Push has come to shove

CAPITAL VIEW

Push has come to shove on the lack of transaparency and level ofdisclosure by IPL franchise owners. With the tax and Enforcementdragnet widening daily and more dirt surfacing, everyone is keen onseeing this investigation taken to its logical culmination. Ministerstheir kith and kin, big business houses, opacity regardingshareholding and tendering processes, routing of payments and fundsthrough offshore tax havens. And above all the sleaze and grime taintof betting. Money is the overriding theme of this classic but shadowyworld of crony capitalism. Nine of the ten franchise owners have beenraided, the only exception being Mukesh Ambani's Mumbai Indians.Actually a wholly owned subsidiary of Reliance Industries - RelianceIndustrial Investment Holdings - is the owner of IndiaWin Sports PvtLtd which controls Mumbai Indians.
Incidentally, RIIHL is the company in which the 12.04 crore PetroleumTrust shares amounting to 3.68 per cent of RIL's equity is vested. Theacquisition costs and initial losses were all borne by RIL in IndiaWinSports as RIIHL advanced a Rs 78 crore loan to it. RIL's Annual Reportfor 2008-09 clearly shows RIIHL as a 100 per cent subsidiary on page130. Recently we heard that Deutsche bank's Anshu Jain has exited fromMI and his 15,000 shares have been acquired by Teesta Retail. Overtime, the shareholding of this enterprise has changed completely andIndiaWin spokesperson has confirmed this.
Sometime in 2009-10, two Mukesh Ambani companies - Claris Trading andSharanya Trading acquired 32 per cent equity in Shinano Retail Pvt Ltdfrom RIIHL which owned 50 per cent in Shinano Retail. This means that18 per cent is now held in Shinano by RIIHL, while the balance 32 percent is held by Claris and Sharanya. The remaining 50 per cent is heldin Teesta Retail, the company that bought back shares from Anshu Jain.Most interestingly, the 50 per cent equity is now held inter sebetween Teesta and Shinano in IndiaWin Sports through a waterfallstructure that ends up looking like this - Shinano owns 20 per centwhile Teesta owns 30 per cent of the 50 that they jointly hold in MIvehicle IndiaWin Sports, the balance being held by RIIHL. EffectivelyMukesh Ambani companies now own 100 per cent of MI.
It is only after the ownership structure controversy broke thatdisclosure was made on Anshu Jain's exit at par, but even now completedisclosure has not been made of Claris and Sharanya's holding in thecompany. Valuation is clearly playing a big role in the plans of thowners. But for the unseemly controversy, many of the franchises wouldhave listed their teams on the stock exchanges next year. But the bestlaid plans of mice and men often go awry and this time a simple tweetbrought the house of cards down.
Pre crisis, most analysts reckon that a valuation of anything between 3x to5x had crept into the system after the entry of two new teams atexorbitant numbers - between $333.33 million and $370 million. MukeshAmbani might have paid $111.9 million for the franchise, but histeam's valuation at present enhanced levels is closer to $400 million,or a multiple of 4x. As I write this MI is enjoined in a scrimmagewith CSK. If MI wins season 3 and operation clean up is fashionedwithin the cricket board and IPL, then MI's valuation goes through theroof. And Mukesh Ambani is richer for it. Not that he needs the money.After all he is the third wealthiest man in the world.