How a courier boy acquired 51% stake in a firm worth Rs 600 crore
It’s a transaction in India’s recent e-commerce history that has perplexed everyone. Moneycontrol talks to the once courier boy who now owns two courier firms on how with almost nothing in hand, he bought GoJavas, a firm that had a turnover of over Rs 650 crore last year.
As a 14-year old boy, Anand Rai, now majority owner of Gurgaon based QuickDel Logistics Pvt Ltd used to earn just about Rs 250 per month as a delivery boy or an Angadia in Mumbai.
He used to live in a shared chawl in a Kanjurmarg slum in Mumbai and pay about Rs 150 per month as rent.
“For toilet we used to queue up every morning near the chawl. It was a shared toilet,” he tells Moneycontrol Startups.
So, how did Anand Rai, now 39, get to own a company called GoJavas which had a Rs 650 crore turnover in 2016?
Let’s go back to his history.
Rai was born in Jaunpur, a village town in Uttar Pradesh. His father was a farmer. “When it used to rain, we did not even have enough money to buy a cover which could save our crop, mostly onions,” he tells.
The quiet village life did not suit Rai. He fled the village to the big town of Dehradun and then the megacity of Mumbai to work as a delivery boy.
Life was tough for the village bum.
“Once, I got looted by the women while walking through a red light area in Mumbai. I was looted of all my belongings but managed to save a lab report which was to be delivered to a customer,” he said.
He worked in various cities with various firms till 2004. That’s when he launched his own logistics company Pigeon Express, out of a small shop in Paharganj. “I was learning all this while the tricks of the trade,” he adds.
The registration of Pigeon Express on registrar of companies shows as 49, Rani Jhansi Road, Paharganj.
Most of the business for Pigeon Express used to come from banking and telecom sector in the form of letters and documents.
Years passed by. Business grew from lakhs to crores for the once courier boy.
Times were good for the small courier firm till 2013 when VC funding entered commerce logistics in a big way.
As per documents with RoC, Pigeon’s loss as of year ending March 2015 was about Rs 3.9 crore over a revenue of about Rs 12.7 crore. Interestingly his company had earned a profit of Rs 21 lakh, just a year before.
“They (VC-funded logistics companies) used to hire my boys at Rs 25,000 per month salaries who were earning about Rs 15,000 per month. After six months, they used to fire them when business got tough,” he adds with a grudge towards VC funded players.
Rai says that in March 2016-17, Pigeon will achieve break even with about Rs 15 crore in revenue.
##How did Rai acquire GoJavas?
So how did a loss making firm managed to acquire GoJavas which earned about Rs 207 crore, just a year before? Revenues of GoJavas had climbed up to Rs 650 crore in FY16. While Pigeon’s sales had not even touched Rs 20 crore.
Vide an Extraordinary General Meeting held on August 12, 2016, the articles of association were altered of QuickDel Logistics Private Limited, which owns GoJavas.
In the document, Snapdeal asked for a passive role but a list of information rights which includes a monthly management review by the 10th of each month, minutes of meeting of board within 15 days of each meeting, income statement and was flows each quarter, etc. Rai also overnight turned a director with about 51% stake in the company.
“Praveen Sinha (co-founder of Jabong) was my good friend. I told him you can’t run this company. It’s not your domain whereas I have been doing it for last several decades.”
Moneycontrol cannot confirm what transpired between the founders of Snapdeal and Jabong who together held the majority stake in GoJavas.
Anand Rai bought 51% stake in GoJavas.
Where did Rai find the money to buy a 51% stake in the company? This is a question raised by several media companies including TheKen here.
To his own admission, Pigeon Express will not be doing more than Rs 15 crore of annual turnover for March 16-17. And as per last funding by Snapdeal, the firm was valued around Rs 600 crore.
As per Rai’s admission, there was ‘some money’ exchanged. “I cannot disclose right now the amount. But my takeover saved GoJavas. It was a failing ship suffering huge losses. It would have died if I had not come into the picture,” he tells Moneycontrol.
“The company had over Rs 110 crore of losses in books. After reconciliation, the losses went upto Rs 300 crore. There is no way it could have survived,” he says.
So has the sell-off of GoJavas to Rai helped the company. Apparently not. Jabong got sold to Flipkart and thus went off its business. Snapdeal the second largest shareholder in GoJavas, started its own logistics arm Vulcan.
"Even I don’t know why Snapdeal started Vulcan when GoJavas existed,” he retorts.
GoJavas had a revenue of over 650 crore with over Rs 110 crore in losses at the time of change of hands in August, last year. “If you take the losses after reconciliation, they went up to Rs 300 crore,” he claims.
However it is expected to fall to about Rs 350 crore this year. The main reason for decline: GoJavas lost both Snapdeal and Jabong as clients in 2016.
This is the reason Snapdeal CEO Kunal Bahl gave Moneycontrol about why the company started Vulcan when GoJavas already existed.
"Third party logistics companies should innovate. They didn't innovate. Our view was that, fine we tried our best (with GoJavas). No problem, we will do it our own (with Vulcan). Majority of our orders will now be delivered by Vulcan," he said here.
'Want to buy GoJavas from Snapdeal'
Evidently, it was in July, last year that Snapdeal decided to start its own logistics arm Vulcan and Vijay Ghadge stepped as CEO of GoJavas. He joined Vulcan.
The company had about 6,000 employees during Ghadge’s regime. However under Rai, they have reduced to 2200 employees.
As per Rai’s claim, Pigeon handles about 25,000 to 35,000 document shipments every day in the form of letters and mailers. GoJavas handles about 10,000 shipments of parcels every day.
What’s Rai's next plan for GoJavas?
"I want to acquire more stake from Snapdeal and increase my shareholding," he tells.
How will he find the money? “Will tell you soon,” he says, keeping us perplexed, like his deal in August, of last year.
(Access documents related to the story here: http://bit.ly/2n4Mle6.)firstname.lastname@example.org