Okay. yeah Okay. Fascinating. ah When people become partners in these big four, do they have to like buy a stake? Like do they have to buy the multiple forms of different, different models, but predominantly partnerships, uh, on the larger, uh, multinational franchises are more like, uh,
00:42:50
Speaker
ah contracts with a larger variable and a lower fixed. ah okay So you eat what you kill is what happens basically. A partnership model is only to build to kill and share. It's not built to build, which is where a corporation comes into picture.
00:43:14
Speaker
okay And once you retire, then you no longer are a partner, like your stake. The word partner means you have a stake, right? So so your stake, you kind of... you you ham But what what is left in the organization, so which is where most of the firms, if you notice, if let's say $100 is their revenue. I'll give you a typical cross section, at least in the US, because I keep going back to US because the data is available. In India, we don't have data on this.
00:43:41
Speaker
okay so $100, the typical cost is about $40 is a manpower labor and manpower cost is excluding the partners. And then you have your SG&A, what we call selling and general administrative expense, about 10 to 15%. The remaining 40, 45% is what is available for partners. So in that invariably between 20 to 22% goes by way of their remuneration and the balance, maybe 18 to 20% is either distributed or a small portion is left and the remaining is distributed. So you don't leave anything inside the organization. It's only when you start leaving something in the organization, it will start to grow. When the enterprise becomes a medium to, you know as you said, you eat what you kill. If it's just going to be a hunting machine, you are never going to build a jungle out of it. That's the game.
00:44:36
Speaker
I guess though it has worked, right? I mean, and I'm guessing it has worked because you're, it's not like you are, you have to invest in your next factory. You're not in a manufacturing business. You're in services business. You need people and i think i people mill are attracted by money and the more money you distribute, the more people you attract. So it makes sense for them to do that, right? To attract talent. You distribute the money. I do. I'm not sure. actually People are not attracted. They are attracted to purpose.
00:45:05
Speaker
People will come and they will visit you for money, but they won't reside with you for money. They will reside with you for purpose. I think that's a difference between a business and an institution. Longevity, right? The continuity of and of an organization is a function of how and why you draw people towards you. and ah Any professional services business can only I mean, they, they can only create an illusion of a purpose, right? I mean, what is the purpose in doing professional services? No, it's what you enjoy, right? See, as long as you enjoy it, see, uh, if let's say, uh, I'm a carpenter, I enjoy carpentry. I enjoy making chairs. Right. If you go to Sabia Sachi, very clear, that man enjoys what he does. And that's, that is evident in the outcome.
00:46:06
Speaker
So any service is business as long as you enjoy what you do. Uh, I think that's the kind of people, uh, one of my big inspirations is Ray Dalio. He's built this organization called, uh, Bridgewater Associates. It's based out of Connecticut. That's where now I'll be moving to his neighborhood. Uh, his organization is the world's largest hedge fund, not because.
00:46:34
Speaker
He's got great clients. All those things are fine. People did not come there because he had all of this. People came there for his vision, came there for his ideology, and they ended up doing what they loved doing. Then it was a different story altogether. I think success automatically follows. Commercial success is a shadow. It will follow when the other ingredients are in place.
00:47:02
Speaker
so I think that's the game which needs to be played where you you're building something for what you enjoy doing and where people who come there or also they they just enjoy doing what it could be. Someone who's who loves accounting comes there, someone who loves tax gets there, someone who loves house. So we have at our office.
00:47:27
Speaker
She's also a shareholder in a company. We have Subhanamma, she serves tea and coffee at our place. She's been serving it for the past 15 years. Her job, she knows each and every person. I'm sure we all will have such people in our lives who knows each and every person. Based on their face, she will know what to serve, whether to give him hot water or if the girl is not keeping well, should I go give her something without asking.
00:47:57
Speaker
For her this is not job. This is life Because she enjoys taking care of people So if the organization is going to be with people like that Who enjoy? What they do in the role they do I? Think then any mean professional services are manufacturing actually it's ultimately a question of association of people yes yes Yes. End of the day. My pushback to you is on the fact that, I mean, your thesis is that the partnership model is flawed. I'm just pushing back on that. So what I'm saying is that ah
00:48:35
Speaker
You don't have to do any kind of fixed asset investment. It's not like you have to set up a manufacturing unit. You have to invest in people. And in the partnership model, inherently, your people will be more empowered because they are decision makers. You will attract people who want empowerment. ah People who have a purpose will also be attracted here because of the ownership which comes in with a partnership tag. You work towards it. You work hard towards it. My sister-in-law used to be in the UI for a decade. and ah She didn't want to leave it, but eventually she had a kid and the work-life balance was getting to her. and Regrettably, she left it. I mean, she wasn't happy about leaving there, but she would have continued to work there if she could have. ah So I don't see why you feel that this partnership model is not going to work. That's what I'm pushing back on. No, no, no. I mean, I really and ah appreciate that question because this is I've been working to not to prove, but to validate.
00:49:36
Speaker
all along. See the challenge in a partnership model. Now, let's say if you are a partner, what would you what what are the responsibilities on your table? Let's look at it that way. What are the responsibilities which you will have to take care of? If you are a great partner. You are responsible for two things, essentially, revenue and cost, and then making sure revenue is more than cost, like at a very simplistic level.
00:50:03
Speaker
That's the outcome, what you're saying, but what is the journey to get to this outcome for revenues? What you should be great at? Yes, selling, selling. You should be great at people, management, when managing your clients, managing your sales team for managing costs. Again, you need to have detailed analysis of what what goes inside the P&L. Can I automate? Should I delegate? Blah, blah. Should I do it in-house outsource? So many decisions. How many people?
00:50:33
Speaker
are comfortable taking these decisions. And is entrepreneurship even everyone's cup of tea? Just because I'm good in a subject, just because I know tax well, I know audit well, putting me as a partner where I have to do a hundred other administrative activities, which drains my energy. I don't enjoy doing it.
00:50:59
Speaker
right from signing balance sheets, to talking to bankers, to hiring, to meeting. It's like 10 other, and you will also do what you love doing, which is tax. I'm just giving you an example. Now this is what happens in a professional services firm. 90% of professional services, if in the US or any developed economy, you look at a professional, what are the functions which you have? In any business model, in any business organization, what are the functions we have? You'll have sales.
00:51:30
Speaker
You'll have business development, you'll have business development, sales, marketing, you'll have operations or execution, then you'll have finance, HR, admin, all the other things. You take 20 firms, 20 Indian firms. What is the ratio of people in execution and operations vis-a-vis the remaining functions? You will know the answer, whether these are run as organizations which are to be built Or are these run as glorified one person, two member shops, even a larger partnership from how much of money is kept in the kitty for reinvestment. You're talking about an example of this is people dependent business hospitals are also people dependent business, professionally qualified, extremely complex. Today, a good professional outfit requires enormous investment in IP.
00:52:26
Speaker
Sheer fact, data protection is not easy. Subscription to data database is super expensive. Very, very big. We pay over $100,000, $150,000 only on four or five databases, which we end up buying. And then being part of international networks, all these are huge capex. A good firm needs to spend anywhere between 10 to 15 crores only on all of the soft assets, which do not even come into picture. ah Unless you do that, you're not building an institution and for that calls for If my gross margins are 50%, I need to be keeping aside 30, 35% in the first four or five years. It's only then you start reaping the rewards at a later point in time. Now, what happens in the when the attrition rates are high? People are there with a horizon of three, five, seven, 10 years. This institution building a 20, 30, 40 year game. Now that's a difference why Accenture has grown so well.
00:53:25
Speaker
Whereas other part in the US, the big four share in the market is one third. It is shrinking. Every year it is shrinking. Because taking the share away like small units are taking the share away. Domestic firms, domestic firms. Okay. Domestic firms are now multi-billion dollars in size.
00:53:41
Speaker
domestic as it like American of grown firms very American grown firms and private equity is common sense now big okay 75 private equity funds have come in the last two years and it's only there using by the day they're doing like a roll-up of these professional services for yes yes oh yes okay they are corporatizing and they are institutionalizing the game Okay, just seeing it right. I mean you this is not only about the the theory is validated It is valid it and there are firms which are listed in see this is one of the ah publicly listed accounting firms I Do know a few names which are listed in Australia Boozell and a consulting firm listed in the US so This journey started
00:54:30
Speaker
If we still stay back as a partnership, there's nothing wrong. It's a difference between a clinic and a hospital. That's the difference we are talking about. I guess even the investment banking industry evolved like this, right? Like say Goldman Sachs was a partnership firm before it became a listed entity. Correct. Most of these investment banks would have started as part of the firms becoming corporatized. Exactly. The Blackstones of the world and all those institutions were originally partnerships.
00:54:59
Speaker
they But where the challenge in India is about the lack of organized knowledge for opening up people's mind to these possibilities. Because the regulators, I mean, I say regulators, it is the institutions, as I say, we don't have a curriculum on how to build a successful practice. We don't have a curriculum on what what are the functions which are required to run an organization.
00:55:27
Speaker
know Today, imagine running ah for running a horse race entity. Of course, you need horses. Absolutely important. But you need to have the administrative mechanism to make it work. That's what makes it a success. BCCA is not about those 12 cricket players. It's about the body behind which makes the game successful. Right, maybe right, right. so okay So coming back to your journey,
00:55:53
Speaker
you ah you know You gave up your practice cert certificate ah to become like a services
Lessons from the 2008 Crisis and Beyond
00:56:01
Speaker
company. How did that journey progress? And you told me that by 2008, you had your first bankruptcy event. So what happened in that duration, the pre-2008? No. So we I started in 2007, March with Citi and started. I'll never forget because it was 5th of March I started. 3rd of March was a Saturday. I quit 4th was Sunday and 5th and it have it happened to be my birthday as well. So never forget that journey. It was good. We started. My first target was to earn 10,000 bucks a month. At least like you start feeling there is some cash. ah We signed up with Sundaram Home Finance as our first corporate land where we said we will do the credit underwriting for their
00:56:50
Speaker
SME Borrowers. That was something which I was doing in Kota Kanzade Bank. Yes. Right. So that helped to steady the cash flows. So we we got an anchor client for like 20, 30, 40, 50,000 bucks and we grew with them as they were grew and forever grateful to the Sundaram group because we worked with three successful MDs and at one point nearly 40, 45% of their book was being oh evaluated by us. okay So That kept the cash flows going. I was pursuing my passion of tax. It was this, uh, uh, assignment we got from the U S to a hedge fund accounting for one of the downstream funds. what's it value safer So typically you have the master fund.
00:57:40
Speaker
which will raise capital, someone will go raise 100 billion. And then he will give that money to be managed by 10 small funds, 5, $10 billion dollars each, like that. Which are basically like one star fund manager. There'll be won stop exactly and we one There'll be one star fund manager and they will too. So this will be like some two, three people. like like that one shows lis I don't know if you've ever seen that. like There's a show on Hotstar called Billions.
00:58:07
Speaker
No, I haven't seen that. Yeah. Okay. Okay. It's a fascinating story. It's about a this staff, hedge fund managers is kind of a story. or like Okay. I'll add it up to the list. yeah So they gave us an assignment to manage their accounting. So it was pitching very hard and for us it was their first dollar revenues. And it for me, the excitement was at scale. We had to hire 25, 30 CAs and then a lot of ah juniors below.
00:58:38
Speaker
And ah I was teaching so that gave access and visibility to students. So yeah, I was able to hire within my own student network. And when I was in city, my brother and myself had bought two apartments in outskirts and have we converted that into an office, every damn thing possible, recruited people. They were supposed to join two, three weeks, henceforth. September, 2008, Lehman Brothers collapsed. And in one email, he canceled the contract.
00:59:08
Speaker
Lehman was your client? No, no, market time. All these guys went out of business but i i try to straighten. See, when you are initially in earlier days, you don't even read the fine print, right? So we had to give him six months, one year notice. We had to hire people with three months notice, whereas that guy would contract with circumstances, saying he could just cancel. So he canceled it.
00:59:34
Speaker
My partner sent an email saying he's not coming to employ. He's not coming back. He's getting back to employment. But we had to pay three for about almost 60 people's salary for three months to tell them to not come to work. Lowest point in life, literally had no clue what was happening around in life. Did you even have the money to pay there? No, no way. No way. I mean, see,
00:59:58
Speaker
but will i have So but my dad passed away earlier, year zero, no cash, nothing. My brother was working in ICIC bank as a manager. And yes, then luckily I sold the house, which I had bought in city. So there was some appreciation over and above that it did two things. It helped me not pay that mortgage and with that money. And then I borrowed from the market. I, first time I borrowed private borrowing and, um,
01:00:29
Speaker
October and I got married. I didn't want to tell this to my wife and she joined. She's a CEO, she's a lawyer as well. Kavita has been my real pillars for success. But that 45 days when you hit the low and when you're struggling to you know scramble for cash, probably the best education I've ever had in life.
01:00:53
Speaker
Whichever college, I mean, later I went and studied in Harvard Booth and all these places. Nothing could have matched this face of life. It was brilliant. You come across like, okay, you come out of it, you know, okay, fine. Everything else will, this too shall pass kinds. Like you've realized. Oh yeah. Yes. What doesn't kill you only makes you stronger. Makes you stronger. Exactly. So all these now start to make so much sense when you cross that face. right When I tell my children, they don't understand this, but yes.
01:01:23
Speaker
oh Yes. And then focused back on tax, started speaking in seminars. I started writing books. 2009 caught my first breakthrough, Bharat Law House. The book, I mean, I used to read Dr. Ahuja's book on tax. He was my icon. And there was a, there was a phase where we both were sitting side by side ah on the same seminar and talking. For me, it was a real fanboy moment.
01:01:53
Speaker
And Bharat Lahore has reached out to publish. They still publish my trans uprising books since 2000. So life moved on. It went on well, but I was not happy. But you were still getting business from US or like, Sudhiram business was there for? No, that was good. So we were looking at clients who would go abroad from India. We made a i made a reasonable name for DBS on international attacks. People who come into India or go from India to other parts of the world, they would look at us as the next alternative to Bigfoot. Because what we brought to the table was we would own the execution.
01:02:27
Speaker
not just draw up the structure on paper. Let's say if you are from India, you are going and buying, let's say a factory in Africa. ah You had to send money from India to Mauritius, Mauritius to let's say Tanzania or whichever part. This is easy to put it on paper or to set up a company, open bank accounts, go through the compliance, manage that for the client. That was a bigger play.
01:02:49
Speaker
So it was for that, it's it's very easy to give Guiana. It's like putting things on paper. I can always be an architect, but the clients wanted someone who could design and construct and maintain it. So that's how we moved from tax structuring to implementation to management, the full life cycle.
01:03:08
Speaker
So that was doing and that's how we started in Dubai. One of my own students, he was in Deloitte, he came and joined us. So from Dubai we were managing our African clients. We used to trap and Dubai was a great trading hub, good banking laws. We we expanded. Which year did you start Dubai? 2011-12. Okay. Thereabouts. And time by this time?
01:03:33
Speaker
Ah, okay. You connected with him on Facebook. No, I just put a post, there was there was this conversation about depression in Dubai and I was passing by Dubai Marina and there was no space for yachts to be parked there. And I just put a post saying there is depression and on the other side you say there's no space for yachts and my junior message is saying, sir, are you here? Next three hours we catch up, we spend the next day and then he puts his paper in Delhi the day after and joins us three months later. well well So by this time, what was the split between the Sudhiram kind of business, where like you know which is not tax focused and the tax business? So Sundaram was taking care of our costs, tax was our cream.
01:04:19
Speaker
Okay. It was our profits, you can say. And how much we were you doing annual revenue? We were doing like what few crores here. I mean, anywhere between two to three crores, four crores per annum. Okay. and This is like 2000, I don't know, early 2010s. Got it. Okay. so so Tiny. Tiny as an organization. It was good. 11, you went into Dubai. You also did the dot com.
01:04:47
Speaker
ah experiment in 2011, 2011. In 2012 we did that. okay So once we started to grow, there was some surplus in hand, you just want to like, okay, let's start. The the game was my business would have been high margin, giving you more retained earnings. yes yes Yes, the way was good because we were able to get annuity businesses out of Dubai.
01:05:14
Speaker
And it was operated very similar to the UI kind of a setup where it was an independent enterprise we used to like, oh we were we didn't have a mechanism to integrate everything under one umbrella.
01:05:27
Speaker
so ah But it was good high margin in business and we saw the same client. And this was like tax advisory and execution. Setting up companies abroad for them. okay It could be setting up companies in US. setting up Because what happened was we were able to get talent who could work across in Dubai much easier compared to India. So India was more in execution or the initial thinking part of it. But you know so engaging with regulators in multi-country jurisdiction, we felt the talent in Dubai was far more international. And they were naturally you know aligned to work with people across cultures. So that was a big difference, we felt. And so we we grew on that.
01:06:13
Speaker
And India is more again, even now, when we see it from the US, we see India as a great place for tax offshoring. We are like by far the best in the world. But when it comes to client relationship management, Philippines is much better.
01:06:29
Speaker
when it comes to accounting and auditing South Africa. Unbelievably, South Africa is far better. So that's that's how we see. But of course, being an Indian, being a Chennai guy, there's always this inclination to move as much as possible to India. Even in our GCC, initially we are trying to move as much only to India. We're not even looking at any other jurisdiction, but maybe client relationships alone. We might keep it in the Philippines.
01:06:56
Speaker
feel good okay yeah So yeah, you had that surplus, ah like better margins in Dubai, which you wanted to experiment with. So what was the dot com thing that you did? So we created this platform called MeteorPro dot.com.
01:07:14
Speaker
My burning question, Akshay, is I used to travel around the world on what I call professional vacations. Without any engine agenda, I'll go to London, stay there for two, three weeks, meet firms. we By that time, we became part of an alliance called MSI Global Alliance, which is based out of UK. And what is that? it It's similar to your, like your video kind of a city. It's an independent association of law firms and accounting firms.
01:07:39
Speaker
okay And they had a network of over 250 odd firms in 100 countries. We were one of the earlier members from India. We became members in 2010. And I still remember the James Mendels and the chairman of the network came to our small office in Chennai at that time.
01:07:58
Speaker
But the sheer outlook was so refreshing. And the membership fee that time was way beyond our means said, we'll take it because the exposure we go by association with these people was very different. So every time I meet a firm from a different geography, the way they look at pricing was very different. The kind of services were very different. Nomenclatures were different. The letters of engagement was so different in each of these jurisdictions. So I came back and said, let's standardize this industry.
01:08:28
Speaker
The biggest problem plaguing this industry is lack of standardization. At the highest level, people need more tax advice. It could be income tax, GST. You have individuals, SMEs, and large organizations. audit world So we productize professional services.
01:08:44
Speaker
And then we onboarded professionals to come and price our productized services. We felt people, it makes the journey become much faster. Because one of the biggest challenge in professional services, is I'm sure you are from the B2B service, is price discovery. So one of the biggest challenges in a B2B professional service this is price discovery. And for the ticket sizes, what the Indian CA or a lawyer is used to, then we felt it does it is undue waste of energy from both sides too.
01:09:12
Speaker
the spend on price discovery might as well standardize the LOEs, letters of engagement and ask the professionals to come and quote with their credentials so that people, clients could come log in and purchase whatever they want. It's a concept it sold well. And I started to popularize this across all CA, wherever I used to be invited as a speaker in the past, I became a sponsor and put up a stall outside and started talking.
01:09:37
Speaker
inviting CA's to come and join the platform. We got about 2000 not CA's and lawyers. And this was a global platform. You were not building this for India. We wanted to start with India and grow exponentially across the world. That's why it was meetyourprofessional.com.
01:09:54
Speaker
oh Everything was set. Clients started coming in. Professionals vanished. No one was willing to execute. ah They put in a bid, right, for the work? They put in a bid. So what happens is,
01:10:08
Speaker
today see the It is not the bid when the client is there, it was the scope of work which was put and you put your price. Okay, so it's a one-time bid. It's not like every time a client comes, you move it. No, no, no. That was a mistake. So it was not active guys who were quoting at that time. And professional services has this client-centric pricing, right? Your price based on you you how big your client is. We say that not the pricing in a professional service industry is your is a function of the willingness to pay and ability to extract.
01:10:41
Speaker
Yeah, that's nice that's nice. I found that like mean to say at the least. okay I mean, it's primarily because you've not cracked the pricing and the lead gen model, you end up doing all sorts of funny things. So ah people put in for the sake of incorporating a company, you won't believe we had quotes from 1000 to five lakhs.
01:11:06
Speaker
Same scope of work based on the professionals experience. It was good. I felt like that's a vibrant, that's how the market is. And it so happened customers always chose the lowest price and always these guys were not there to fulfill their requirements. So we ended up delivering at the backend, uh, services, which we did not have capabilities to fulfill at prices, which we did not have control over. And that this drama went for two years. It burned us out.
01:11:36
Speaker
burn me personally, professionally, as well as financially. Now, as much as our tax and our credit was running on the side, this was draining everything. We did raise small capital for that, which also I repaid at a later point in time.
01:11:56
Speaker
In 2014-15, so much of it got covered by all the media publications. We were talked about India's first marketplace for professional services. Central Minister called us and gave us awards and all those things. VC started to reach out. But I lost conviction in the model that it will make money. So to 2015-16, we decided it's time to move on. Did it take you too much time to lose conviction?
01:12:22
Speaker
Was that the fatal one and a half, two years, uh, which is a long, long time, right? Like a quarter is a year in a startup, right? Oh, I mean, we never looked at it this as a, as a, okay. Startup startup of two today's terms because, uh, one week, one year funding it with our own capital. And we, again, actually so the horizon with which we look at a business decision, at least a 20, 30 year journey.
01:12:49
Speaker
You thought that these are teething problems. ah very is that That's how I was, yes. That's how these were. Because on the other side, certain things have worked in what we have done. Our office in Dubai and Singapore worked. Our practices in India worked. So what did not work is that exponential blitzkaling did not work. So i was I was more curious to understand why it did not work. So that was my the last six months of staying on in the business. What was your...
01:13:18
Speaker
Incentive for Meteor Pro, did you did you see the business eventually becoming an aggregator like a Zomato instead of like at this stage, like to take the Zomato analogy a little further. You were writing a few restaurants and you were also trying to build an aggregation platform at the same time while writing a few restaurants. Correct. Did you see yourself becoming a pure play aggregator when you started this Meteor Pro?
01:13:48
Speaker
I wouldn't use the word aggregator, but in our industry, we call it as platform. I was always fascinated by the work, what Mr Pratap Reddy has done with Apollo, where oh his book, The Healer is still there in my library. I keep reading in terms of how this man quit his stuff in US and came back and how his family's moments pushed him to start something in India, access bring act quality,
01:14:19
Speaker
oh healthcare to the larger masses. And how he flipped around a professional services business into an institution. right And that that was my thought process and I thought in the digital world, this could be made much faster.
01:14:35
Speaker
That's how we thought we will take this. See, the intent, the eventual model was, okay, out of 2000 people, there'll at least be 200, 300 people who will be really good people committed to the cause. And then we thought like, okay, the remaining will naturally fade away. This 200, 300, we can build the entire game much faster.
01:14:51
Speaker
That was a thought process. we never got it to ah you know like We never wanted to be in the aggregation model. You you you get where we came from. right yeah that's when it's it the The right way of looking at it is a digital franchising model. Apollo is built on franchising. They don't own the underlying hospital. They just brand it. Similarly, this was a digital franchising model that you were experimenting with. Yes.
01:15:19
Speaker
which is I guess the fatal flaw here is that probably there was no skin in the game for the professionals. For the professionals, right. Yes, there was no skin in the game. We thought like, okay, let's at least because that time the digital world, the trust was also not as it is. It was 12 years back. ah the One, it was a low trust game, both on the supplier and the customer side. And second, professionals were so worried of putting their prices openly on the public.
01:15:50
Speaker
You've never seen that happen. I think a journalist from UK called me and said, and I want to spend time with you only to understand how did you get lawyers and accountants to put their price on online? He was just fascinated by seeing that part of our website. But yes, ah they didn't have skin in the game. And second, we didn't communicate the vision. It just became a platform for aggregation, as you rightly said. And that trivialized the entire journey.
01:16:17
Speaker
and I want to ask ah like a slightly random question here. please This B2B services, I've seen a bunch of companies trying to do this. I've seen a lot in the legal, the lawyer space, like there's Find My Lawyer or Book My Lawyer or this kind of Find My Ado kind of but platform, none of which have managed to scale up in any meaningful way. A lot of them are now like SaaS businesses, providing some case management software to their clients. yes um That's a journey you end up taking, correct? Whereas Urban Company has scaled.
01:16:52
Speaker
What is the difference? that That why did they scale? There's also services, although it's like say blue collar services, this is professional services. I completely but agree with you. What do you think is the difference? Are one company scaled and this space of professional services has not seen scale by anybody so far? See, it's about the extent of enablement you have done, you do to the suppliers. Now, if you're just going to be an intermediary connecting A to B,
01:17:22
Speaker
then you are a broker, but an urban company is an ecosystem. They are training, they are giving them training, they are giving them the tools. Yes, today when that guy comes for a haircut or manicure or whatever, he brings a beautifully done kit. He sent training videos. He has dignity that he's part of this brand.
01:17:44
Speaker
He comes with that uniform and there's a good code of, he cleans the place. So the amount of enablement which he's done, even though I know that guy, I would prefer to go through Urban Company the second time, engage the same guy, but I wouldn't want to do that through. In US we have TaskRabbit, very similar, very, very similar. You pay 50, 60 bucks an hour, you get good guys.
01:18:05
Speaker
they're supposed to take for, there is a proper SOP, there is a commitment for, all those things are taken care of, right? So it's the extent of enablement you do in the system which determines the success of the platform. Okay. And by swear in nature, these lawyer-accounted platforms cannot do so much enablement because typically the audience here is already, they're already trained, they already know how to work, they already have all the tools, there's not much you can give them.
01:18:34
Speaker
and The only thing you can give them is leads. You can't give them much beyond beyond lead leads. you can so again you should i mean The moment you trivialise a game for LeadGen alone, you've lost the prize. Yeah, that that's true. LeadGen is massively hard. oh that's Then it becomes like a i another... I would ideally pro prefer to look at it as something like, t the professional services business, i think the way this will evolve, at least my limited view is,
01:19:04
Speaker
This will become very similar to the hospital business where you will have larger players. It is getting more and more investment. in I wouldn't use capital intensive. It need not be physical asset intensive, but digital asset intensive going forward. Because every country is coming with its own GDPR version of regulation regulations, and data protection, the firewall, the software investment. One, it may not be enough. It's not about the money. It's about the bandwidth you have to manage all of this.
01:19:36
Speaker
which can come only if you have scale. And value unlocking is going to start. You're going to see that in the next few, in the coming years. But this is a direction in which this industry, if we were to speak five, 10 years down the line, I think we would have seen quite a few good professional services brands coming out of India, who would have scaled up across functions. Today, we don't have this function called marketing yeah in Indian firms. Where do we have?
01:20:04
Speaker
There's no business development, there's no marketing. You don't see any of the any names rather than the big four anywhere in the arena. and That's all going to change. There are quite a few good friends of ours who are working in this arena. I'm i'm sure the industry is warming up to it. It will become a capital intensive game as we move. There there are some code of ethics which disallow marketing, right? So which is where the... there so It is for CEOs and doctors.
01:20:34
Speaker
Not for consulting firms, where ZA has worked. Okay. Okay. Okay. So that's where the, and I think ICI is also involved. I think that hackover is still there, right? The, the hackover of those code of ethics. Just imagine actually the irony of life. You struggle so hard to clear and then you get a book, which is like 500 pages, which only tells you what you can't do.
01:21:00
Speaker
haka i mean Why would you ever put yourself in that spot? but I think ICA is well warmed up and I hope the entire non-attest space good is ripe for good value creation and institution building at this quadrant.
Post-MeteorPro: Scaling SMEs through Financial Solutions
01:21:17
Speaker
so Coming back to your journey, so Meteor Pro experiment didn't work out, you shut it down. ah I think 2016 is... 2014-15, this happened. okay The shutting down happened. And what was your revenue by then? I don't know. I mean, DBS was good. It was flat in those two, three. We didn't grow much from 2012 to 2015, obviously, because my energy was focused on Meteor Pro at that point in time. It was lying flat.
01:21:46
Speaker
ah Then we got into, so again, the real question was, I was looking at how do I get access to large pools of clients whom we can serve. The question was about how to serve the professional and services industry.
01:22:04
Speaker
In your mind, the unlock to growth is demand not supply. I mean, like ah one approach could be to say that as I continue to create a kick-ass team, business will automatically grow. Let's focus on execution. or the other is i you own but actively chase demand, get clients, and that's how I grow. So so your focus was demand, not supply. At that time, with my limited view, I was thinking if I were to have more relationships in the game, it becomes easy. And I was only looking at what I wanted to say. I was looking at Google. Google was not selling ads. Google was selling search.
01:22:41
Speaker
Search was free, ads were paid. Then when I started to look at revenue models, ah Starbucks never made money from coffee, they made money from other things around. McDonald's did not make money from burgers and fries, they made money from selling coke and water. So how do businesses make, how do businesses scale? my my The only thing which was ah I was obsessed with was scaling of this industry.
01:23:06
Speaker
So I thought if we were to get into an unorganized market, which required this service absolutely required the service, but was not served, was the smaller end of the SME space. oh But how do I get to them? If I were to go tell them that even if it's going to be $2,000 a month and our guys will come and solve it for you on scale, but that guy will say, you're not solving a problem for me. I don't want you to solve, which is not biting me. right So then we said, okay, what is biting the money? Let us solve for the money. The add-on will automatically come. That's how ah we got the micro lending.
01:23:44
Speaker
ah certainly by ands like Lending to SMEs. That was the lending to the smaller guys, the Kirana stores. We used to lend anywhere between one to 10 lakhs.
01:23:55
Speaker
And you thought that the Kirana stores would need professional services around accounting. I'm sorry. No, no, please. I find myself so stupid in that logic today. At that time, you know why? When I used to work, when we used to do the evaluation for, we we started with Sundaram, then we started doing it for all HDFC acts, all these guys. It was a fairly large team which we had.
01:24:21
Speaker
ah We figured out the quality of books, the papers these guys had were so bad, so bad that they were paying 3, 4, 5% more on their borrowings because their papers were bad. So there was a direct, if someone were to spend 25,000 bucks, he could save 3 lakhs on his interest cost. right If only his paper, that was my real spark and we had done like almost 40, 50,000 transactions by that time in the last five, seven years. So I felt that was my conviction in the game. I said, like okay, we would be able to sell this as a service and bring bring take borrow this, take this guy with the high cost load and then tell him boss, if you convert your papers better, which we will help you do that.
01:25:13
Speaker
And then we ourselves can onboard you into a better institution at a much lower price. So that was a journey which I planned. Okay. Does it make sense? I mean, okay. Logically fine and all, but today it sounds like. No, no, no, no. You got the context, right? So this was a thought process. Yeah. yeah And then we said, okay, let's do that. So we got a good team. We started doing that.
01:25:39
Speaker
We honored about 3,000 odd clients. We were super profitable in the venture as a lending address. You got an NBFC license or you were like using somebody else's book? No, no. We invested. We got an NBFC license. So we had an NBFC license. We lent to... It was good. It was really good. For the first time I was managing a collections team. We used to give loans on weekly collections. That was like crazy. That was more like a treadmill game.
01:26:08
Speaker
Yeah, yeah, opposite. So from 98% to 82% can happen like in a matter of five days. So that that was like that that's the churn we used to have. But good, it it was a good business which we were running. But when things started, there two we were not able to sell services to these clients.
01:26:31
Speaker
And then that was the first, I also set up simultaneously to move these guys from lower to larger tickets. We also had a debts s indication team apart from the sourcing.
01:26:43
Speaker
All this was funded from my consulting businesses. What is the meaning of debt syndication? So this team will focus on getting these taking these customers and moving them to a lower cost alone on like refincing for their existing loan Refinancing Refinancing an unsecured with a mortgage loan. Once their papers were good or some track was established. So we were doing the, the internet was doing the entire value chain.
01:27:11
Speaker
We figured out we were not able to sell services to a loan client. We realized loan was a low-trust game. Ultimately, what we were selling was money. We were not selling any rocket science to them. But services was a high-trust game. So selling a high-trust to a low-trust was very difficult, whereas a vice versa would have been much easier.
01:27:34
Speaker
But this beast took a journey by itself. I think we did some very decent, I think if I'm not wrong, we had three, 4,000 clients rolling at any point in time. Office was
Evaluating Investment Offers Amidst Internal Conflict
01:27:46
Speaker
suddenly the team size became big. The numbers we were handling were big. And then the Wirecard's engagement started to come. We started conversations with them. The Wirecard was coming as an investor. As an investor. We signed the term sheet for 250 million dollars with them.
01:28:03
Speaker
Oh, wow. So you would have been valued at like 500 to a billion dollars, something like that. It was an insane valuation. Let's not get to that at this point, but yes. But this NBFC was a separate entity. This valuation was for the NPFC. It was for the NPFC. It was a separate entity. But I was not happy doing this for two reasons, because I never wanted to be in the lending business, filing cases against poor people. I couldn't sleep at night ah when defaults happened. It was at that time I had signed the term sheet with wire cards. I went to Kenya. I'm part of these organizations called EO and YPO, where we used to have these leadership retreats.
01:28:53
Speaker
And in one of the leadership retreats, I'll never forget my, this gentleman, the role he played in my life, person called Warren Ruston. It was a, it was a five day retreat. We were living along with the Maasai Mara tribes in the, in the forest, in, in one of the huts. The fourth day I go to him and and I ask him, Warren, I'm running two ships at the same time. I'm not happy doing both. Uh,
01:29:21
Speaker
One is what I enjoy, the other is scaling up well, lot of money there, but I'm not very happy. So he gave me one answer and never forget that answer. He said, like, close your eyes and which one will you do if you are not paid a dime tomorrow morning? Which one you will happily jump and go to work? And they're like, fine. The answer to this will determine which direction you have to take. And then he walked away.
01:29:48
Speaker
So after the retreat, I just wrote reflections and all came back. I went to these guys and said, I'm not taking up this offer. They had signed. They also put the initial round of money also as comments. Then they said, we are going to four feet, whatever. So I had also put my capital, a serious amount of money. It was not, um when I placed my father in law's property and put money inside that. So it was like, and my father was a person who's never borrowed even for a car loan.
01:30:16
Speaker
that that kind of, he's a school school principal comes from that background. So like, fine, let's go ahead. If that's because it was suffocating to live in that kind of a mind, because this was started for a different object too, but this became big by itself. And that entailed certain actions, which was not resonating with the persona. I'm not saying right or wrong. It was not need to do. It was a different beast, basically. It was a different beast and I was not happy managing it.
01:30:45
Speaker
You won't. So I said fine. It's okay. Take whatever consequences you want. Let's I'm i'm getting off this venture. Five days later, those days become bankrupt.
01:30:56
Speaker
Yeah, Wildcard famously was ah it was discovered like there was a lot of fraudulent transactions, money laundering, all sorts of stuff happening. Absolutely. And they said like ah there was a billion dollars missing in their balance sheet. Suddenly, the German guy who was answering our calls. oh Then he became defensive and all this, this, this. They have made a few other investments in India as well at this point.
01:31:22
Speaker
they They eventually it did not materialize the way it was supposed to happen. But I'm so happy in life that it happened the way it did. But that that that was a nice phase of life where I realized the means to an end cannot dominate the the the game. I mean, the journey is much more important than the outcome. thing
Reflecting and Realigning: New Business Strategies
01:31:45
Speaker
That was the realization I had in life. Did you wind down the NBFC or did you sell it?
01:31:52
Speaker
So I moved out. I moved out of the venture. And we eventually ended up winding it down. We didn't sell it. oh it really could Fairly. It was a good asset to sell. It was a good asset to sell. And and as a capitalist, you should have sold it, right? You you believe in capitalism. i believe so i think I believe in thought capitalism more than really more than fictional capitalism.
01:32:22
Speaker
ah I believe the real drivers of capitalism are deep thoughts and execution around it. For me, it if I had stayed for one more year, yeah the outcome would have been very different. But it would have had very different consequences on my psyche if I had stayed there for one more year. And I didn't want to become someone I'm not comfortable being.
01:32:45
Speaker
yeah It was not a saleable asset when you decided to walk away, like you. It was a saleable asset at that time because we had the entire team, we had a portfolio which was performing. Phenomenal IRR collections were good. But when I walked out, those guys had to take on
01:33:05
Speaker
control I said like I'm absolutely fine and when they took on control immediately this issue happened I had an option of going back taking control running the ship for one more year and then getting whatever is the loss let's move on because I think you never know how long you're going to live I might as well end up doing what you enjoy you know the the biggest flaw in investing ah is throwing good money after bad money exactly and you are able to detach yourself from something which you write off as a mistake. I made a mistake. It's OK. Even if there is no residual value in it, I don't want to throw any more of my time. In your case, time is money. Time is currency. Time is currency. I don't want to throw good time over bad time, like like to recover at some value out of the two years I invested. I don't want to invest another year of that. Yes, yes, yes, yes, yes. Fascinating.
01:34:01
Speaker
So, I mean, I firmly believe time and energy are real currencies in life. So that's more. Moved on. Yeah, yeah, yeah. Okay. So, you moved on. That was that saga in life. That was the, what I would say, the go-cap saga. What a nice learning experience. The hunger was still there, right, to scale. Now, this didn't work, so what did you try next?
01:34:28
Speaker
No, I took a one year off from work, active work. After the NBFC, you walked off. After the NBFC, I came back again, consulting group, no no questions about it. That was a steady state, our clients were growing, we were also growing. But team by what, i like what would be our revenue number, approx, like annual revenue? At that time, I would be doing, I don't know.
01:34:53
Speaker
two, three, 4 million thereabouts. i don't I don't have track across, but we we were fairly profitable, doing very well. And from a business standpoint, we didn't experiment anything new. We were like just maintaining the ship at that time. And the business was Dubai in India. Like these were the two. Singapore. Singapore also you started. Okay. Yes. Singapore again, we started in 2011-12.
01:35:18
Speaker
okay Okay. So all these three. And yes, then we got into this game of, so we were still operating very much like the big four, where it was all franchise outlets of ours.
01:35:34
Speaker
Like Dubai and Singapore were separate entities. separate entities yes where only ah We used to get a share for the fees, what we either referred or served and stuff like that. That's how it was. Because we didn't have a larger a structure for a larger game, first and foremost. Though we realized, I had the learnings of Meteor Pro, but the vision was still not very clear.
01:36:00
Speaker
And then I took a complete one year off in 20, after COVID, around that time. We moved to Dubai, relocated to Dubai, and then stayed there. I left the family there, then I went to US, started writing down, started writing down all the significant events in life, right from my childhood till that moment, more for my grandkids, but effectively for myself in terms of,
01:36:28
Speaker
I wanted to understand two things. What I did would talk about my ambition, but how I decided will talk about my values. These were the two things which I really wanted to understand what was my drive and what are the value systems.
01:36:45
Speaker
So wrote down the decisions and that one year of life came back and published it. It was that one year it was just travel. Like there was no, like you were not trying to get new clients or nothing like that. It was pure travel. I was out of active engagement right from 2012-13 onwards, where the consulting business was running. So we could have grown the 10X from what it was, but that wouldn't have solved the problem, this problem which we were trying to solve off scale.
01:37:15
Speaker
But it gave a fascinating,
Expanding Horizons: Real Estate and Wealth Management
01:37:16
Speaker
after I put that in a book and then we probably published it in our 15th year. and and will It gave a fascinating insight that he never learned from mistakes. We were repeating so many similar mistakes because it right from childhood, you know, was taught that you learned from doing you you learn from mistakes.
01:37:41
Speaker
I felt what they missed out was you learn from reflecting on your mistakes and not from, you know, true, true, true, true. So that reflection was completely missing. So that one year really helped. It was draining in terms of going back and retrieving from the past, right? But there was very interesting insights. So then I went to study scaling up at the US. I've been to almost From there on every year I've been traveling, at least two, three months I'll go there, meet entrepreneurs, meet firms, meet businesses which have succeeded at scale to understand why. Come back. My real challenge was at that time was
01:38:21
Speaker
How do you make the current team understand what it takes to scale? That was a bigger challenge. It was a team which stuck, they stuck for independence and freedom. but know You're going to tell them that, I'm going to bring in a lot of systems, controls, and processes, which are going to help scale, that at times could be counterproductive to why they joined us.
01:38:41
Speaker
So these are all, so but it had to be taken. One good thing, the chemistry was good. Most of them who joined me were my students. So we had that equation, so that change management, we're still going through that phase that helped. And then the real magic happened when we started to marry business services and professional services. Realized professional service is only a cog in the larger game of things.
01:39:05
Speaker
start playing the larger game of things, the larger deals which where you not only facilitate, but also do the fulfillment. Give me an example. What is the difference between business services and professional services? Okay. Let's take an example. One of our um in Dubai, we also have a real license, meaning we are we are also in the real estate, broking in UAE.
01:39:31
Speaker
So a typical, we used to advise clients, let's say from the US or UK, investing in Dubai on how to invest, set up the structures for them and do the whole thing. Say our revenue was 10, $15,000 for doing it. You would end up going and buying a property where where the payout could be anywhere between 40 to $50,000 based on the size of the property. Most of the time we'll go and negotiate on behalf of the client.
01:40:01
Speaker
because the client would not trust anyone to do that. So it was in one of those conversations where we went to close three deals for our clients, the client himself said, you guys are so good, why can't you guys do this yourself? And that came back and then we were discussing, because not a fairly large conquisite contract, so I was with the client, ah bouncing off this idea, then like let's get started.
01:40:27
Speaker
So only for our own capital clients we started doing it. And then that became a sizable number. That was much more in terms of revenues compared to the larger game. Today we have more than 200 million of properties under management where we oh lease them out for our client. We rotate the portfolio for our clients. We maintain it on their behalf. So we do the end to end. All you just need to do is have the intent and the money to do it. The rest we'll take care of it.
01:40:55
Speaker
So there's like, say, a night rank, JLL, ah like this. Imagine a mix of EY and night rank together. right Wow. That's, so we started doing that. There's also very ops heavy business, right? Because then you're doing facilities management and you need a lot of people on payroll. No, we work with partners. See, okay. the The challenge is about getting it at the right price and owning the execution. Actually, we don't need to own the team. We need to own accountability. In this game, accountability is everything.
01:41:30
Speaker
You own accountability, you're sorted. That's the game which we are. And what the client gets in return is mind space, more than anything else. So that's that started. Then we acquired a virtual CFO practice. Again, capital client base, that grew scaled up 3x, 4x since we bought. Which country was this based in? India. Virtual CFO was in India, our real estate broker was in Dubai.
01:41:58
Speaker
Then the larger leap came when we got him into wealth and private deals. So we used to work with a lot of family offices who would come to us for advice when they are buying large chunks of unlisted securities, private investments like companies like Swiggy or Zomato before they went public.
01:42:20
Speaker
We used to advise him on how to do what are the tax challenges, how to break the budget. And the bigger challenge they had was they would want to do a 20 million transit, but an American fund would want to buy, sell them 50 million transit because he doesn't, he can't slice it to smaller taxes. He said, like, see, we understand the tax game.
01:42:39
Speaker
We understand what it takes to conclude deals. Why don't we start getting into that space? So we started there. So we moved from a service-based pricing to an outcome-based pricing. In the last 12 months alone, we have done over $300 million in revenue in that space.
01:42:57
Speaker
house How does this outcome-based pricing work? Like say someone is buying Swiggy shares pre-IPO. so okay The lot with us has to be larger, at least say a 20-30 crore transaction.
01:43:10
Speaker
And so first we will buy, we will buy in our, it's a prop, we buy it. And then we take care of the entire, the challenge when you buy it from an overseas buyer is a compliance of pain. You know, there's a RPI, there's other tax regulations. We go through that full process. Sometimes it might take about one and a half months.
01:43:32
Speaker
Normally, if we are to do it for a specific client, let's say if you are going to invest 25 crores in that, we might end up charging you 10, 15, 20 lakhs on that. But instead of that, we only sell it to you.
01:43:45
Speaker
from our books, but we load the fee on the margins. Right. You mark it up and there is an an opportunity to make more margin here depending on how hot the startup is. The stock is and more importantly, we're solving a real problem and we are adding value to the client then and there. So where we are different from a wealth firm is we are not a wealth firm which does tax.
01:44:11
Speaker
We are a tax firm which does wealth. It's a huge difference. Selling from again, we ourselves also sell again, high trust to low trust. So you're just now putting into practice what are we are doing? What are we have learned? Of course, the hard way. But now we are very clear. We are expanding the game now. We bought in some very big heavy hitters on our board. We consolidated the full journey in 2023.
01:44:40
Speaker
Of course, US has started value. We've got some good firms with whom we are talking for a merger. We are now doing a roll-up in the US and building a GCC in India for servicing the roll-up.
01:44:53
Speaker
yeah like So far, we have not diluted not taken on board any big investors at this point in time. We just diluted a fractional minority last year.
01:45:04
Speaker
It was a client who went through the full journey with us. He said, please take me part of this board. This journey, it's so exciting. So then we did a valuation and we took it out. Now we have cracked the model. We are growing. We got over 100 CA firms reached out to join us.
01:45:22
Speaker
inherit yeah okay In india and India. Currently, we are not very bullish on expanding here as we speak. We are very selective, but we are going full steam in the US. So next 15, 18 months of growth, we want to stabilize that game and the GCC in India, whereas our current practices will continue to grow.
01:45:43
Speaker
and
Strategic Shifts: From Franchisee to Corporate Structure
01:45:44
Speaker
Let's see where this goes. We are going for a public market. I wouldn't use the word exit because we want to be here for, I'm looking at it for a 20, 25 year horizon as we speak. Trying to hope to hit the market at 20, 27, 28. So I want to kind of recap version three of DVS, like the things which you have changed, just so that the listeners are with us.
01:46:12
Speaker
ah so High trust to low trust is like a driving philosophy and that led to you offering professional services, say like the real estate management business. Business services are marrying them with professional services. Right, right, right. Business services like real estate management or even the wealth management. well all of these are yes yeah yeah All of these are high trust to low trust kind of examples where you are owning the larger part of the problem solving essentially and like there is a problem fiction for the client. Right, right, right. You're owning the friction for the client. And the other thing which you're doing is a US market. You are now more aggressively looking at expanding in the US and for that you are going through an M and&A route and you will have a GCC ah global capability center, which is essentially like a KPO in India, which will service them.
01:47:09
Speaker
And the third thing, which I assume you're doing, we've not explicit explicitly spoken about it, is the move away from the franchisee partnership kind of a structure into a more corporate structure. Absolutely, absolutely. So because DBSR philosophy is, we believe partnership is
01:47:31
Speaker
for sharing and not for building. So if we are here to build an institution. And so we have to give you an example. One sec. I'll just maybe I can make this a culture book.
01:47:45
Speaker
okay Clearly talks about how we think, work and decide what are our core values, why we exist what and this is not aspirational, this is experiential. The entire book is backed by historical events of what we have done that's there in the larger book which is there at office.
01:48:02
Speaker
so the The intent is to build something for the future with people who align with our values, who align with our purpose. Wealth is going to be created. That's not a question. But we want the journey to be fun with like-minded people who are intellectually curious, who have the hunger to do something different, to dream and dream big. I think that's the game we are in. For us, everything is an adventure as we move on.
01:48:33
Speaker
So have you like absorbed the Dubai-Singapore entities? and so it's now absolutely No, absolutely. Singapore, we are singapore um is ah v have v gradually winding down Singapore at this point because we believe ah certain developments is not... We ourselves are, for a variety of reasons, we are focusing more on Dubai and in the US. We wanted to reduce our width focus only on oh two markets and Dubai is now under India. We got the code approvals for consolidation ah early this year. So that was a long process. the The holding company is in Singapore though.
01:49:16
Speaker
the The Indian parent, the the entity which will go public out of India will be is an Indian company. A part of its ownership is held out of Singapore because I am a non-resident Indian. okay And ah at at a later point in time, investors prefer to enter via Singapore, which is why we are not the entire state. Some state is still held out of Singapore for that reason. If at all there is an investor who is keen on coming there. But the Indian entity is what This will be an India story from India for the world. What is your revenue today?
The Future of DBS: FinTech and Professional Services Platform
01:49:56
Speaker
Like this year what do you estimate you will do? This year we must be like plus. 300 million dollars. Yes, across practices. So you were at
01:50:15
Speaker
ah You said something like a four-ish, five-ish, like a single digit million dollars in 2019 when that NBFC was being wound up.
01:50:26
Speaker
yes how so how did i' like like this is like such a massive see the The trajectory is again, you see all the guys like Flipkarts and Zomatos, the pivot happens.
01:50:39
Speaker
we do where So far as the pivot happened when we married business with and this excludes the AEM which we have. in the property business because the AEM for us is an annuity game. So we don't have a mechanism to put that on paper. But yes, when you clearly understand your value proposition, when you do the right kind of, it took time. See the the deals business we've been exploring for the past six years. It did not happen. It was an overnight success after six years.
01:51:13
Speaker
yeah Yeah, that's so true. All overnight successes are like decades. essential So it takes it took us marrying that with this, but where I see the real amalgam being so successful is if it's a pure play vertical integration, it's a direct fit where you're not reinventing a fit.
01:51:39
Speaker
I was listening to this gentleman, and I think Todd Greaves, who runs his enterprise, Raising Cane's in US. He's got 800 outlets and he's not changed his menu for the past 28 years. So we decided we we realized that we should never reinvent the wheel.
01:52:01
Speaker
rather start adding more spokes of the wheel which you can own. That's a game we want to play. Essentially, like you're no longer swimming against the water flow, but you're just like you you know which way the water is flowing and you're just damming it. and Go with the tide. Actually, the the intent is don't try to solve a problem for the sake of solving. Create value.
01:52:28
Speaker
for the clients, they automatically create value for you. So we are very clear that whatever we do, we would want to solve for value creation. That's it. And yes, we do have pure vanilla transactional advising practice, but that's really miniscule compared to this because when you, it's a difference between like being a lubricant in a car, then vis-a-vis being the car itself for the client.
01:52:54
Speaker
Yes. Yes. Yes. Yes. I understand. Yeah. Amazing though. I mean, that this 4 million to 300 million is like mind blowing. I have never heard a anyone else talk about this kind of ah growth, but I understand like that analogy of being a lubricant versus being the car, which explains this explosion, ah but incredible. Okay. And this business from the US is what? Like outsourced accounting work or like investing in India?
01:53:24
Speaker
invest and investing Investing in India. and okay Investing in India and investments in India, both. Managing investments in India. Okay. yeah okay okay So we either place these investments or we do co-investments with them. So our business model has moved from a pure place services model to a value partnership model across. Give me some examples of this investing in India model. like ah invest hu See, let's take a large fund. I thought they made some marquee investments in India. We also work. Now there's like a private equity fund that we're talking about. A private equity fund. Okay. So they are exiting. We buy from them. Ah, okay. And then you flip that. We, we, we buy either, we and then we decide to either hold or we break bulk and
01:54:20
Speaker
flip it in India or elsewhere. Okay. So this is like investment banking essentially then. so So you part your quality right way and back. We are part, however you want to call it, you can call it because we are not publicly listed. We don't have investor money now. So we can be all over as long as we are we are building the book. And what is interesting actually is The GMV of what we are doing is at least two and a half times what I mentioned to you. And the best part of this GMV is the people to whom we sell to are the people to whom we will also give an exit at a later point in time. So it's been a portfolio of the management for us.
01:55:07
Speaker
at a much later stage. So this is an annuity game, what we are playing, but the value drivers are not only knowledge, it's also a ah capital game. So we have solved for capital for this because this is a hugely capital intensive model. Okay. So somebody wants to offload $50 million dollars in Swiggy and you can find buyers in India who want to buy it.
01:55:31
Speaker
ah Do you lock in the price the moment you buy that, okay, I'm buying at $100, I will lock in $120 or do you? So yes, we we have a risk management matrix which we adopt in terms of there is a an internal research team which does the risk and we run it past our IC to figure out whether the risk is within the tolerance limit and the amount under commitment which is uncovered, is that also within tolerance limit?
01:55:57
Speaker
and then we take a call. That's a process which we go through, but the decision making which happens at that, we go through this full journey for that. I mean, goes you know, not, ah not locking in a price can give you both upside and downside. So do you see, I mean, again, we decide on what percentage of the board of the Lord we won't lock the price.
01:56:20
Speaker
okay Okay. So that that's where you leave some room for the upside. Right. But ah again, it's a function of multiple variables at this point in time, which is something like an Ola we are dealing with as, as we speak, all these, a lot of the NSE is being one of our most popular. We were one of the larger ah bankers for NSE transactions in South India. We would have easily done, I mean,
01:56:49
Speaker
a few million years or so. Secondary transactions of... secondly So what is interesting actually is in India, the secondary market is almost 25% of the primary market, of the listed market, the unlisted secondary market. How does that compare to other countries? Like what is this? Honestly, we I don't have the data, okay but but it's mass offlet it's massive. It's massive.
01:57:16
Speaker
ah the The challenge is about owning the entire value chain. This is something I really learned from reading Gautam Madani's life. Fascinating. i mean he You spoke about something swimming for swimming with the tide. If you go back to the first conversation on taxation, it's about aligning with the government, that's swimming with the tide.
01:57:41
Speaker
Right. right it's Adani's premise has always been go with the garment, go with the flavor of this, go with the tide. And he got his company listed first company when he was 32 years here. Imagine in 1990s, whatever people say, okay i don't i'm I don't have access to what he's done and how he's done. But for someone to list his company at 32 in 1990s takes a very different foresight.
01:58:10
Speaker
to exist. So it's it's it's about like, this is the title there. And today, as we see, we are seeing multiple tides. We're coming up with a couple of very interesting projects, which I'm sure by April, we'll be going live with that in this business, where we are creating, we're solving for quite a few friction points in the value creation journey.
01:58:37
Speaker
We are going one step below. Currently we work with large family offices. We are going one step below for the semi-retail H&Is and ultra H&Is who are also our clients on the taxation front and other services. It is a mix of both. It is a mix of unlisted mix of access to international markets because today since we are at the US and we are at New York. So we have access to some very interesting partners who've reached out seeing what we are doing. I mean yesterday as you were as it was due, yesterday night I got a very, a mail from one of the larger wealth management firms out of the US reaching out to us for partnership. So we would be, we are clear on our vision. DBS will evolve into, we got it written almost four years back. The intent is we are building
01:59:33
Speaker
a scalable professional and business services platform, enterprise evolving into a FinTech platform. That's the end game. I would say end state of existence and from where the evolution will happen. I mean, this is as we see today. So that's why if you see our board, we have this, the India CEO of Millennium Edge Fund. He is, Millennium was a $70 billion fund. India CEO is on our board. We have Mr. Sundaram, who's a private equity veteran. Guru Kalyan, who's ex BCG.
02:00:04
Speaker
and of course Kavita and myself. So and these are like not advisory board or real board on the um the main board.