Published>Tue, Oct 12 10 03:17 AM
With irregularities in the shareholding patterns of leading teams Rajasthan Royals and Kings XI Punjab forcing their ouster from the Indian Premier League (IPL), it's an uphill task for the Kochi franchise to replace them and become one of the eight teams for the next IPL season. The Kochi franchise needs to resolve the fight among its six promoters over shareholding, key to which is conversion of sweat equity into direct stake, and incorporation of the team under the Companies Act. All this needs to be done within 10 days as demanded by the Board of Control for Cricket in India (BCCI).
Though promoters claim to have incorporated their team under the Companies Act, the rift is still wide open between the six with no clear compromise emerging. One of the six, who holds sweat equity of 26% wants his stake to be converted into direct stake as is the case with the other five. However, this is not acceptable to the majority as they have pumped in the funds.
"All issues will be resolved within this week. We will inform the BCCI and IPL governing council shortly," a source in the Kochi consortium said on condition of anonymity.
On Sunday, the BCCI terminated the franchise agreements of Rajasthan Royals and Kings XI Punjab citing breach of their franchise agreements with the BCCI.
BCCI feels the problems for Kochi IPL team persist. According to BCCI insiders, the five-company consortium is split into two groups, one comprising Rendezvous Sports World (owned by Satyajit Gaikwad & Co) which owns around 26% stake in the consortium (as sweat equity) and other group including Anchor Earth Movers (27%), Parinee Developers (26%), Anand Shyam (8%), and Film Wave (12%), which together hold 74% stake with Vivek Venugopal holding 1%.
According to this group, the effective stake of all promoters who have invested 'real money' is 74% while the balance lies with Rendezvous Sports World (RSW) as sweat equity. Sweat equity is defined as equity created in a company as a direct result of hard work by the promoters.
"RSW has taken the initiative of bringing in the various sponsorships for the Kochi team as part of the sweat equity they hold. However, they want this to be converted to direct equity which is not acceptable to a few promoters who are putting in the cash. However, both groups are in talks and the matter should be resolved soon," an IPL insider familiar with the developments said.
While the Kochi consortium won the franchise for Rs 1,500 crore for a 10-year period in March, it participated as a consortium of five or six individuals. BCCI is concerned that there is no clear legal entity for the franchise and therefore, dealing with it is a problem area.
On Sunday, BCCI president Shashank Manohar said that both groups had sent letters to the board asking for its recognition. "...In such a scenario, the Board cannot work with groups within a franchise... They will have to resolve their issues in next 10 days or the franchise will be cancelled," Manohar had said.
However, sources told FE that Anchor Earth Movers, which owns 27% in the Kochi IPL franchise, is keen to move forward and is talking to all parties within the group for an early resolution of their differences.
However, for Rajasthan Royals and Kings XI Punjab, the road to IPL-4 is virtually over after the BCCI terminated their franchise agreements. KPH Dreams, the promoting firm of Kings XI and Jaipur IPL Cricket Private Ltd (JIPLC) have both been issued notices in this regard.
The charges on JIPLC include irregularities in the shareholding of the promoting firm. According to BCCI, JIPLC had claimed that the Emerging Media (IPL) Ltd, UK would be the entity controlling the Indian holding company operating the franchise through its wholly-owned Mauritian subsidiary. But in April 2008, JIPLC stepped into the shoes of the original bidder without being a group company or entity controlled by the bidder. This meant that while the bid for Rajasthan Royals was presented by one company, the agreement was signed by another. There were changes in the shareholding pattern of JIPLC in the last three years and its shares were sold or transferred without any permission from the IPL governing council.
Therefore, for Rajasthan Royals, the original promoting firm was Emerging Media Group with investors like Manoj Badale, Lachlan Murdoch, Aditya Chellaram, Suresh Chellaram and others. However, the shareholding pattern changed in 2009 with Raj Kundra and Shilpa Shetty buying 11.7% stake. Similar charges of violations in the shareholding of KPH Dreams have been leveled by the BCCI. KPH Dreams is promoted by Preity Zinta, Ness Wadia, Karan Paul and Mohit Burman. It is also alleged that former IPL commissioner Lalit Modi is one of the promoters with investments routed through shell companies and individuals.
However, rival IPL franchises see an opportunity in the expulsion of Rajasthan Royals and Kings XI teams as it would free several players ahead of the player auctions in November. These players include Yuvraj Singh, Irfan Pathan, Brett Lee, Kumar Sangakkara, Shane Warne, Shane Watson, Sreesanth, Yusuf Pathan and others.
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