The End of Kochi Cooing

first_imgSunanda PushkarA brand new firefight has begun within the embattled Indian Premier League (IPL) Kochi franchise. On Tuesday, the franchise consortium tried desperately to resolve what appear to be irreconcilable differences. The chasm is widening with the Anchor Earth Movers-led section trying its best to oust the Gaekwads of Rendezvous,Sunanda PushkarA brand new firefight has begun within the embattled Indian Premier League (IPL) Kochi franchise. On Tuesday, the franchise consortium tried desperately to resolve what appear to be irreconcilable differences. The chasm is widening with the Anchor Earth Movers-led section trying its best to oust the Gaekwads of Rendezvous Sports World (RSW) in this joust for control. In the process, the franchise appears to have walked into a Board of Control for Cricket in India (BCCI) ambush. With the board keen on having only eight franchises in ipl Season Four, sources say that both Kochi and the Rajasthan Royals face the axe. A code of silence seems to have enveloped the major partners.Former minister Shashi Tharoor, who has washed his hands off the franchise which he once actively promoted, says: “I am currently travelling and have no desire to be further involved in this matter. I wish to stress that my wife had no “sweat” equity “given” to her. She purchased shares in RSW from Kisan and Pushpa Gaekwad, and when RSW’s role in the IPL franchise created such public controversy, she decided she did not wish to continue and returned her shares to the Gaekwads for exactly the same amount she had paid for them.”So, how did the Kochi franchise walk into the BCCI trap? Simply by shooting off a missive to the board. Mehul Shah, Atul Shah, Nerul Shah and Chintan Vohra who control the Anchor Group’s shareholding of 27 per cent between them have ensured that other fragmented shareholders join hands to outmanoeuvre the Gaekwads. Mehul says: “We have decided as a policy that we should not comment on this business as it leads to unnecessary confusion. You need to respect and understand our situation.” Vivek Venugopal, who owns 1 per cent of Kochi equity, mirrored this underlying credo when he said: “We have heard about the notice being issued by the BCCI to us, but we haven’t received it yet. We will respond to it as soon as we get it.”advertisementBCCI bouncersThe board’s response to the letter by the Anchor GroupHow can the sweat equity portion be 25 per cent?It needs to conform to the rules and since it is not registered as a company, it cannot exceed 10 per cent.How did Sunanda Pushkar return the 18 per cent equity to Pushpa Gaekwad directly without getting the BCCI’s approval?The BCCI needed to be informed of any change or transfer in ownership pattern. Meanwhile, the Gaekwad faction announced the name of Satyajitsinh Gaekwad as the new CEO of the franchise. Satyajitsinh formally became the CEO on September 16, a day after Shailendra Gaekwad resigned from the post, after which the Mehul faction went ballistic. The faction said since they control 74 per cent of the shareholding, even if Rendezvous holds 26 per cent and has nominated Satyajit Gaekwad as the CEO, no correspondence should be addressed to him by the BCCI. But the Gaekwads, it is reported, are adamant because they reckon that the free equity which totals 25 of their 26 per cent (1 per cent being paid equity) is equity in consideration of cash (under Section 75 of the Companies Act). So the Gaekwads contend that professionals get remuneration and sweat equity for professional services rendered to the franchise, which are intangible.The BCCI has now issued a showcause notice to the consortium. At the board’s recent annual general meeting, President Shashank Manohar read the riot act to the franchise. He said the franchise was split down the middle and this made it extremely difficult for the board to communicate with any one legal entity. “We will issue them a showcause notice and give them a timeframe within which you have to incorporate your company,” he said. “Otherwise we are going to cancel this franchise because we can’t work with groups within a franchise.” But, when india today quizzed board secretary and president-elect N. Srinivasan, he said: “The BCCI has not issued anything to anybody. I am not in a position to say anything.”RSW won the Kochi bid after forking out a whopping $333.33 million, outbidding Gautam Adani and the Videocon Group. Unfortunately, RSW ‘s journey since winning the bid has been hurtling from one controversy to another. With then IPL Commissioner Lalit Modi tweeting about secret partners, including Sunanda Pushkar and a former Indian cricket captain whose identity is still to be revealed, the controversy turned into a full blown crisis. Modi’s famous tweet opened a can of worms. “Why is 25 per cent of Kochi team given free to Rendezvous Sports for life?” Modi asked. “The same equity is non-dilutable in perpetuity. What does that mean?”advertisementNow things are coming to a head given that all pending issues need to be resolved expeditiously. After all, the Season Four player auction has to take place in Mumbai next month. On Tuesday, when the consortium partners met in Mumbai, an attempt was made to bury the hatchet. A management committee was formed with one individual representing each investor. But the Gaekwads made it clear that a RSW representative will be from the Gaekwad family and will retain the position of CEO for perpetuity. He will function under the supervision of the management committee. But this has not gone down well with the Mehul Shah faction which wants to prop up Anchor as the team owner and is keen on branding the Kochi franchise with the company name.Kochi franchise partners celebrate their successful bid in April.The Gaekwads will have nothing of this. Shailendra refused to comment on the issue while Satyajit was non-committal, saying: “We are discussing all issues; we had a positive meeting in Mumbai on Tuesday and we hope to resolve all the pending issues over the weekend.”But the most contentious issue is that the Shahs want the Gaekwads to reduce their free equity component drastically. They now want as much as 15 per cent of the 25 per cent free equity to be paid equity, which means that the Gaekwads need to invest this amount in the company. For the 15 per cent paid equity, the Gaekwads are willing to cough up Rs 1.22 crore per 1 per cent of the shareholding. This works out to Rs 18.3 crore for which sources say, the Gaekwads are willing to issue a cheque, but the Mehul faction now wants a bank guarantee. The Gaekwads want the company to be registered and incorporated with the Registrar of Companies and only then will they release a bank guarantee. After making this payment, the Gaekwads seek to retain 10 per cent of the free equity as sweat equity but the Anchor-led faction seeks further dilution.What then is the formula for survival? The Gaekwads believe since the bid is in their name, all rights vest with them, but the bulge bracket investors are busy elbowing them out of the venture. Also, mentor and well-wisher Tharoor and his wife Sunanda have disassociated themselves from the issue. The tattered franchise is using glue to stick together, but the question is for how long? With the Gujaratis opposing the Maharashtrians in this battle of attrition, it’s simply a question of who will blink first.last_img