The Victims

(L To R) Dribjot Singh, Surinder Mehan, and Gurdip Singh from Mohali have repeatedly tried to contact the company, but in vain. They are yet to hear from the company

Rahul Randev (R) and his father from Rajpura in Punjab paid a monthly rent of Rs 3,000 for a year for a shop, waiting for their business to take off

Rajan Vohra, an SBA from Shimla, filed a lawsuit against Skumar.com for recovery of his money. He was the Regional Representative for Shimla

Vishwa Mohan Banta owns a small pharmacy, Indu Drug Store, in a small alley off Shimla's most famous address, The Mall. In the normal course of events, Banta's life would have been as happy, or unhappy, as a small trader's can hope to be in a tourist-destination like Shimla. But in late 1999, the chemist saw an advertisement in the papers, and on the tube, that he now wishes he had never seen. The ad in question was of Skumars.com, holding forth the promise of high returns for businessmen who had the wherewithal to invest a nominal amount in the company's e-commerce initiative. The concept itself-a virtual marketplace where franchisees served as conduits-was a trifle nebulous, but this was 1999, when people hadn't even started asking questions about path to profitability or business models. So Banta sent Draft #1, for Rs 500 (application money), on

March, 10, 2000, to Skumars.com. Four months later when the company 'chose' him as a franchisee, he sent them the Rs 5,000 sought for signing the agreement. On August 26, 2000, he paid his first instalment of Rs 74,500. On September 28, 2000, he paid his second instalment of Rs 1.2 lakh. Then he waited and waited. Today, he is still waiting for a network that doesn't exist, and returns that he believes, he may never see. Coincidentally, Indu Drug Store is just a few feet away from The Mall's most famous location, Scandal Point.

There are a 2,000-other Bantas across India: Gurdip Singh in Mohali; Pahul Randev in Rajpura, A.G. Abdul Kareem in Chennai, A.V. Thomas in Mumbai, and Madhavi Mohan in Bangalore. All had dotcom gold-dust in their eyes when they flocked, lemming-like, to become part of a business that promised returns of Rs 26,000 a month for franchisees, and Rs 57,000 a month for Strategic Business Associates, with 40 franchisees under their wing. The Kasliwals expected Skumars.com to create the largest virtual marketplace in India, where people could trade anything. With a planned investment of Rs 1,000 crore, a 50,000-strong franchise network, and a reach of 1,008 cities and towns, there was nothing small about the project. Nor was there any uncertainty. Skumars.com promised, in its siren-toned offer to franchisees, to build its v-sat network around equipment bought from the world's finest suppliers (Hughes, Gilat), train its franchisees with the help of Oracle and Karrox, and source hardware from Zenith, HCL, and Wipro. The company also had its dates down to a T: by March 2000, SBAs would be appointed; by June, the franchisee network would be in place; June and July would be devoted to training; and the network would roll out in the third quarter of 2000.

Taken in by the publicity binge that accompanied the offer-SKumars Online Limited, the company behind Skumars.com apparently spent Rs 25 crore on this-53,287 people paid Rs 500 each (a total of Rs 2.66 crore) to be part of the dream. The company shortlisted 270 SBAs and 2,000 franchisees. Over time, a faxed response to Business Today's queries from SKumars Online says, "1,200 people paid Rs 2 lakh; the rest of them paid Rs 80,000." That works out to over Rs 30 crore.

Then began the great wait. In the meantime, some franchisees got down to the task of setting up Skumars.com kiosks: a few hired space; others modified their existing shops. Enquiries about the commencement of the business drew no responses. And the company didn't go for the Infrastructure Provider II licence-required for v-sat service providers-maybe because it needed to provide a bank guarantee of Rs 100 crore. This despite a portion of the money collected from franchisees being earmarked for the v-sat network. "Now they say we should go for our own connectivity, through VSNL, or some other ISP," says A.G. Abdul Kareem, a small entrepreneur who owns a chemical manufacturing business and was drawn to SKumar.com's scheme on the strengths of the returns promised. "We have given the franchisee the choice of connectivity," is the official line. "For those who wish to go for V-SATs, we will start deploying them shortly."

For the record, a Hughes Escorts (the company is India's largest v-sat deployer) spokesperson Business Today spoke to said that while Skumars had sought some details from Hughes initially, nothing much came of it. And several franchisees claim that their queries on the v-sat front have been met with the standard response of a ship from Germany ferrying V-SATs to India being delayed. Talk of sunk investments.

"Some (franchisees) are performing. but I would have loved to have an aggressive front-end." Vikas Kasliwal, Chairman, skumar.com

A business model in flux

Franchisees and SBAS did get something in return for their investments: a pc, printer, scanner, web camera, and ups, which was billed to them at Rs 64,000, but which Madhavi Mohan, a franchisee from Bangalore, says, "couldn't have been worth more than Rs 40,000." While that may seem like a case of splitting hairs, franchisees then received a statement of account from Skumars.com with Rs 1.5 lakh shown as the hardware cost (including v-sat), Rs 10,000 as registration fee, Rs 20,000 as activation fee (not for the network, but for the site Skumars.com, for which franchisees were provided with a trading access code), and Rs 20,000 as a refundable trade deposit. Franchisees were encouraged to sign this statement of account and return it.

This statement seems to have replaced the 'Certificate of Utilisation of Funds' that franchisees were supposed to receive from Haribhakti & Co, a Mumbai-based audit firm that, according to one communication from the company to franchisees, would maintain an escrow account into which franchisee funds would go. But while Haribhakti says it works with SKumars on other projects, it didn't on this one. "They just printed our name in their brochure," says Chetan Desai, the partner who was supposed to handle the account. "We never got started."

It isn't any of this, though, that bothers franchisees too much: it is the fact that the promise of the great marketspace SKumars held out in its campaigns hasn't amounted to much even after the network finally went live (not through the v-sat route, but through the dial-up one) in August 2001. First, say franchisees, the company touted the business model as one linked to e-commerce. Then, it suggested that franchisees start some offline activities with the equipment provided. Still later, Skumars.com started pushing UTI's offerings. To be fair, the company's initial offer document does list "seven broad categories of services and products (to be offered): e-mail and videomail, information, financial services, gifting, education, online shopping, and chatting." "The basic business model is not being implemented," rues H.S. Saluja from Mohali, who thought the franchise would be the ideal launch-pad for her daughter, a gold medallist in mechanical engineering. And unfortunately, the company seems to have come a cropper at service. For instance, in September 2001 SKumars wanted franchisees to sell trouser and shirt material (made by SKumars, of course). Surinder Mehan, a franchisee in Mohali, placed an order, but there was nothing forthcoming from SKumars despite several reminders. The company's Chairman Vikas Kasliwal refutes the suggestion that franchisees are getting a bad deal and hints that they have only themselves to blame. "Some people are performing; but I really would have loved to have a more aggressive front-end."

A scam in the making?

Skumars may have set out with noble intentions, but the way it has managed its relationships with franchisees and its indifferent record at responding to them endows the entire affair with the contours of a scam. For one, the company hasn't bothered to refund the money of those franchisees who wished to quit, despite its offer document saying they could (at three months' notice). "Despite numerous phone calls I haven't received any money," says a 51-year old Mumbai-based engineer who opted out of the business four months ago and does not want to be named for fear that it will hamper recovery of dues.

That quote finds an echo in Chennai where Rajesh Dave, another franchisee has formed an association of 45 franchisees, and in Bangalore where Madhavi Mohan has done one of 112. "We feel we have been cheated by the company," says Mohan. "Many of our people have applied for a termination, but even after six months, there has been no response from Skumars.com," adds Dave. And Kareem says the company seems to have a policy of not responding to e-mails and registered letters. Worse, since many franchisees signed the statements of account sent to them ("Balance in your account- Nil"), they can't really ask for a refund. Never mind that the v-sat network, for which they have paid, doesn't exist.

Then, the company seems to suddenly think up new expense heads and charges franchisees for the same. Recently, it asked franchisees to cough up Rs 30,000 more if they wanted a v-sat linkage, plus Rs 3,500 as v-sat maintenance charge, payable even before the network was put in place. And those individuals who chose not to take the v-sat route were promised a refund of Rs 65,000, not Rs 75,000. The balance Rs 10,000 was deducted as 'software development for the terrestrial platform'. The company's response: "If refunds are due, they will be made available in due course."

"If the company isn't in a position to provide business, why should it retain our money," argues Rajan Vohra, an SBA from Shimla who has filed a lawsuit against the company. But legal recourse, feels Vohra's attorney Vijay Arora, could take time. "Our lawyers say we can only file a civil case under breach of contract, and that could take years to even come up for hearing," says Dave.

Skumars.com claims it can still make its franchisees rich. "Our franchisees and us (sic) had set out to start a new business," says a company fax to Business Today. "All new ventures have risks associated with them." Adds Kasliwal, "We are headed in the right direction." But with no clear roadmap for revival-''We have made additions to our plans" was all a cryptic Kasliwal would tell BT-and a stock that quotes at Rs 4 (the company raised Rs 75 lakh in a modest November 1, 1999, initial public offering)-the future does look bleak for Skumars.com, its franchisees, and its investors. "They took us for a long, expensive ride that we didn't enjoy," says Vohra. So much for the desire to make a quick buck.

-additional reporting by Abir Pal, Nitya Varadarajan, & Venkatesha Babu

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