Uff, yeh opacity!

The LEAGUE OF EXTRAODINARY GENTLEMEN AND A FEW LADIES

SUNDAY GUARDIAN

>> At the very kernel of this IPL whirligig is the etymology of>> Rendezvous Sports World which bagged the Kochi franchise for an>> astounding $333.33 million. A clutch of disparate individuals bagged>> the franchise cocking a snook at their more well heeled adversaries ->> Videocon and Gautam Adani - who were bidding for Pune and Ahmedabad>> and appeared to be sure shot winners. This obviously upset Dhoot and>> Adani who had powerful backers in the cricket board. This is the>> genesis of the latest avalanche which has enveloped the IPL. This when>> IPL Commissioner Lalit Modi decided to pull the rag tag bobtail outfit>> blessed by a union minister a notch or two down. And he had the goods>> on them. Which he used effectively and efficiently. Modi claims that>> Shashi Tharoor pressurised him into not revealing his lady friend>> Sunanda Pushkar's name as one of the beneficiaries of the sweat>> equity, but the reality is that while authenticating the consortium>> members, he found the perfect weapon to destabilise the Kochi>> franchise bid. He found free equity amounting to 25 per cent having>> been given to a clutch of individuals. Armed with this incendiary>> nugget of information, he tweeted last Sunday outing Pushkar and her>> relationship with Tharoor. Since then all hell has broken loose. For>> the last couple of years, there have been rumblings of discontent>> amongst franchise owners and sections of the BCCI on the level of>> unilateralism shown by Lalit Modi.>>>> But nobody has come out openly against Modi because nobody wants to>> upset the equations in this secret society called IPL which doesn't>> have any semblance of transparency from day one. Modi managed to keep>> media on his right side all this while, but when the Modi-Tharoor>> public spat got out of hand, the same media turned on Modi himself.>> The sharks began to circle smelling blood. Suddenly information flows>> began to do the rounds on Modi's extended family connections with>> franchises. But all this was known for a long time. Modi was truly>> pater familias for the IPL brood.>>>> Fact 1 - Lalit Modi's borther in law Suresh Chellaram was the lead>> investor in Jaipur IPL Cricket wholly owned by Mauritius based>> Emerging Media Sporting Holdings, owner of Rajasthan Royals.>>>> Fact 2 - Lalit Modi's step son in law Gaurav Burman, director with UK>> based Elephant Capital is Kings XI Punjab franchise co owner Mohit>> Burman's brother. Modi's step daughter Karima Sagrani is married to>> Gaurav.>>>> Fact 3 - Subsequently, Gaurav Burman, director with Elephant Capital>> Plc forked out Rs 44.4 crore last November to acquire 50 per cent>> stake in the Mauritius based Global Cricket Ventures. So far so good.>> But guess what - GCV - won the lucrative digital, mobile and image>> rights of the IPL and also became the exclusive licensee of digital>> rights to the Airtel T20 Champions League till 2017.>>>> Fact 4 - Amar Bindra, son of former BCCI president and presently>> Punjab Cricket Association president IS Bindra was appointed general>> manager in season one by Kings XI Punjab. Kings XI having won the>> Mohali franchise.>>>> Fact 5 - N Srinivasan, vice chairman and managing director of India>> Cements and BCCI treasurer in 2007-8 won the Chennai franchise>> christening it Chennai Super Kings. Since then he has become the BCCI>> secretary and is slated to take over as the BCCI president by rotation>> in September.>>>> Fact 6 - Chairman of the national selection committee Krish Srikkanth>> is officialy the brand ambassador of Chennai Super Kings.>>>> Hasn't anyone in the cricket board heard of the term conflict of>> interest? No, if even they had, they were oblivious because the BCCI>> is a cosy private club, practically autonomous since it is registered>> as a charitable society under the Tamil Nadu Societies Act. What is>> galling is that if the BCCI is a cosy club, then the IPL is a secret>> society bound by a code of omerta. A society where paisan helps>> paisan, where paisan protects paisan's interests and where like minded>> individuals close ranks against any interloper. Now view the entry of>> this rag tag bobtail outfit - Rendezvous with a gargantuan sized bid.>> Obviously, the movers and shakers in the secret society were outraged.>> And Videocon and Adani more so, because they thought they had got the>> short shrift. So when the Sunanda Pushkar piece was unravelled in the>> Rendezvous jigsaw, the game was afoot.>>>> But there are imponderables in the path of any tactical gambit. In>> Modi's case, the weapon was lethal, the target high profile, but when>> media get the bit between their teeth, then they start asking>> uncomfortable questions. So, the media which was suffering from>> temporary or selective amnesia was suddenly reminded of Modi's>> connections and misdemeanours. The cupboard was replete with skeletons>> and it didn't take long for the Indian Parivar League to tumble out.>> In the process, media and the government's investigative agencies>> widened their dragnet. Yes, they wanted a piece of Rendezvous and its>> antecedents, but they also wanted to probe deeper into the dark and>> secretive world of the society bound by omerta, the code of silence.>> They wanted to know the financial architecture and ownership structure>> of the eight existing franchises. Rendezvous is an easy target, but>> amongst the eight franchises are some pretty big fish with connections>> which go right to the top of the Indian political pyramid. An>> implosion is unlikely, but the franchises are suddenly feeling a bit>> uncomfortable. They had played their cards pretty close to their chest>> and no one was asking uncomfortable questions. Now things are>> different, the heat has turned on the big boys. Nobody wants strife.>>>> Opacity always existed within the IPL. There was no transparency>> whatsoever. Five of the eight franchises are public limited companies>> by virtue of being listed on the stock exchanges. They have a>> conglomeration of foreign and domestic investors and shareholders. The>> majority of the vehicles that own five franchises are wholly owned>> subsidiaries of the listed entities. And yet there has never been any>> disclosure of the financial details of the investment route, vehicle>> or profit and loss statement. Not so much as a by your leave.>> Investors and shareholders have never been informed by these>> companies. Reliance Industries, GMR, India Cements, U B and Deccan>> Chronicle Holdings are all listed. And they are team owners. Why is it>> that it took Deccan Chronicle till the end of season 3 to make a clean>> breast by sending a notice to the Bombay and National Stock Exchanges?>> Why did they take so long to inform the BSE and NSE that Deccan>> Chronicle Sporting Ventures is a 100 per cent subsidiary of DCHL.>> There was talk that global media investment management company Group M>> had taken 20 per cent equity in Deccan Chargers. Has DCHL informed the>> BSE and NSE about this minutae of detail? Is it true in the first>> place? Again the same issue of transparency is thrown into stark>> relief.>>Let us try and examine each and every franchise's ownership structureor at least attempt to unravel it for it is very difficult to draw abead on these things given that nothing much is known in the publicdomain.In the beauty parade that took place onJanuary 24, 2008, Mukesh Ambani's Reliance Industries emerged as thebuyer of the Mumbai franchise for $111.9 million (Rs 441 crore). Whatis the ownership structure of Mumbai Indians? This is what is known -RIL group firm IndiaWin Sports Pvt Ltd owns 95 per cent while DeutscheBank's Anshu Jain owns 5 per cent. But is it possible that theshareholding structure of the franchise has changed over time? RIL's100 per cent subsidiary Reliance Industrial Investment Holdings Ltdthrough which 68 per cent equity is held in two investment arms -Shinano Retail Pvt Ltd (18 per cent) and Teesta Retail Pvt Ltd (50 percent) -owns majority interest in the team, while two private companiesowned by Mukesh Ambani - Claris Trading and Sharanya Trading own thebalance 32 per cent in the venture. Claris and Sharanya Tradingentered the equation between season 2 and season 3, thus altering theshareholding pattern. Sunday Guardian asked IndiaWin Sports whetherthis had happened and in a statemnt the same was confirmed. It is alsounderstood that RIIHLhad given a Rs 78 crore loan to IndiaWin Sports Pvt Ltd, owner ofMumbai Indians earlier. The statement made available to SG is:"Since its inception, it is a well known fact that the Mumbai Indiansfranchise is owned by IndiaWin Sports Pvt Ltd. Reliance Industries,through its investment companies has invested in the entire equity ofIndiaWin Sports Pvt Ltd. Over the last three years, there have beenchanges in the holding by investment companies, however there is nochange in the original position i.e. Reliance Industrial Investmentsand Holdings Ltd, the 100% subsidiary of Reliance Industrieseffectively owns 100% economic interest in Indiawin Sports Pvt Ltd.">> >>>> What is the premise that IPL works on? In many ways the principle is>> the same as the stock market. The name of the game is valuation, based>> on the forward earnings potential of the company, in this case the>> franchise. So, let me thrown another example to highlight this. In the>> original team auction, Rajasthan Royals was purchased for the lowest>> price - $67 million. A year later, an inflated valuation was shown>> when Raj Kundra and Shilpa Shetty picked up 11.7 per cent for $15.4>> million, ratcheting up the valuation to $140 million. When Sahara>> Adventure Sports and Rendezvous Sports World pumped up the volume>> bidding $370 million and $333.33 million, the bar was raised>> significantly. If Kings XI Punjab purchased for $76 million by Dabur's>> Mohit Burman, Bombay Dyeing's Ness Wadia, Apeejay Surendra's Karan>> Paul and Priety Zinta is asking for $300 million as exit price, then>> their valuation has grown 4x in three seasons. That is what this game>> is all about. Sunanda Pushkar has reportedly received 4.7 per cent of>> free equity with vesting rights for only two years. Which means that>> if her free equity is worth Rs 70 crore now, in another two years by>> the same yardstick apllied in the case of Kings XI promoters case, she>> can exit at a price of Rs 280 crore. All for rendering professional>> services. Wow. Now, that is sweat equity.>>>> By bringing billionaires like Mukesh Ambani, Vijay Mallya, superstars>> like Shahrukh Khan on board, Lalit Modi had revolutionised the game.>> High jinks liquor baron Vijay Mallya came to the party and bought the>> Bangalore team - christening it Royal Challengers. The team owned by>> UB Sports under Mallya's flagship firm UB Group now has his son>> Siddharth Mallya managing the team. Mallya paid $111.6 million for the>> team. Deatils are sketchy with regard to the exact ownership pattern,>> but it will probably be the cleanest deal.>>>> The curious case of the Emerging Media consortium needs to be looked>> at in greater detail. Last year when rumours of Manoj Badale promoted>> Emerging Media picking up a direct stake of 50.3 per cent in IPL>> franchise Rajasthan Royals abounded, Emerging Media dispelled the>> notion by saying that there was no change in the franchise's>> shareholding pattern. The franchise spokesperson had then said, "There>> have been reports in a cross section of the media on Emerging Media>> picking up majority stake in the IPL franchise, Rajasthan Royals. We>> wish to clarify that all these reports are completely unfounded and>> baseless. There has been no change whatsoever in the shareholding>> pattern of Rajasthan Royals." Rajasthan Royals, the franchise is owned>> by Jaipur IPL Cricket, wholly owned by Mauritius based EM Sporting>> Holdings. It was largely believed that Manoj Badale was the majority>> owner of the franchise, but as it turned out, the Nigeria NRI>> Chellaram family (Suresh and Aditya) owned 44.1 per cent in the>> Mauritius holding company. Badale is a minority partner in the holding>> company with 32.4 per cent while the balance 23.5 per cent is divided>> between Blue Water Estate owned by Lachlan Murdoch and Kuki>> Investments owned by UK based Kundra (Raj) family and Shilpa Shetty.>>>> Shadowy investment companies are the bane of IPL now. Particularly>> those routed through Mauritius or the tax havens of British Virgin>> Islands. That is why the ED and tax sleuths are so excited. Prominent>> southern based industrialist and owner of India Cements, N Srinivasan>> is the owner of Chennai Super Kings. Chennai>> Super Kings is a fully owned subsidiary of India Cements and in all>> likelihood, CSK will be first off the blocks to list on the stock>> exchanges next year. At a recent analyst meet, Indian Cements>> management indicated this. If Mukesh Ambani and Vijay Mallya>> represented big business in IPL, then Shahrukh Khan brough the glam>> quotient or X factor to the platform. SRK's presence meant that the>> confluence of cricket and entertainment was complete. So King Khan is>> reportedly the majority owner with 65 per cent through his production>> firm Red Chillies Entertainment, while the balance 35 per cent is>> vested with actress Juhi Chawla and her husband Jai Mehta.>>>> Which brings us to the two lesser mortals in this league of>> extraordinary gentlemen. Two franchisees who used the platform to make>> a statement of intent. A vehicle to promote themselves, their>> companies and their brands. T>> Venkataram Reddy, owner of newspaper group Deccan Chronicle Holdings>> bought the Hyderabad franchise for $107 million. Sometime last year, a>> valuation exercise was conducted which discovered a price of Rs 1240>> crore for the Chargers. This is when top rated media investment>> management firm Group M reportedly came on board by picking up 20 per>> cent in the club. Infrastructure player GMR owned by G Mallikarjun Rao>> bought the>> Delhi franchise - Delhi Daredevils. Naresh Ganaparthi of GMR was the>> bidder officially. It made eminent sense for GMR was building out>> Delhi's multi million dollar airport project. GMR Sports is the>> holding entity of Delhi Daredevils.>>>> Modi versus Tharoor is a subset of a larger malaise in the cash awash>> Indian Premier League - one of a complete lack of transparency and>> disclosure on who owns how much of what? The sleuths will obviously>> follow a paper trail to uncover these tracks. One hopes that all this>> is made public otherwise this will be an exercise in futility, one>> which will have the government merely baring its fangs and letting>> sleeping dogs lie. That will be a travesty. This thingie needs to be a>> given a real spin dried wash and then a thorough tumble dry.>