Trade with Commodities: THE REAL FACE OF A GLITTERING ENIGMA

Reclusive Bullion King Lands in the Taxman's Glare

P Kothari, the pioneer of online gold trading, may be paying for his aggressive ways

The walk up to the 20,000-square feet Bullion House, headquarters of Prithviraj Shermal Kothari's RiddiSiddhi Bullion (RSBL), is remarkably unimpressive. A few ramshackle buildings, jewellery shops and sweet-meat stores dot both sides of the road. One has to dodge handcart pullers, twowheelers and an unrelenting stream of people on the street to enter Bullion House. Yet, it is from this street that Kothari, or PK, as he is known in Zaveri Bazaar, has revved up a cumulative turnover of . 1.2 lakh crore over the past six years, earning the title of India's 'bullion king'.
Jignesh Shah, a pioneer in commodity trading in India, has also walked this very street for a lesson or two in bullion trading from Kothari. So has Rajan Mehta, former head of Benchmark Asset Management Company, credited with the launch of India's first gold exchange-traded fund (ETF). "Kothari understands the bullion market better than most suited-booted professionals," Mehta swears.
They are not the only ones to come to this street looking for Kothari. An intimidating force of about 100 income-tax officials also pounded this street as they raided RSBL's offices last month. Speaking to ET on the condition of anonymity, I-T officials claim they have some evidence suggesting that payments have been allegedly made by the company for bogus exports and imports. Kothari rejects the claim and has since written to the I-T department demanding proof of wrongdoing. The I-T officials did seize . 8-10 crore in cash at Kothari's offices. This was part of the collection for the day's gold sales and would have been deposited in the bank the next day, Kothari claims. "I will shut down all my trade if the I-T department finds a single bogus entry in RSBL's accounts," dares Kothari. "We, gold traders, are businessmen and not mafia. We operate within the system." Several Unconfirmed Rumours
This past month, a vicious swirl of unconfirmed rumours has surrounded him — hawala connections, underworld links, even IPL betting. Kothari is a glittering enigma. Till two years ago, he lived in a 625-square feet, 2-bedroom apartment near Tardeo's AC market. His wife still cooks his meals. And he is happy driving a Toyota Etios, a functional . 8-lakh sedan.
Yet, he runs a company with an annual turnover of . 25,000 crore.
Industry leaders credit him with shaping the bullion market and seek him out often for advice. He was in the committee advising MCX and NCDEX, two of the largest commodity futures bourses in India. "Anything to do with bullion trading in the country has shades of Kothari's idea," says a veteran commodity exchange professional. Yet, most industry people refused to go on record for this story, afraid to be linked to him after the raids. What is the real face of India's bullion king?
HUMBLE BEGINNING
Kothari, a Marwari, started off in the early '80s doing simple tasks at his father's 180-square feet shop selling customs notified goods. Situated at Mumbai's Cursetji Shuklaji Street, the shop was among the few licensed agents that sold everything from gold to Pashmina shawls seized by the customs.
Today, he buys truckloads of gold and silver bars and sells them to over 2,200 jewellers through his online spot bullion trading platform, the only such in the country. He set it up in March 2008. Ninety-seven per cent of all trades on the platform result in delivery. The trading platform accounts for around 15% of bullion trading in India. At its peak, RSBL, India's top gold and silver trading company, was selling gold and silver worth . 100 crore daily.
The transparency and aggressive pricing offered by the spot platform has wooed many jewellers who used to buy bullion from conventional channels.
Earlier, people used to call every broker and dealer for quotes locally and deal with them — this lacked transparency and price benchmarks. The rates on the RSBL Spot platform have now become the benchmarks.
"Competitors have failed to sustain if their prices are way too different from the RSBL online platform," says Rajiv Popley, MD of Mumbai-based jewellery retail chain Popley and Sons. Popley has been dealing with RSBL for over two years now, but has never met Kothari personally.
"Traders were exited about RSBL, and I too wanted to try dealing with it. Today, 30-40% of our purchases are through the spot trading platform of RSBL," he says.
RSBL earned a net profit of . 85-100 crore in the six years launching its spot platform. Margins in this business are wafer-thin.
"Kothari's pricing game may have made him a market leader, but his aggressive personality has also earned him many foes," says another bullion dealer, who is a close friend of Kothari and also competes with him. "Kothari rubbed many people on the wrong way when he was heading the Bombay Bullion Association (BBA)."
Mohit Khamboj, who was recently elected the president of BBA, has levelled several allegations against Kothari, including illegal possession of a BBA premise by his associate. Kothari responded with a defamation suit. But the matter was resolved last week after Kothari withdrew the suit and Khamboj made way for him in BBA as a director on the board.
Kothari says there is a lack of understanding of the current business model of the bullion trade and the stigma of smuggling in gold and silver, prevalent in the '80s, has stuck to the industry.
"The I-T scrutinised RSBL accounts for several months last year and conducted 100% client verification. But they found nothing untoward, and the recent raids may be due to difference of opinion on interpretation of a few transactions," says Kothari. I-T officials carried out the last raid on RSBL on June 11. They are yet to conclude the investigation. "We are still making inquiries," is all a senior I-T official will say.
"There is no scope of illegal dealings if trades are booked on the online platform of RSBL. Ease of transaction, quick delivery and price transparency has been Kothari's USP," Popley claims.
THE EARLY YEARS
Kothari began his bullion trade in the days when Dawood Ibrahim ruled the roost, selling smuggled gold to small Marwari jewellers. Customs raids were a common feature at Zaveri Bazaar. This pushed the business to a dismal state. But Kothari saw an opportunity and tied up with overseas banks to import gold, which was later sold in India. To attract more dealers and their business, he distributed around 50 VSAT terminals (satellite antennas) to help them track international bullion prices, which also allowed jewellers to price their products better. His understanding of technology and sophisticated market mechanisms — both uncharacteristic for a home-grown bullion trader — have held him in good stead.
His comfort with technology led him to promote Contakt Tech Solution, a mobile value-added service provider. Financial market experts who have worked with Kothari say he has a sharp mind. "He provided crucial support in market-making for our gold ETF," says Mehta.
Only now is Kothari permitting himself the first taste of luxury. Last year, he left his 625-sq ft home for a 2,500-sq ft, 4-bedroom flat at Imperial Twin Towers, the ultra-luxury apartments at Tardeo built by Shapoorji Pallonji. The furniture at his house is modern, but not ostentatious. His wife dislikes chunky jewellery. PK himself is content wearing simple, but crisp white clothes. He occasionally slips on a suit or blazer. Unlike his personal lifestyle, he does nothing to hide his business ambitions. Kothari monitors international bullion prices on his tablet for up to 16 hours a day. Someday, he would like to buy gold mines in Australia, Canada or Africa. "Some such mines — they are also listed companies — have approached RSBL," he claims.
He would also like to build a gold refinery close to Mumbai for making gold coins and bars. His plan is to build one in Navi Mumbai or Panvel. This will make delivery of gold coins and bars to various jewellers in Mumbai and Gujarat easier and less risky, he says.
India's bullion king isn't finished yet. His ambitions will take him higher…if the income-tax investigators will give him a clean chit.
(With inputs from M Padmakshan)