CRUDE THE NEW HOT BUTTON

From the inner most recesses in Tehran’s secretive world of
spymasters, a call was given to launch strikes against Israeli
diplomats around the world. A tit for tat kind of reaction, hitherto
not known to come out of Iran. The shadowy Iranian Quds Force is being
seen as the new action force targeting Israelis. Iran of course has
been shrugging off all that the Israelis have thrown at them by saying
that it is nothing more than posturing and filibustering on their
part. Adding that what the Israelis are saying lacks credibility and
smacks of slander. Even as we wonder what the truth is, a Israeli
newspaper reported the Israeli Vice Prime Minister Moshe Yaalon naming
Brigadier-General Qasem Soleimani, commander of the Quds Force, a
covert arm of Iran's Revolutionary Guards Corps, as the mastermind of
this neo attack strategy.

Yaalon went on to say that Soleimani is subordinate to the Iranian
leaders and is responsible for the special force and for subversive
activity against everybody by coordinating operations with Lebanon's
Hezbollah guerrillas who are now viewed as a proxy for Tehran. Lending
credence to this new theory, the United States blamed the same Quds
Force in 2011 for an alleged plot to assassinate the Saudi ambassador
to Washington

Even as this state of play had the world on an edge after the
coordinated attacks in Tbilisi and New Delhi, the failed Bangkok
bombing also at 3.15 IST sent shivers up everyone’s spine. The result
was seismic reverberations in the global crude futures market. So,
oil is on the boil again. Any armed conflict in the middle east is a
surefire recipe for a further spike in global oil prices. Crude
futures markets are already on fire. And India is caught between a
rock and a hard place. It needs weapons and defence armaments from
Israel and curiously 11 per cent of all our crude requirements come
from Iran. Delicious irony, no?

Throw in the bit about India’s natural unstinted support for west
Asian nations and you have a heady mix. Mavens in the foreign and
finance ministries are scratching their heads wondering which side
they should tilt. With the war having arrived on our shores and blood
being spilled, India is viewing the entire scenario with great
consternation. At the core of it all is the politics of oil, rather
than the economics of oil. Iran pumps out 3.5 million barrels of oil
daily.

Of this 3.5 million barrels, as much as 600,000 barrels goes to six
top EU nations while the majority is sucked up by energy deficit
nations like China and India. What has complicated already elevated
crude prices is not just the emergence of Iran as a big boy on the
nuclear stage, but equally the concerns coming out of Sudan where a
newly divided South Sudan is accusing its northern counterpart of
seizing 2.4 million barrels of oil. With two flashpoints on the global
crude map, the balance of power has been disturbed. What is perhaps
most pertinent is that Israel normally trigger happy to take action –
both deterrent and offensive – is not pressing the hot button yet.

Though it has been ratcheting up the rhetoric. Defending its people
and land is a way of life for insular Israel, but perhaps a nuke armed
Iran is a suitable enough reason not to go ballistic. Or perhaps the
US is mollifying Israel and telling it not to cross the Rubicon.
Crossing the Rubicon at this juncture can have cataclysmic
consequences for the world economy. A bellicose Iran will not take
things lying down. What has happened in Afghanistan, before that
Kuwait and now in Iraq could well see retaliation and reprisals from
Iran.

The world teeters. For India it is as I said extremely bad news,
because not only do we get it in the neck politically since both Iran
and Israel are our friends, but we suffer acutely economically. Just
when the inflation genie has been wrestled back into the bottle and
mothballed, comes the crude spike which may end up as a super spike.
Cassandras have been screaming from the rooftops that crude is headed
northwards to new gravity defying levels. Its economic impact is
scary. India will obviously import inflation given that 80 per cent or
thereabouts of its crude requirements are out sourced. Empirical
evidence suggests that a $10 increase in crude prices can shave off as
much as 20 to 40 basis points from an importing nation’s Gross
Domestic Product. Goldman Sachs Asia Economic Analyst reckons for
India it will be closer to 0.2 percentage point.

Every dollar increase in crude prices translates in to a 50 paise
increase in petro product prices here in India if the Government
allows a pass through. The Indian crude basket on February 15 was a
sky rocketing $118.35, a mix of sweet and sour crude. Now comes the
tricky part, as of April-December, the under recoveries for oil
marketing companies is Rs 97,313 crore. Wait, there is more pain. For
the full year ending March 31, 2012, the projected figure is Rs
140,000 crore, eating at the very innards of public sector oil
companies. The picture gets grimmer when one factors in a loss of Rs
12.31 per litre of diesel, Rs 378 per LPG cylinder, Rs 28.77 per litre
of kerosene and Rs 1.50 per litre of petrol. This makes for a Rs 465
crore loss borne by oil marketing companies daily due to subsidies.
All wreaking havoc on the already soft underbelly of a rapidly
decelerating Indian economy.

Oil prices are rising in any case on furious demand from Asia led by
an ever hungry China, the world’s second biggest crude consumer. So,
while geo politics is being blamed for $120 levels for crude, Asia’s
huge appetite is acting as a catalyst. China’s crude imports increased
7.4 percent from a year ago to 23.41 million metric tons in January, a
record high, according to preliminary data from Beijing-based General
Administration of Customs on February 10. Don’t forget, that the US
economy is beginning to chug along nicely too.
Forewarned they say is forewarned. When the head of the National
Iranian Oil Company, Ahmad Qalehbani said that oil was headed for $150
in the last week of January, the world should have paid attention. Any
conflagration in the middle east will leave behind an economic
wasteland. Pray and hope.

-MAIL TODAY,FEBRUARY 19,2012

Retrofit

On February 3, a day after the landmark Supreme Court ruling, Department of Telecom dashed off a missive to the telecom regulator TRAI asking it to give its recommendations on the auction of the spectrum that would be surrendered by the operators within 60 days. Moreover, by June 2, the operators holding the invalidated licenses need to physically hand over the spectrum held by them. It is unlikely that the government will file a review petition against the judgment relating to 123 cancelled licenses. Equally, the Government is faced with a huge embarrassment and the legacy of cancelled licenses will haunt UPA-II forever. However, there is every possibility of the Government seeking more time to roll out a fair and transparent auction. Remember that the successfully conducted 2010 3G auction took 688 days.

There are multiple issues and ramifications which the judgment has thrown into stark relief:

*Why did the Government not defend the illegality of A Raja’s action on January 10, 2008? Smartly, it may have sensed the court’s mood. The entire lot of seven steps laid out by the Supreme Court in Section 70 (i)-(vii) relating to A Raja’s unconstitutional actions which led to the cancellation remained unchallenged during the hearing. The Government has restricted itself to merely describing the history of telecom reforms, spectacular growth in telecom services, increase in tele density, and merely the fact that giving away licenses in 2008 at 2001 determined prices cannot be called unconstitutional. In fact, it was argued, and the court notes in paragraph 49 “that the policy decision taken by the DoT for migration of CDMA service providers by NDA Government in 2003 was “neither illegal nor unconstitutional”. But that is where it ended on merits. No arguments were offered for A Raja’s actions between 2007 and 2008. The Government, however, argued, and the court notes that “the power of judicial review should be exercised with great care and circumspection and the court should not ordinarily interfere with the policy decisions of the Government in financial matters”.

* The judges agreed with this contention of the Government but gave detailed reasons including “when it is clearly demonstrated before the court that policy framed by the state or its agencies/instrumentality and/or its implementation is contrary to public interest is violative of the constitutional principles, it is the duty of the court to exercise its jurisdiction in larger public interest and reject the stock plea of the state that the scope of judicial reviews should not be exceeded beyond the recognized parameters”.

* Even famed lawyers arguing for the various companies restricted arguments to issues such as “TRAI did not recommendation auctions” or that “UPA only continued the policy from before” and therefore these licenses should not be subject to questioning. Some cited the Prime Minister’s speech at FICCI’s India Telecom Summit and others hung on to national interest, foreign investment and benefit to the people at large. They even argued equities by demonstrating investments, cheaper tariffs, and unfair treatment per se against A Raja since their clients had been “pushed down” in priority due to the distortions in the first-come-first-served. In effect absolutely no defence was offered on the issue in front of the court which related to the multiple illegal acts of A Raja, loss to the exchequer, violation of Article 14 of the Constitution, illegal advancement of cut-off date, last minute manipulation of first-come-first-served coupled with insider information to benefit particular companies or violation of procedure such as avoiding a meeting of the full Telecom Commission or simply following the TRAI Act when deviating from Recommendations of the TRAI.

*TRAI put out a detailed affidavit and argued when put in a corner that DoT should have only made a decision on spectrum allocation after determining the full availability of spectrum. TRAI also argued and demonstrated that DoT violated the TRAI Act by not seeking its mandatory recommendations before introducing new service providers under section 11 (1) (a) second and fourth proviso. In fact, TRAI admitted that it had initiated action against several new entrants for cancellation of licenses since they failed to meet roll-out obligations. None of these helped either the Government’s case or that of private operators. Finally Government made several statements which the court was quick to seize upon. These included Kapil Sibal’s press release of 29-1-2011, which the court had quoted in great detail in paragraph 57. The statement already admits that spectrum will not be bundled with licenses in the future, that there will be no concept of contracted spectrum and spectrum will only be made available through a market driven process in the future. That even spectrum beyond 1.4 MHz will be given to licenses that are found valid but at prices determined under the new policy. It said “we need to seriously consider adoption of an auction process for allocating and pricing of spectrum beyond 6.2 MHz” while ensuring that there is adequate competition in the auction process.

*With the Government itself conceding that auction was the way going forward then any defence against the process of auction whether level playing field or its adverse impact on prices, had no chance of surviving since those would have had to come from the Government itself. No wonder then Supreme Court trashed the TRAI for its Recommendations, calling them “lopsided and contrary to the decisions made by the Council of Ministers, as well as one that overlooked the main objectives of National Telecom Policy 1999 regarding a transparent process for allocating spectrum”.

*The court’s observations on the issue of first-come-first-served, which it describes as open to “misused by unscrupulous people who are only interested in garnering maximum financial benefit and have no respect for the constitutional ethos and values” resonates strongly on the political landscape of this country. What the court did by cancelling licenses is truly take the fight against against corruption to its logical culmination.

*Additionally the Government has survived by the skin of its teeth on the issue of collective responsibility.

In conclusion, given the fact that the Supreme Court has in one shot done DoT’s unfinished work of pursing licence cancellations and left the PM and FM out of its ambit, it is a responsible judiciary which has acted as the instrumentality against rampant graft which thrived courtesy a confluence of politician-bureaucracy-big business nexus. As it is famously said “Be careful what you ask for. You may actually get it!” The judiciary has given the people of India a famous victory. One which tears down the edifice of corruption.

-MAIL TODAY, 14TH FEB'12

DISEQUILIBRIUM - MAIL TODAY 12th Feb

Kashmir is where I was born, Kashmir is what no one can take out of me, even though Kashmir has been taken out of me and away from me. It is my heritage. The umbilical cord that binds me to the Valley is inseparable and un detachable. It is invisible and yet visible. For the deepest recesses in the dark corridors of my mind reverberate with images and events which shaped my childhood. I never lived in Kashmir, I only went there every summer and spent two of the best months of every year in the Valley. I grew up in Delhi, went to school in the rajdhani, but always had one foot planted in the Valley. Yet the feelings are strong, the emotion heavy when one recollects those pleasurable moments spent every summer. All that is in the past, I haven’t visited Kashmir for close to 30 years and yet I cannot get it out of my head and psyche. How can I? I grew up in a household obsessed with Kashmir. As a child I was drawn into this discourse. From my grandfather to my father and my uncle, this naked obsession was stark and ubiquitous. The stories were endless about the dramatis personae who shaped the accession – Panditji, Sardar Patel, Mountbatten, Karan Singh, Bakshi Ghulam Mohommed and Ghulam Mohommad Sadiq among others.

Last weekend, a bunch of students studying masscom at Kashmir University landed at my door. In the 22 to 23 age bracket, almost 30 of these reasonably smart and articulate kids visited our office and spent a couple of hours with me. Restive, but quiet at first, they slowly opened up on my verbalencouragement. I told them about their heritage, how Panditji and that true Nationalist Sheikh Mohammed Abdullah virtually plucked Kashmir from under Mohammed Ali Jinnah’s nose. I asked them whether they read a lot, I asked them whether they had paid any attention to their past, whether they had focused on their rich but controversial history. Some said yes, others hummed and hawed. Impromptu, I took them back in time in the Wellsian Time Machine. I asked them whether they knew that Jinnah had dropped anchor in the Valley for close to 40 days in the run up to accession with India. Jinnah in May 1944 tried hard to network with Kashmiri leaders, convincing them of the virtues of siding with what would eventually become Pakistan. During his lengthy stay in the Valley, he tried his utmost to seek a meeting with Sheikh Abdullah who studiously avoided him. Sheikh Saheb was the man who both sides wooed assiduously for he was the centrifuge that would deliver Kashmir toone or the other.

With Sheikh Saheb dodging the bullet, Jinnah was disconsolate and finally left Kashmir in a bit of a huff. I recounted this story for the benefit of those present in my room. Moreover, I reminded them of Gandhiji’s celebrated visit to the Valley the same year. Maharaja Hari Singh was recalcitrant, seeking independence from both the new entities – Pakistan and India. Lord Mountbatten and Lord Haslings Ismay (Mountbatten’s chief of staff) both tried to reason with the Maharaja, but to no avail. Finally it was left to Gandhiji to work his miracle. While it is reported that Gandhiji’s car was stoned in Baramulla, it is also well known that when Gandhiji arrived in Srinagar, people who were present recount the size of the procession and the cries of Mahatma Gandhi zindabad. Gandhiji obviously convinced Hari Singh who fell in line and paved the way for V P menon to bring back the instrument of accession on October 26, 1947. Even on the morning of October 26, 1947, Jinnah tried repeatedly and even desperately to speak to Sheikh Saheb by calling at Panditji’s residence 17 York Road, but an untrusting Sheikh Saheb eluded him.

Since that fateful day, Kashmir is a story that refuses to go away from the news pages. It is a story of life and equally death. Life of a Kashmiri in the free democracy of India and death of a dream of referendum which never took place though it was promised. It is also a tale of what could have been, but the first travesty took place when Sheikh was arrested in Gulmarg and then incarcerated. Let me not bore you with history. Let me tell you about my interface with the youth of the Valley. A collective which while replicating the Intifada from the middle east in the violent summer of 2010 had turned resistance into its most destructive face in recent memory. I discovered to my chargin that these youth revered the firebrand Gheelani because he stood for a particular cause. A cause which is unacceptable to India for obvious reasons. I have had a lengthy conversation with Gheelani Sahebmyself and I found his demand of ‘azadi’ completely facetious. But the youth gathered warmed up to the conversation once I broached his name. As I said at the outset, they were restive and the pain and anger became more evident when the Army and para military were mentioned. It was like a dam had burst, they couldn’t control their emotions.

From us – Muslim and Hindu – in the same room, there was a palpable change for the worse. It became us and them. They railed about the ‘excesses’, they railed about Omar Abdullah’s misrule, the railed about the lack of infrastructure and civic amenities. There was anger over mis governance and the bijli, sadak, pani inadequacies. They believe that Gheelani Saheb stands for something and at least he is steadfast about his ideology unlike the Hurriyatwallahs who keep changing tactics and don’t necessarily stand for anything anymore. It was like a two way classroom where while they tried to glean something from me, parallely they offered me a peep into their minds and psyche. The byplay was fascinating for they started asking questions. Questions about India’s (mind you India’s) intent,India’s approach towards removal of AFSPA which they reckon is draconian, the longish stint of peace and quiet in the Vale this year and the strong yearning for lasting peace and tranquility. There were other posers – why did the Pandits sell their houses, why don’t you revisit your madre vatan, when will the army pull out, will we get better governance et al? There was no meeting of minds.

I told them that the world has moved on, time will pass them by, the fruits of economic prosperity have to be absorbed by one and all and Kashmir is not an exception because it is an integral part of India. The youth want peace, they too want to move on with their lives, but only on their terms. Yes, Lt Gen Hasnain’s efforts at involving the youth has paid in spades in 2011, but the yawning chasm between action and deliverables is huge. This perceptual and real gap is what is hurting Delhi’s exact role in the Valley. The youth are fed up of the violence, they want too want to move on, but they want a set of covenants which are cast in stone. They believe in Gheelani Saheb’s standing as the tallest ideological leader and not necessarily in his ideology of ‘azadi’. This generation of youth wants improvement in the physical infrastructure of the Valley, they want jobs and education. The two teachers who accompanied the youth spoke of how 2011 was a great year for academics as there were no disruptions. Maybe that is way forward – kuch tum karo, kuch hum karein – only then will this divide be bridged.

I too yearn to kiss the turf. Madre Vatan beckons. I too want to show my family my homeland. Kashmiri Pandits were stampeded out of the Valley, it has left their psyches brutalized, their memories vandalized. They are equal partners in the progress, but no one will return, the fear pyschosis is over riding.

KING'S RANSOM- INDIA TODAY

I

This story is three years old. It grabs your attention for the sheer audacity of Raja and the deafening silence of the prime minister. On January 3, 2008, just a week before Raja went ahead and collected cheques from these operators on a first come, first served basis, the prime minister gave his virtual assent to this loot. By acknowledging Raja's letter of December 26, 2007 he gave his stamp of approval, saying: "I have received your letter of December 26, 2007 regarding developments in the telecom sector."

Former Telecom Minister A. Raja

Singh had turned a blind eye to Raja's carefully orchestrated hijack through 7, Race Course Road. What Raja managed to do in that week beginning January 3 and ending January 10, 2008 continues to reverberate in the corridors of power in Delhi. In his letter to the prime minister dated December 26, 2007, Raja pretty much laid down the action plan. It was a brilliant stratagem. He wrote, "My efforts in this sector are intended to give lower tariffs to the consumer and to bring higher teledensity... more specifically in rural areas.

In these circumstances, the discussions with the external affairs minister and solicitor general have further enlightened me to take pre-emptive and pro-active decisions on these issues as per the guidelines and the rules framed thereunder to avoid any further confusion and delay." Strong-arm tactics that the prime minister was unable to resist.

Forget that the Cabinet was never brought into this loop, and the Government of India's Business Rules were contravened. For instance, when you disinvest in a public sector company which is government property, you first seek Cabinet approval. Similarly, spectrum is a scarce national resource and thus government property.

Raja's genius is that he conjured billions out of thin air. After all, what is spectrum? It is a section of the electromagnetic frequency scale, a lode of natural channels used by cellphones.

Raja nearly got away till he was singed due to the Government's 3G auction conducted through a price discovery mechanism which queered the pitch for him. As the CAG report says, "The Honourable Minister of Communications and IT for no apparent logical or valid reasons ignored the advice of Ministry of Law, Ministry of Finance, avoided the deliberations of the Telecom Commission to allocate 2G spectrum, a scarce finite national asset, at less than its true value on flexible criteria and procedures adopted to benefit a few operators. TRAI, the regulator, also stood by as a helpless spectator when its recommendations were being either ignored or misused."

The prime minister has much to answer for. Why hasn't he ever asked for the file on 2G and shown his displeasure? How did he allow this unfortunate decision to go through? Why didn't the terms of reference (TOR) for the GOM on spectrum availability not include spectrum pricing? It is learnt that 22 in the original TOR, this was very much there, but was dropped under DMK pressure at the last moment. Why were the companies which won licences allowed to sell significant equity shortly after being given Letters of Intent (LoI) resulting in trading of spectrum, an illegal act? If on November 2, 2007 Singh told Raja to use the transparent mechanism of auction to ensure discovery of the correct price of spectrum, why is it that on January 3, he looked the other way? What happened between November 2, 2007 and January 3, 2008? Was the DMK pressure too much? It's a question the Supreme Court is vexed by. As Justices G.S. Singhvi and A.K. Ganguly said: "The sanctioning authority can say I am not inclined to give sanction. But we find the alleged inaction and silence troubling." Says senior Supreme Court advocate Dushyant Dave: "The Supreme Court will see through this and take action."

Why is it that key members of the executive failed to take any action whatsoever on a loss that is eight times India's total health budget and three times the education budget? Equivalent to 3 per cent of our GDP, equal to our defence budget and a third of our annual tax revenues? Former BPL Mobile chairman and Rajya Sabha MP Rajeev Chandrasekhar says, "Almost 16 years after telecom was liberalised in India, we haven't managed to evolve a policy on how to licence spectrum." Then law minister H.R. Bhardwaj and his secretary T.K. Viswanathan passed the buck, asking for the setting up of an EGoM and obtaining legal opinion from the Attorney General (see box). Raja blocked; he complained to Singh about the law minister, calling his suggestion out of context. TRAI wrote three letters on October 15, 2007, October 19, 2007 and January 14, 2008, all before the licences were given and the first two before the LOIS were issued, requesting Raja not to cherry-pick their recommendations and ensure that legal implementation of statutory recommendations was kept intact. Raja brazened it out yet again. He snubbed TRAI and went ahead to issue LOIS and subsequently issued licences without referring the matter back to TRAI. DOT secretary D.S. Mathur and Member (finance) Manju Madhavan wrote a four-page note, strongly recommending auction. Raja once again ignored the note.

Mathur refused to sign the LoIs but ultimately retired on December 31, 2007. LoIs were issued within 10 days after getting signatures of new DoT Secretary Siddhartha Behura on January 10, 2008. Behura was brought in from Raja's erstwhile Ministry of Environment and Forests. Finally, the then finance secretary D. Subba Rao wrote to secretary DOT questioning the pricing for licensing. He instructed an immediate halt of processing of LoIs, but again Raja went ahead and issued the LoIs and collected the cheques on January 10, 2008.

The scam started coming together in May 2007 with a palace coup: communications minister Dayanidhi Maran was ousted and environment minister Raja, a Karunanidhi family loyalist, was crowned. Along with him came his personal secretary R.K. Chandolia. Assisted by DDG (Access Services) A.K. Srivastava within DoT, they crafted a scam to make Harshad Mehta look amateurish. Raja announced closure on the applications for spectrum even though TRAI had recommended 'no cap' in the number of licences. Even though 575 applications were received, the Government had spectrum for 150-odd licences. Anybody else would have resorted to a market-based auction process knowing that companies would give an arm and leg for precious spectrum.

But Raja did the opposite. He carefully designed a public relations campaign and sent out multiple press releases, posturing to implement TRAI recommendations on 'no cap'. Instead, he surreptitiously imposed a definitive cap by issuing only 122 licences on a first come, first served basis to companies using an arbitrary cut-off date, leaving over 300 entities in the lurch and benefiting nine (see box). Telecom analyst Mahesh Uppal says, "Of course it was a loot, but it can be easily reversed. You just need to take back the spectrum from these operators and reverse the process. Agreed there will be litigation and consequential losses, but you need to be prepared." Uppal gave the analogy of getting a DDA flat in the Capital through a public auction. He said, "If it is proved that I got this by misrepresenting facts and the allocation was mala fide, then the flat may be taken away from me."

As Raja's ouster hung in the air, an SMS campaign rode spectrum across the nation: A narco test is in order for Raja… He would sing: "One for my master, one for my dame and one for the Singh boy whose government is now lame." Raja, who may yet cost it an arm, is exultant, an embattled Singh is struggling to retain an image of integrity, and the Opposition senses a kill. Will there be blood?

The Unitech puzzle

SUNDAY GUARDIAN

Even as the Nira Radia phone tapping expose continues to dominate thepolitical and media mindspace, disturbing news concerning one ofIndia's top realtors forms one of the key components of the DG ITInvestigation Milap Jain's findings. In his report to Sudhir ChandraMember - Investigation, CBDT dated August 25, 2009, Jain cites thetapping on lobbyist Nira Radia's phone and lays bare the collusionbetween the realty firm Unitech and lobbyist Nira Radia. Thisconfluence of big business and a high profile lobbyist in salvagingthe group's image and financial health during a full blown corporatecrisis is shocking.
Interestingly these findings pulled out from raw conversations betweenvarious Radia associates come against the backdrop of the LehmanBrothers collapse in the US. Apparently, Unitech had sold shares inits Mumbai joint venture to Lehman Brothers before the dramaticcollapse of the iconic investment bank for Rs 750 crore.The firsttranche of Rs 740 crore was paid towards 50 per cent of Unitech'sholdings in Shivalik Ventures. The report suggests that a short termcapital gains of Rs 240 crore was realised on this sale which havebeen reported as a Capital Account adjustment rather than atransaction as income.
There is a suspicion on the part of DIT that the Group has taken bogusloan entries through entry operators. The entry operator, worried bythe then recession wanted to reverse the loan entries. Theconversations show the paranoia on the part of Unitech on the collapseof Lehman in the US. The concern is magnified due to the likelihood oftwo further tranches of investment which were to come from Lehmanthrough third party investors. Even more damaging are conversationspertaining to damage control measures including the bogus claim thatTelecom Italia is all set to invest in the Group's telecom venture.
In this hour of crisis, intercepted conversations show that Radia wasusing her influence to bail out Unitech by roping in Tata Realty withan advance, of which an outstanding of Rs 650 crore is spoken of. Evenmore damaging is the information that cheques given by Unitech have'bounced.' Radia is also shown as mediating on behalf of Unitech for atelecom license with Radia advising Unitech on bringing the Telenorinvestment into telecom venture in calibrated tranches in order togive a general impression to all and sundry that there is no windfallgain for Unitech's promoters, but that the investment is coming intothe body corporate. Incidentally Unitech which was in the throes of adeep rooted financial crisis turned itself around on the back of this22 circle license for which it forked out Rs 1651 crore. Subsequentlyit brought in Telenor as an investor with a corpus of Rs 6200 crorewhich helped retire some of the mountain of debt.

ISIS Equity Partners is suitor for Kings XI

Sunday Guardian

Yes, the first IPL franchise is ready to bite the dust. A top of theline Delhi based legal firm has been mandated by the Kings XI Punjabpromoters KPH Dream Cricket Pvt Ltd to find a buyer for the embattledIPL Mohali franchise which is facing queries on the tax and routing ofinvestments front. While it is cooperating with BCCI and Department ofIncome Tax to resolve all issues, it is parallely driving its saleprocess forward. Sources close to developments have revealed to SundayGuardian that the deal price has been finalised at approximately $300million, which is four times the price at which the franchise waspruchased in 2008 by Dabur's Mohit Burman, Bombay Dyeing's Ness Wadia,Apeejay Surendra's Karan Paul and actress Preity Zinta. A duediligence process is underway and the sale is likely to be concludedshortly.
It is believed that ISIS Equity Partners which is one of the UK’sleading mid-market private equity investors is the suitor for thefranchise. ISIS is reportedly partnering a corporate in thisacquisition. Typically, ISIS invests in transactions of between £5mand £75m in value in companies with profits in excess of £1m. Fundsare investedon behalf of both retail (Baronsmead VCTs) and institutional clients.Mohit Burman who is the majority shareholder in Kings XI confirmedthat ISIS Equity is someone with whom Kings is in anadvanced stage of dialogue. He refused to confirm the other entity dueto a confidentiality agreement.
Co owner Mohit Burman categorically told Sunday Guardian that thebuyer is neither Hero Honda's Pawan Munjal or Videocon's VenugopalDhoot who to his chargin found that his bid was trumped by Rendezvousand Sahara in the two teamauction held recently. While the modalities of the sale are still notknown, it iscertain that the price may be a consideration now that the fur isflying after the investigation being conducted by ED and IT sleuths.Earlier it was reported that Pawan Munjal was paying $260 million forthe city based franchise but this was vehemently denied by bothparties.
The exact shareholding of KPH Dream Cricket Pvt Ltd is:
MB Finmart (new name of Dabur Investment Corp) 2,23,850 sharesNess Wadia JMD Bombay Dyeing 4,47,700 sharesPreity Zinta4,47,700 sharesKaran Paul Chm Apeejay Surendra Group 77,861 sharesWindy Investment2,23,850 sharesRoot Investment 79,600 sharesColway Investments4,47,700 shares
Since both Windy and Colway share office space with MB Finmart andother Dabur group promoter owned entities. It is clear from theshareholding pattern that Mohit Burman is the majority shareholder inthe franchise. At a purchase price of $76 million, the selling priceof $300 million offers a huge premium, the valuation being 4x. Eachone of the four promoters is expected to make handsome returns ontheiroriginal investment. Burman is known as an investor who flips hisinvestments for a good profit - he did this with some like PunjabTractors and reportedly Vishal Mega Mart while in others like Aviva,Centurion Bank, Bongrain, Amforge Industries he remains invested.Earlier this year, he was part of a Burman family initiative to launcha $200 million healthcare and life sciences fund. Asia Healthcare Fundhas the Burmans as anchor investors. Some of Mohit Burman'sinvestments have been through vehicles like Elephant Capital listed onLSE AIM and in the past have been wide and varied:
*Aviva India, one of the leading life insurance players in India withits products available at over 370 locations and a sales force of over9,500 individuals. Following the liberalisation of the insurancesector in 2000, Mohit and his team gained one of a limited number oflicences and entered into a joint venture in 2002 with the AvivaGroup, one of the world’s largest insurance groups. The Burman familyhave invested over $75 million in the venture and own approximately 74per cent. of the business.• Vishal Retail, one of India’s leading retailers with a chain of 26stores and strategically positioned as a “value for money” destinationtargeting the fast growing middle class consumer.• Fidelity Fund Management India Private Limited (“Fidelity India”).Fidelity established its direct presence in the Indian market bysetting up Fidelity India in 2004 as a joint venture with the Burmanfamily. Fidelity India now has multiple funds. India is now the secondlargest country for Fidelity in terms of numbers of employees. Thecompany has offices in Mumbai and Delhi, with investment professionalsbased in each. The Burman family holds 25 per cent. of FidelityIndia. This investment was brought to the Burman family through theircontacts in Fidelity UK.• The Lord Krishna Bank (“LKB”) was started in 1940 in Kerala by agroup of entrepreneurs. Today it has grown rapidly in size and scope,from a local to a national bank and a network of 111 branches across11 states. TheBurman family has invested Rs.48.3 million in LKB, resulting in a 6.6per cent. holding.• ABN AMRO Securities (India) Private Limited, a joint venture betweenthe Burman family and ABN AMRO Bank, providing equity and debtsecurities services.
There is likely to be some debt on the books as well, but since thefinancials of IPL teams are not very transparent, this figure cannotbe quantified. As per the IPL conditionalities, none of the eightoriginal franchise owners could exit from their clubs - effectively 51per cent - till the end of season 3. While Kings XI reached the semifinals in season 1 losing to Chennai Super Kings, season two saw themwinning seven and losing seven. However, season 3 was anunmitigated disaster with the club losing six of its first seven games.
Mired in controversy from the beginning, Kings XI has been more famousfor its off field news flow - a racism row over two of thecheerleaders, followed by an unsavoury dispute between Ness Wadia andPunjab Police, then the infamous slapgate involving Sreesanth andfinally this year the use of the Bhagat Singh's name in anadvertisement created a huge controversy. With Bhagat Singh's kinthreatening to sue Kings XI for use of the freedom struggle martyr'sname in an advertisement, it created a furore in Punjab.

Modi's fattened friends and family circle

Sunday Guardian

If suspended IPL Commissioner Lalit Modi is keeping quiet,it is not without reason. Apparently when he came to Delhi to mount alegal challenge, he was told by city based senior counsels that it isbest at this juncture to prepare an adequate defence to the showcauseissued by the BCCI instead of going directly to court. In any caseformer president A C Muthiah's petition against N Srinivasan hasalready been admitted in the apex court. Moreover, it is Modi'sfriends and family enterprises which was a wide and varied networkwhere his tentacles were omnipresent. By slicing and dicing the rightspie, Modi made money hand over fist for the BCCI and doubled thecentral revenue pool for the franchisees, butbeneficiaries of his largesse were also his tightly knit circle offriends and family. Now when the BCCI wonders where the concludedcontracts are, some of these murky relationships are beinginvestigated. Sportzpower tried to track down some of these deals toexamine the extent of crony capitalism that Modi and Co indulged in.When Modi sold the theatrical rights of IPL to Entertainment andSports Direct (ESD) for Rs 330 crore for ten years, these samedistribution rights were transferred to Crown Infotainment and UFOMoviez. ESD is a wholly owned subsidiary of Dubai based investmentadvisory and private equity firm Dar Capital Group, headed by ArunRangachary.
Now guess who owned Crown Infotainment? Yes, Kunal Dasgupta, theformer CEO of MSM/Sony Entertainment Television. The technologypartner remained UFO Moviez and in another coincidence both UFO Moviezand Crown are owned in turn by Valuable Media. And who was the CEO ofUFO Moviez? Rendezvous investor Sanjay Gaikwad. This complicated webgets even more complex when it is discovered that ESD has another Modiloyalist - Chris McDonald as partner along with Dasgupta and one KapilAgarwal. Agarwal, Joint MD of UFO Moviez is reported to be related toModi from his mother's (Bina) side, but this remains unsubstantiated.
Chris McDonald incidentally was the CEO of Ten Sports. Ten Sports wasfirst brought into India by Lalit Modi owned Modi EntertainmentNetwork. McDonald now wears many hats, he also doubles up as the CEOof Red Partners. Which has an ominous linkage with the IPL. It wasnamed the one year on ground food concessionaire for the IPL thisyear. Red Partners was centrally responsible for the entire food andbeverage experience of IPL. On getting the contract earlier this yearMcDonald said, "We will work towards ensuring that IPL fans attendingthe 45 day cricketing carnival across India will now be privy to atruly world-class food and beverage experience akin to what sportingfans around the world have become accustomed to. Our standardizedmenus will cater to the unique fan base of each region enhancing theinstadia experience for IPL fans.”
Last year McDonald had stepped down as CEO of Taj TV's Ten Sports, acompany which he founded in late 2000. McDonald and Modi have knownone another for years. Modi's earlier venture Modi EntertainmentNetwork specialised in handholding foreign channels and broadcastersin their quest to grab a slice of the still closely controlled Indianmarket. Modi got Walt Disney, ESPN, Ten Sports and FTV in to Indiathis way. But most of these relationships soured very quickly, withsome ending up in arbitration proceedings. Pioneer Diagsys, anotherfirm floated by the same Kunal Dasgupta who architected the multipleyear multi million IPL broadcast deal with Lalit Modi, has the rightsto hawking the advertising in between the 20:20 matches. The mid over150 second advertising rights deal was sealed by Dasgupta and Modijust days before season 3 kicked off. It is believed that Pioneerwould have made Rs 54 crore from this deal itself. These 150 secondswere retained by Modi and IPL despite protests from Sony formonetising through this process at a subsequent date.
Similarly, another allegedly dubious and quickly concluded deal wasthe one with Yog Sports, a marketing and distribution company whichIPL and Modi tied up with for merchandising of IPL products for aperiod of 10 years. Yog's job was to set up IPL match stores atvarious IPL venues, malls, high street destinations, multiplexes,airports et al and a total of 200 stores across 12 cities. Theyappeared virtually out of the blue with one Saumitra Srivastava namedas director of the company.