You've got to tell my wife. Tell her I haven't been sitting idle all these years. I have created this wealth," the excited employee implored Puneet Dalmia. It was 10:00 am on Tuesday, May 25. Puneet, the chairman of jobsahead.com, a careers portal, had summoned all his employees for an urgent announcement at the company's office in South Delhi.
His announcement was greeted by cheering: the company was being bought 100 per cent by US jobs portal monster.com for Rs 40 crore. All 90 employees who owned stock options could soon expect a fat cheque in the mail. Says Puneet: "This deal will create a market leader."
Puneet won't reveal how much money the lucky 90 will get. But some investors are already celebrating. Gaurav Dalmia, Puneet's cousin and a stakeholder in jobsahead, says his investments, held on an average for three years, will fetch him returns of 300 per cent!
Puneet's rivals are quick to discount such claims. "I am surprised that four years after the jobsahead investors put in Rs 25 crore, they sold the company for just Rs 40 crore out of which they get Rs 30 crore. This gives a return just above 4.5 per cent per annum. That's around the same return as a fixed deposit in a nationalised bank. Perhaps they had better uses for the money or perhaps they were expecting even lower returns if they had waited for more time," says Sanjeev Bhikhchandani, chief executive, naukri, the leading online jobs site.
Whatever the returns, it is all in cash, no stock. People who signed up for stock deals in the past quickly realised that their holding might not be worth the paper it was written on. But there are no such problems for the shareholders of jobsahead. More significantly, the deal is for an Internet business, a space long abandoned by M&A specialists.
But this is a deal that almost harks back to the frenzied days of the Internet boom. Puneet Dalmia and his partner Alok Mittal, the company's original founders are all of 32. And in true Internet style they've built a company that has been snapped up by a bigger predator.
It all began in 1999 when the world was in the grips of Internet mania. Puneet and Alok, then in their mid-20s, too decided that it was time to jump on the bandwagon. Both came from different backgrounds.
Alok came from a firmly middle class family. Puneet, by contrast, was from the Dalmia Cements family. His grandfather's elder brother, Ramkrishna Dalmia, had built the Sahu-Jain business empire from scratch becoming in the process one of the wealthiest Indians of that era.
The two met while studying at IIT Delhi. After graduating in 1994, Puneet went to IIM Bangalore where he bagged the gold medal, while Alok winged his way to the University of California, Berkeley, for a course in computer science and management of technology.
Studies completed, Puneet started working with Dalmia Cements and Alok had signed up with Hughes Software System. Then they were bitten by the Internet bug.
Together with Gaurav, they started looking at the different options. Finally, they narrowed them down to two: travel or youth. Since most Internet users were young people, they decided in favour of a website for youth. That is how zipahead was born in 1999 with seed capital from Puneet, Alok, Gaurav and a clutch of non-resident Indians.
But soon they realised that 80 per cent of the traffic to their website was directed at the careers section. At the same time, Puneet and Alok were struggling with how to scale up zipahead.
In 2001, the two decided to spin off the careers section as a separate website, jobsahead (zipahead was shut down a couple of years later). Since the website was all about selling a service, it did not require a physical storage space.
So, the investments could be kept low. Around the same time, ChrysCapital invested in jobsahead by acquiring a sizeable stake in the company. That strengthened their position but Puneet and Alok knew the key was to get corporates to sign on with their website.
Initially, the losses were heavy "" the company was losing up to Rs 80 lakh a month. But Puneet and Alok pressed on, because they were convinced it was only a matter of time before corporates would look at e-recruitment in a big way.
As it turned out they were right. In 2002-03, jobsahead broke even. In 2003-04, it reported a profit of Rs 3 crore on a turnover of Rs 40 crore.
Some two years back, monster, the world's largest jobs site, set up shop in India. A large number of its global clients were looking at recruiting in India, especially for information technology. It set up shop in Hyderabad.
Around six months ago, senior monster executives met Puneet and Alok and offered to buy out jobsahead. Two weeks later, they shook hands agreeing in principle to go ahead with the deal. Ernst & Young was hired by monster to carry out a due diligence on jobsahead. But it took almost six months to announce the deal.
What made monster go for jobsahead? In the words of Arun Tadanki, president and managing director (Asia), monster: "jobsahead was the biggest competitor of monster.com in the US and the main reason for this acquisition is to cash in on the excellent revenue base of jobsahead. This will help us tap the Rs 80 crore online jobs market in India."
Naukri's Bhikhchandani has a different take on it. "I suspect jobsahead was getting squeezed from below by monster and from above by naukri and didn't really have too many options left," he says.
Bhikhchandani argues that jobsahead's bread and butter business of selling a resume database had been hit hard ever since naukri launched a similar service in 2002. The entry of monster and Timesjobs would have made matters worse for jobsahead, he adds.
On their part, the stakeholders of jobsahead are known to have spurned at least one big offer in the past. During the dotcom boom, an overseas investor had given a written statement saying he was willing to pay $100 million for the company without even doing a due diligence it!
Apart from the unclear intent of the buyer, the jobsahead promoters were unwilling to throw their employees to the wolves. "We all knew we would be investing in other businesses. You can't do that with people talking ill of you," Gaurav says.
People who have worked with jobsahead insist that the company has always been a good employer. Employees were allowed to freely order food and refreshments and there were special yoga rooms where they could take a break.
The deal will take another six months to be completed. Still, a fight over market leadership has erupted between jobsahead and monster in one camp and naukri in the other.
According to Puneet, jobsahead has a 40 per cent share of the online jobs market, while monster.com has another 25 per cent. "Together, we will be almost twice as large as the next player (naukri)" Puneet says. The combined entity is already being talked of as the largest careers portal in the whole of Asia.
Bhikhchandani scoffs at the claim. "We are not worried. Naukri is ahead of both jobsahead and monster combined in terms of traffic, daily addition to resume database, client base, response delivered, rate of technological innovation, sales and servicing ability as defined by number of offices and staff, brand strength and virtually every other parameter that measures company health in our business," he says.
For the next one year, Puneet and Alok will continue to run jobsahead. In the long run, monster is expected to shut down jobsahead as it makes good sense to promote one brand. Tadanki, who had set up monster in India, has already moved on to a bigger pan-Asian role. jobsahead CEO Rejeev Puri is tipped to take over as the head of monster in India.
