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Authors: Ashwin Sanghi

Tags: #Fiction

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BOOK: Chankya's Chant
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The very first lessons were in bookkeeping and accountancy. Agrawalji’s books were maintained by his trusted Marwari
munim
—his treasurer—who was given the task of explaining the intricacies of double-entry bookkeeping to the young man.

‘Gangasagar, what’s two plus two?’ asked the munim on the first day.

‘Four,’ answered Gangasagar.

‘Wrong answer. I’ll give you another try later.’

Several days later they had progressed to maintenance of primary books, ledger posting, and trial balance preparation. The munim once again asked him, ‘Gangasagar, what’s two plus two?’

‘Four,’ answered Gangasagar.

‘Incorrect. You’ll have another chance to answer it correctly.’

A few weeks later they had covered income recognition, expense estimation, and finalisation of the profit-andloss statement.

‘Your final chance. What’s two plus two?’ asked the munim.

The frustrated lad snapped, ‘It’s whatever you want it to be!’

‘Correct answer,’ laughed the munim. ‘You’ve finally understood the beauty of accounting!’

Profit was in the Agrawal blood. Anything that could possibly be bought and sold for a profit was of interest to Agrawalji. Gangasagar soon realised that he was in the hands of a master teacher. One day, he sat in on a conference between Agrawalji and his munim.

‘Munimji, why aren’t we trading in jute?’

‘The margins are terribly low, sir. Not worth the effort.’

‘But why not export it?’

‘Export prices are even lower than our domestic purchase prices. We’ll end up buying the stuff and exporting it at lower prices. It’s a loss-making proposition, sir.’

‘But what if we exported jute waste instead, and labelled it as jute? It
is
jute after all.’

‘But sir, who’ll buy rubbish from us?’

‘I will.’

‘What exactly do you suggest, sir?’

‘What if we get Agrawal Hong Kong to buy your rubbish? You could buy jute waste here in India—which costs virtually nothing—and sell it to our own foreign subsidiary as jute.’

‘But the profit will be fictitious. Our Indian arm would show a profit while the foreign arm would show a loss. It would still be a zero-sum game.’

‘Not really, munimji. The government is offering import licences of equal value as incentives if we export the stuff. We may not necessarily make money on the transaction but we’ll rake it in with the premium on the import licences!’

Gangasagar vowed to himself that he would work overtime to acquire the raw cunning of his mentor.

One morning, Agarwalji was taking a walk. His usual route went by his office. It was a cold wintry dawn and most of Kanpur was still asleep. The security guard outside saluted smartly as his boss strode towards him.


Ram Ram
,
saheb
,’ he said.

‘Ram Ram, Gauriprasad,’ said Agrawalji. ‘Why are the lights on in the office? Who could possibly be inside at this hour?’

‘Gangasagarji switched them on,’ said the guard.

‘Gangasagar comes to the office so early in the morning?’ asked the incredulous Agrawalji.

‘No, saheb. On most days he doesn’t come in early,’ answered Gauriprasad.

‘Good! He has a mother and two sisters at home. He ought to spend some time with them, too,’ said Agrawalji.

‘No, no, saheb. He doesn’t come in early on most days because he doesn’t leave the office on most nights.’

Gangasagar was with his boss in his office, discussing an idea. Agrawalji always had profitable ideas, the latest one revolving around gold. The Second World War had concluded and Agrawalji had reason for optimism.

‘The American dollar has always been linked to the value of gold. Till recently, a troy ounce of gold was worth twenty dollars, but the recent world war has changed all that. The dollar has now been devalued and the price of one troy ounce is now thirty-five dollars,’ said Agrawalji.

‘So?’ asked Gangasagar.

‘What it means, Gangasagar, is that a dollar is worth one-thirty-fifth of an ounce of gold.’

‘How’s that an opportunity?’

‘Even though the American government has pegged the value of the dollar to gold, the intrinsic value of the dollar will continue to fall as they print more money to finance the war deficit.’

‘And?’

‘And as the intrinsic value of the dollar falls, the intrinsic value of gold must increase.’

‘So there’s an opportunity in this?’

‘Not just an opportunity—an arbitrage opportunity!’

‘I don’t understand.’

‘Simple. If I own a dollar, I should be able to exchange it for one-thirty-fifth of an ounce of gold, right?’

‘Right.’

‘But the value of that fraction of an ounce of gold is intrinsically much more than the value of the dollar, right?’

‘Right.’

‘So, if we keep buying dollars and selling them in exchange for the official gold value, what happens?’

‘We’re in profit?’

‘Right. So what are you waiting for?’

Agrawalji earned his company millions by arbitraging the dollar against gold. Gangasagar watched, listened and absorbed.

On another occasion it was cotton-trading. India had gained its independence from the British a few years earlier and a new government was running things.

‘The new industries minister plans to nationalise textile mills,’ said Agrawalji casually one day.

‘We’re not affected. We’re traders, not textile manufacturers,’ replied Gangasagar cautiously.

‘You’re wrong, it does affect us. The industry will go into a slump.’

‘So?’

‘The price of cotton will fall.’

‘And how does this concern us?’

‘Short-sell cotton.’

‘Huh?’

‘Sell cotton today and buy it later at a lower price.’

‘But if nationalisation happens immediately, there won’t be enough time to handle both sides of the transaction efficiently, sir.’

‘We must make sure the minister enacts his drama of nationalisation a little later.’

‘How?’

‘We show him how he can partner us in this profitable scheme.’

Gangasagar began to understand the incestuous relationship between business and politics.

It was late in the evening. Gangasagar was on his way out of the office when Agrawalji called him in to his cabin. ‘The planning commission has announced that over the next five years the country shall invest heavily in dams, roads and bridges,’ he announced.

‘But we’re not in the construction business,’ Gangasagar gently reminded his mentor.

‘Then let’s get in.’

‘But it’s a very specialised industry. We’re traders, sir. We don’t know the first thing about construction.’

‘Just incorporate the company. Allot ten per cent of the shares to Lakshmi & Co. Register the company’s name with suppliers of steel and cement.’

‘Why?’

‘You can start placing orders for construction materials.’

‘But we do not have any projects! Why would we buy materials without projects in hand?’

‘Because we plan to sell the construction outfit a year later.’

‘But who will buy a construction firm with no projects?’

‘Any of the other construction firms, because ours will be one of the very few that has huge stockpiles of cement and steel, both of which will be in very short-supply!’

‘And what if the finance minister accuses us of hoarding?’

‘How can he do that? His son-in-law owns Lakshmi & Co.’

‘I need you to go to Patna,’ said Agrawalji to Gangasagar.

‘I’m at your command, sir,’ said Gangasagar.

‘Don’t you want to know why?’ asked his mentor.

‘If it’s important, you’ll tell me,’ replied the young man.

‘As you know, Patna is the state capital of Bihar. Bihar is rich in mineral deposits, particularly iron ore.’

‘And?’

‘The government is handing out mining concessions. We need to own a piece of the action.’

‘And what is it that you want me to do, sir?’

‘The government doesn’t seem to know where the deposits are. I need to know what lies beneath
before
I bid, not
after
.’

‘You want me to take a shovel and dig for iron ore?’

‘No. I need you to go meet a friend of mine who used to be employed as a fighter pilot with the RAF. He lives in Patna.’

‘We plan to drop bombs to open up the earth?’

BOOK: Chankya's Chant
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