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Sahara assets frozen
When I read this headline in the Indian Telegraph, I thought – clever chaps those Indians and this image sprang to mind.
If you want the background to this story, read “Force India: How the tower of cards could collapse” – Oct 14th 2012.
Anyway, Subrata Roy – known to TJ13 readers as ‘Rob Roy’ – Vijay’s mate has been up to dodgy business. Shara own 42.5% of Force India and Vijay has the lions share of the rest
The Indian securities market regulator (Sebi) have not been happy about how the group went about raising $3bn of capital from small private investors.
The first question that springs to mind was why didn’t they raise the money from the banks? Particularly as they were offering the small investors in excess of 15% interest per annum. Anyway, the Sebi ordered this money be repaid, and if the investors couldn’t be found their share lodged with the Indian authorities.
Rob Roy declined to comply. So in Mumbai the market regulator Sebi today ordered a freeze of all bank accounts of Sahara Group chairman Subrata Roy and the attachment of all his movable and immovable properties in an attempt to recover over Rs 25,000 crore that two unlisted group companies raised over four years ago.
In two separate orders, Sebi whole-time member Prashant Saran directed the attachment of the bank accounts and the properties owned by Sahara India Real Estate Corporation Ltd (SIRECL) and Sahara Housing Investment Corporation (SHICL).
The bank accounts and properties of three Sahara Group directors —Vandana Bhargava, Ravi Shankar Dubey and Ashok Roy Chowdhury — have also been frozen and attached.
The Indian Telegraph comments, “Valued at $3 billion, this is India’s — and probably the world’s — biggest disgorgement exercise after controversial security flotations.”
The Supreme Court verdict had seemingly marked the culmination of a two-and-a-half-year battle that market regulator Sebi had waged against the Sahara Group on the charge of violating rules that govern how companies can raise money from the public.
However, the Sahara Group had tried to stymie the recovery of money by challenging in the courts the process that Sebi was resorting to. Last December, the Supreme Court threw out the Sahara Group’s challenge and ordered it to pay the amount in three phases — an immediate payment of Rs 5,120 crore, Rs 10,000 crore by the first week of January 2013 and the remaining amount by the first week of February 2013.
The Sahara Group did not make the payment, necessitating today’s order.
Saran has ordered Roy and the three group directors to furnish details of all the movable and immovable properties they own within 21 days.
The 17 banks who have lent kingfisher Airlines nearly $1.5bn yesterday signalled their patience is at an end. having extended beyond reasonableness extension after extension to Mallya to lodge monies with the authorities to repay debts the banks.
The Hindustan Times reports the head of the bank consortium as saying, “We have shares pledged to the consortium of United Spirits. We also have some shares of Mangalore Chemicals and Fertilisers. These shares are low-hanging fruits. So, this should be the first line for us to recover the money. We expect some realisation at least from the sale of shares during this quarter itself.”
Kingfisher Airlines CEO Sanjay Agarwal did not take calls or reply to messages sent by HT. The airline’s official spokesperson, too, declined to comment.
Vijay’s personal luxury airliner was impounded by Indian tax authorities last month and he has pledged his father’s estate as collateral against the airline which will be recovered by the banks along with assets from United Spirits.
Far be it from me to suggest there is a conspiracy to humiliate the once ‘King of good times’, but the timing for Diageo could hardly have been more perfect. Three months ago they requested permission to acquire United Spirits shares from Indian shareholders – a process necessary for a foreign based investor.
The timing of this approval and the consortium of banks stated intentions could hardly have been more perfect for Diageo
Mallya has always banked on getting out of this alive with value from his shareholding in United Spirits. Yet, should there now be a run on the share price of United Spirit’s due to the banks’ imminent recovery activities, it could be by the time Diageo come to pay for the remaining shares, it may cost them merely a goat and a hand full of chickens.
Force India Financing
I have consistently questioned where the funds for Vijay’s announced $80m investment into the Force India team will come from. Interestingly I was contacted this week by someone with inside information who asserts Mallya claimed to a gathering of workers at Silverstone that these monies would be from his own funds.
Following the news today, we now understand this investment will be derived from…Err…Mmm. Let’s move on shall we?
Bernie’s ingenious F1 financing model
We’ve just discovered how strange the timing of events can be. Following the release to the world yesterday of the ‘lost documents’ the acquit Mr. E of all wrong doing over the transfer of F1 commercial rights shares; and the subsequent eulogies over how F1 could have never been what it is without its loving father figure today we hear another hammer blow has been taken to the viewers of F1.
In an 11th hour deal, Canal+ have gazumped long-standing French F1 free to air broadcaster TF1 and procured the rights to show F1 exclusively in France for the coming season.
The BBC surrendered the rights to a shared deal with SKY in 2012 that saw them cover just 10 race weekends live and provide highlights only for the rest. SKY in Italy have now commanded a similar arrangement for 2013. However in France F1 will only be shown on the subscription TV channel Canal+. Ironically after years of no French driver in F1 we now have Romain Grosjean, an exciting talent, who many of the French public will now be no longer able to watch.
In the UK during the 2012 F1 season, we were provided with regular TV viewing figures until just after the Eurpoean season concluded and then it all went quite (Google ‘F1 UK viewing figures’ if you don’t believe me – no articles after October and plenty before).
FOM claim global audiences were up 12% in 2012, however there was an additional race weekend compared with 2011, and of course the inaugural Austin event and the return of F1 to the USA accounted for more than this increment.
In the UK we have detailed TV viewing figures for the first 11 races. The first 11 races of 2011 were watched in the UK by 45.7m people, an average of 4.15m per race. Over the first 11 races of 2012 the corresponding total was are 24.15m viewers, averaging 2.2m per race.
For the five races which were shown live on both the BBC and Sky, the total was average is 3.8m – much closer to 2011, but still a fall of 9.5%.
What’s the problem I hear you cry? Surely the coffers of F1 are being bloated even further and the teams receiving more finance.
Simply put. Teams are sponsored by companies who wish to have their brand emblazoned across the retinas of as many people possible. All TV advertising works this way. Place an advert on prime time TV and you may pay 10 times the 30 second-rate as you would for an advert run during off-peak viewing slots.
The risk to F1 is that if TV figures slump 50%, sponsors will fund the teams to a far lesser extent than they do now. So the great F1 financing model may be in need of some rethinking as suggested by Adam Parr. Yet whether Mr. E is on his ‘A game’ on this matter is yet to be seen.
HRT: Dreams and fantasies of HRT making a comeback have been firmly squashed today. Matt Martin, the owner of an auto parts recycling business concluded the acquisition of the scraps of HRT today. This included 2 cars from 2012, a demonstration car and some tooling and a couple of trucks.
The Cosworth engines and Williams gearboxes are to be returned to their respective owners.
Sutil and Force India: Today the Silverstone team announced, “Adrian has had a seat fitting with the team this week. At this stage, the test driving schedule for the Barcelona test is not finalized but there is a possibility Adrian could be involved. The driving schedule will be communicated on Monday next week.”
GPDA: Pedro de la Rosa will continue as chairperson of the Grand Prix Drivers’ Association in 2013 despite not having a race seat for the season.
Max Chilton: has just proven everything that is bad about twitter as @maxchilton tweets, “Dinner time.”
Re; UK TV numbers – this is always worth bookmarking.
Martin Whitmarsh tells the truth about survival mode. (BBC)
I was wondering how long a acknowledgement would take, and i think the delay is simply about not embarrassing sponsors, and not speaking too soon, before new deals are agreed.
But I have to ask the question: why would you say “the rate card is down”?
That’s not something as a salesman I’d like to announce, true or not. One tends to fanny about the subject a bit more.
Right when I started, the first hard thing to learn is how to manage the “drop close”. When you can afford to drop your pants on price, and steal a sale, but the sale evaporates if you can’t argue the rarity of circumstances, and worse hits your real card numbers if it becomes known.
(There are many legitimate situations for banging out fillers and cheap deals, but it’s all rather nudge nudge, wink wink. I made it my specialist subject, so could describe the effect in much more formal terms.)
Therefore who says the card is down, has done their deals, or is signalling to wavering pens that they have the opportunity for a steal. Or, just possibly, talking down the market. I don’t pay much attention to Whitmarsh, but maybe someone who does can try a take on how he operates? Does one read in to the “parent company” comment a little swipe at MB?
In my day it was all about Brad or the Brad digest, but then I am very old.
I remember BRAD or Brad, or whatever. Having your own copy was a rite of passage. Bear in mind, though, who thought Brad was useful were merely posing. It was the poverty of such very expensive references (at 18, spending 200 quid plus on a book, stung a bit) that led me to working on theoretic analyses for price discovery. Brad really was just a agency list. I forget the other one that was common. In my early years I got a break: EMIC, “European Market Information Center” in Victoria St., would sell of the previous years’ Gales and Moody’s and all sorts for peanuts. So if I camped out in this little known library, I had for a few hundred quid, shelves of references. Gales used to publish the list of professional associations who has journals, and that was my first link to discovering what a untapped market that was: almost infinite specialty magazines of very vertical interest with amazing demographics (all engineers, highly qualified) yet hardly any of them having any sales presence. Try finding that today in print. Brad, by the way had no practical value, I quickly discovered. People pay to advertise their career as “brand manager” of whatever, i think the acronym stood for Brand Database, and so it was frankly a expensive invitation to a circle jerk. Anyhow, blast from the past . .
I’m pretty sure it gave all the rates for ads in page, half page, double page etc in every uk publication.
Ahh, yep. Correct. But do rate cards matter? My gig was sussing out where things traded. Still is.
Just a thought, but if the Indian authorities do not slam down on Sahara and Mallya with vengeance, they will be hurting their credibility. The same face saving that allowed these two to survive so long, will become the weight of frustration that smothers them.
I want to say, oh wonderful contradictory India. And it is. Wonderful, and very contradictory, and I think that makes it more intelligible than saying it’s hypocritical. I’ve never done business there, despite friends who are incredibly patched in, a mate’s uncle was chairman of Air India, for one example. I was always very warmly told that I’d be insanely out of my depth (mind) to try. Admittedly this largely by people who prefer to do business anywhere but India. One pal, born and educated here, described his experience trying to do business in his home country as “a delightful nervous breakdown”.
Anyhow, if you have to get caught by BT or another company who have call centers there, chit chat that sems to go down well includes pointing out that the correct English pronunciation of Mallya is Mal-liar. You won’t get any guffaws or overt appreciation of the joke, but dropping that in got what I needed to be done, done very expeditiously indeed.
Judge, if I recall right you mentioned the whole FI/Bianchi/Ferrari rumours were probably a negotiation tactic to get a better deal from Mercedes for Engines. Personally I’d like to see Bianchi race this year but if Sahara and VJ cannot bankroll the team anymore do you think Sutil has a greater chance of getting the seat? Perhaps they will let Sutil race with Bianchi in as a Friday driver so he can race in countries that does not readily allow ex convicts in?
What I cannot understand is why the Indian authorities have not treated VJ the same way as Shahra. Since VJ sold a large chunk of the Spirits company he has apparently sat on the money, it has not been used to pay down any of his debts, maybe it is this tha the is intending to use to prop up the F1 team.
VJ may not have been paid a penny yet. Indian takeover regulations require entities that buy 25 per cent or more in a listed company to compulsorily make an open offer to shareholders for an additional 26 per cent – at the price of the earlier transaction. Thus, Diageo will have to make an open offer for an additional stake of 26 per cent from the market at Rs 1,440 ($26.57 at today’s e/x rate) per share.
However these deals have all kinds of back door exits conditional on a variety of matters. The funds committed by Diageo to mallya may be held in a kind of escrow account
So this week having proved to the Sebi they control 25% of United Spirits Diageo are now in a position to make an offer to the shareholders to acquire their shares directly.
However, the timing of all this is exquisite – Banks chasing Mallya for shares in Spirits business – shareholders running scared just sell cheap on the open market (before Diageo make them a direct offer) Diageo picks up the shares cheaplyand gets a bargain 😀
Interestingly United Spirits was trading around 1250 Rs at the time of the announcement – it has climbed quickly to 2015 Rs in November and today has been trasding at 1897 Rs
In March 2012 the price was 590 Rs – most of this price movement is speculative and not based upon financials. If I was holding thiese shares at present I would take my money, head for the hills and watch what happens next.
You say “Diageo will have to make an open offer for an additional stake of 26 per cent”.
Do Indian regs allow a foreign company to own more than 50% of the stake in an Indian company?
I believe they changed the law recently. I seem to remember Diageo were to buy just over 25% of United Spirits and then following Sebi approval launch a mandatory offer for the remaining shares to obtain a controlling interest
“Dinner time” was LOL worthy. Good stuff as Always! 🙂
Hi GM and welcome – don’t think we’ve had the pleasure of your ‘expert witness testimony’ before 🙂
Great you can comment as it helps build the community. If you haven’t seen it check out the project page – we are all in some way TJ13