CAPITAL VIEW
The Afternoon Despatch and Courier
As many as five of the eight existing franchises in the IPLare public limited companies, by virtue of being listed on the stockexchanges - Mumbai Indians owned by Indiawin SportsPvt Ltd, a Mukesh Ambani controlled Reliance Industries group firm,Royal Challenger Sports owned by UB Group controlled by Vijay Mallya,Chennai Super Kings owned by India Cements, Delhi Daredevils owned byGMR Sports part of GMR Ltd and Deccan Chargers Sporting Ventures ownedby Deccan Chronicle Holdings Ltd. Sadly, the level of complianceleaves a lot to be desired on the part of these companies.
On this path to transparency, on Thursday, Deccan Chargers was thefirst team off the blocks by sending a notice to the BSE and NSE clarifying onits etymology. As the ambit of the government investigation widens, itis imperative for the franchises to come clean on their antecedents.The three other franchises - Kolkata Knight Riders, Kings XI Punjaband Rajasthan Royals have fragmented holdings and as a consequencerequire even greater transparency. There is even an offshore Mauritiusand British Virgin Islands link with some of the franchsies which isbeing investigatedseparately by the Enforcement Directorate.
Despite being public limited companies, the level of opacity thatexists in this secret society called IPL is staggering. Look at theKochi franchise, only 1 per cent is held by a Keralite - VivekVenugopal of Elite Group. A clutch of Gujarati businessmen andMaharashtrians with diverse backgrounds own the balance 74 per cent.There is the small matter of 25 per cent free equity being given to abunch of disparate individuals for professional services rendered.This free or sweat equity structure contravenes the existing CompaniesAct guidelines on this matter.Together, they have forked out an astonishing $333.33 million forKochi which is far removed from both Gujarat and Maharashtra. Maybethat is why everyone is suspecting a Dubai real estate connection in thisenterprise. And Sunanda Pushkar provides just that since she works fora real estate fund Tecom Investments, a member of Dubai Holding. Thatis the genesis of IPL turning into a war zone.
Investors and shareholders of the five listed companies which own thefranchises have the right to know how and from where the funds havebeen routed into these entities. Most of them are 100 per cent whollyowned subsidiaries, others have some personal investments from theirowners, but very little is known about the financial architecture. Themath of running a franchise is two part like any other business -revenues and expenses. While the revenue model has improvedconsiderably in season three with the efficient and effective slicingof the rights pie, the expenses eco system is large and varied.
Tall claims have been made by research firms on the profitabilityquotient of the teams, but there is no empirical evidence forthcomingfrom the franchisees or BCCI/IPL. As the investigative dragnet'sgarrotte like grip tightens, there will be a mad scramble on the partof BCCI/IPL and the team owners to clean up the augean stables. It isimperative on the part of the listed entities to provide fulldisclosure on the routing of their investments, their ownershipstructures and concurrently complete profit and loss statements of allthree seasons so that shareholders of these companies and investors inthese companies know where they stand. Next few days will see manymore teams making a clean breast of it...Hopefully.
(The writer is a noted author and business journalist)
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