How Dhruva Advisors is taking on the Big 4 by cracking marquee deals for India Inc

Often, a moment defines the path a business ought to take. It could be a serendipitous meeting or a big idea. In the case of Dhruva Advisors, one question was all it took.

When Dinesh Kanabar founded Dhruva in October 2014, it set out to be a multi-practice firm offering many services. Kanabar, a chartered accountant by training, had begun his career at Ratan S Mama and was the deputy CEO of the taxation and auditing boutique when it merged with PricewaterhouseCoopers in 2007. Kanabar later joined KPMG, which he left as Deputy CEO in 2014.

Being 56 did not deter Kanabar from starting from scratch. With his partners, he wanted to create a new culture (flat hierarchy) and new processes (no competing among partners for accounts) and get big clients with complex problems (premium fees). But what would be its basket of offerings?

Then came that moment of blinding focus. Kanabar had invited a former McKinsey strategy head to talk to his new team at its first meeting and provoke it to think out of the box.

Kanabar, now 66, smiles as he recalls, “He asked us a very simple question—why do clients come to you?” The question seemed elementary for the eight partners in a meeting room at the Four Seasons Hotel, Mumbai. After all, they had a cumulative experience of a few hundred years. One spoke of the expertise. Another mumbled quality of service offered.

Neither was wrong, but the answer lay elsewhere. “Clients come to you because they have an unresolved problem and believe you have the solution,” said the guest.

The team realised the business was not about service but about offering a solution. Out went plans to do the grunt work of compliance, risk management, forensic accounting, litigation or corporate finance. The focus would be tax and regulatory-related work; coincidentally, all of them were specialists in taxation.

The competitive landscape was nothing to laugh about. On top were the Big Four of PwC, EY, KPMG, and Deloitte, along with their global clients. Dhruva’s founding team had worked in some of the Big Four, the so-called PSFs or professional service firms, so they knew the inner workings of their rivals. The four who partnered with him to set up Dhruva were all in KPMG, having worked with at least one other of the Big Four.

The decision to be only in tax has paid off. Today, Dhruva handles tax problems of the biggest names across sectors-Reliance Industries, Adani, JSW, Warburg Pincus, Blackstone and Culver Max Entertainment, among others. Kanabar says, "The more complex the transaction or litigation or a restructuring, the higher the chance of Dhruva being there."

In the last decade, Dhruva has positioned itself as a firm that can handle complex matters. Dhruva claims it takes “full ownership” of its advice, and does not weave in "caveats" to protect itself if things go south.

Making it work

But despite the clarity of the vision of "offering a solution", Dhruva did not jump into it. It spent time on understanding the challenge. Kanabar says they prefer to handle complex problems of big clients and charge a premium for their solutions. Not for them the volume game of handling routine problems of many small clients. "There is a trust factor that we can deliver an out-of-the-box solution that others cannot," says Kanabar quite plainly.

Success came relatively quickly. Dhruva soon outgrew the 4,000 sq. ft office, where it began life. It moved to 15,000 sq. ft digs in central Mumbai as work came in faster than Kanabar had anticipated. He admits that the firm “is perhaps expensive but is worth the buck spent since it has a single-minded focus on the client’s problem.”

STAFFING NUMBERS

Take the PVR-Inox merger announced in March 2022. The lockdowns triggered by the 2020 Covid-19 pandemic and the social distancing that followed had laid low the two listed multiplex players.

Their competition was history: the future lay in a merger. The combined entity would need to go through several clearances, always with the fear of being struck down as going against the laws against monopolies.

Kanabar says this was a unique transaction where two successful entrepreneurs (Ajay Bijli of PVR and Siddharth Jain of Inox) were coming together to fight common challenges. It was not just the social distancing rule that required seating in public spaces and transport to be spaced out. Locked-up consumers were getting addicted to OTT content being streamed to their devices.

Ravaged by closed halls and then sparse attendance, the multiplexes now faced OTT as significant competition. Sheer logic made the merger eminently sensible. PVR-Inox would have over 1,500 screens across 110 cities and dominate film distribution and exhibition.

Kanabar says, “Both the entrepreneurs had to deal with questions on the operating structure post-merger, final shareholding apart from tax and regulatory considerations. Dhruva played a crucial role in bringing about a convergence on the logical way to govern the merged entity.”

Today, PVR-Inox is the largest player by far, with revenues growing from Rs 750 crore in FY21 to just under Rs 6,300 crore in FY24.

Siddharth Jain, Executive Director of Inox Group, thinks advice from Dhruva is holistic, considering all constituents. This part becomes critical in an M&A scenario since its success often comes down to viewing the issue from multiple perspectives-not just strategic but also taxation and regulation.

“The tax regime is always challenging, and to navigate it, one needs advisors with deep experience and the ability to blend technical and commercial perspectives. For us, Dhruva comes with domain expertise and advises us based on the commercial ground reality,” he says.

Other prominent transactions include the HDFC-HDFC Bank merger and Adani’s buyout of SB Energy Holdings (see chart ‘Big Deals’). Easily, the one that tops the list is the mega HDFC-HDFC Bank merger. Announced in April 2022, it became effective on July 1, 2023. This $40 billion all-stock deal created a financial powerhouse with over Rs 18 lakh crore combined assets and a market capitalisation of $154 billion (Today, it is $165 billion). Kanabar says the merger was unique because different regulators governed multiple entities.  

"It had to be structured so that one could anticipate the concerns from regulators and tax authorities, without which approvals would be a challenge. While a large part of the heavy lifting was done in-house by the client, Dhruva was the sounding board in evolving the right structure," Kanabar says.

Vishal Mahadevia, Warburg Pincus’ MD & Head of Asia Private Equity, says Dhruva’s biggest advantage is as “a home-grown firm, it can foresee challenges on the tax front. They can blend their deep understanding of the tax system in India with our global presence”. To him, it is about someone who understands his company’s ethos and ensures it is “fully compliant with the law and implements transactions seamlessly.”

Mahadevia says Warburg Pincus “always looks up to Dhruva for advising and implementing practical solutions, which helps us move forward smoothly and swiftly during any complex situation.”

Punit Shah, a Partner at Dhruva, points out that his pitch to clients is often around distinguishing it from the Big Four. “I always say our practice is evenly split between tax advisory and tax litigation. It sounds simple, but it is hard to find such a fair mix in any other firm.” The way Dhruva is structured means it is a partner-led service (Kanabar repeatedly speaks of how he wanted the organisation’s culture to be devoid of hierarchy). Shah says, “We all get together and try to find a solution.”

When that prevails, it also facilitates a flow of new ideas. An example is to look at the family office as an opportunity. “One must understand there are multi-jurisdiction issues at play. You could have family members living overseas, and that makes understanding of taxes in those countries mandatory,” says Vaibhav Gupta, another Partner. It calls for a specialist, and this is something Dhruva has pursued. “Today, we deal with clients in Kochi, Coimbatore, Jaipur or Ludhiana. That’s how large the opportunity is,” Gupta says.

Stepping out

The decision to go outside India for Dhruva was marked by spotting an opportunity early in the day. Ironically, Dhruva’s first stop was the UAE, known then as a tax haven. For Kanabar, the trigger was the UAE government’s plan for a 5% value-added tax or VAT. The tax was a new concept in the UAE.

"Most people thought it was political chatter, but we decided to enter the market. If VAT did go through, it would put us in a strong position," recalls Kanabar. In India, Dhruva was then helping clients enter the world of GST.

The scenario then did not require UAE businesses to maintain proper accounts-auditing was not even on the horizon. VAT became a reality once corporate tax was introduced, and Dhruva’s decision to set up an office was smart. Among Dhruva’s clients in the UAE today are International Holding, Dubai Investments, ADQ, ENOC, Landmark and Majid Al Futtaim Group. “Our UAE office is one of the largest independent tax practices in the region with a workforce of 110 people. We are keen on entering Saudi Arabia, and with credibility in the GCC, we plan to build on that strong base,” says Kanabar.

Talking from his Dubai office, Nimish Goel, Dhruva’s Partner in the UAE, elaborates on how it is a multi-cultural market. "It takes time to get it right, but good work done for a large client helps spread the word. Once we get the little nuances, that understanding places us strongly in the region."

From the time Dhruva was conceived, Kanabar decided it would not be obsessed with targets. The tack was to build on its expertise and convince clients why they should be working with Dhruva.

Sandeep Bhalla, another Partner at Dhruva, says, “The one difference we bring is building a certain level of trust in the relationship, which could be with the client or regulator. Conversations with regulators are often more meaningful because we tell them what is right without bias.”

Ultimately, it comes down to the scale and that gets even more possible with a larger clientele and also being in India at an interesting phase.

According to Mehul Bheda, another Partner at Dhruva, whatever is done has to work from every perspective-tax, the Companies Act, the Foreign Exchange Management Act, the Securities & Exchange Board of India, etc. "That is the key challenge and could impact even a small transaction. One speaks of experience from a previous transaction, but the familiarity with a situation is most important,” Bheda says. To him, the Dhruva brand is well-recognised, which, topped up with the India story, makes a difference.

Kanabar speaks of technology’s role and how Dhruva has invested early and consistently. “Preserving the entrepreneurial culture is most important as we move to the next decade and beyond,” he says. In a complex business scenario, only expertise makes a big difference. Dhruva has clearly understood that. 

@krishnagopalan