Posts Tagged ‘Sucheta Dalal’

The curious case of Mukesh Ambani & Raghav Bahl

9 January 2012

PRITAM SENGUPTA in New Delhi and KEERTHI PRATIPATI in Hyderabad write: Media criticism in India, especially in the so-called mainstream media, has never been much to write home about.

Operating on the principle that writing on another media house or media professional means exposing yourself to the same danger in the future, proprietors, promoters and editors—most of whom have plenty to hide—are wary of taking on their colleagues, competitors and compatriots.

That risk-averse attitude amounting to a mutually agreed ceasefire pretty much explains why the biggest media deal of the decade—Reliance Industries Limited (RIL) funding Network 18/ TV 18 group to pick up ETV—has been reported with about as much excitement as a weather report.

That the newspaper which issues P. Sainath‘s monthly cheque, The Hindu, declined to publish media critic Sevanti Ninan‘s fortnightly column on market rumours about the impending deal (without telling readers why) provides a chilling preview of what lies in store as the shadow of corporates lengthens over the media.

In 2008, New York Times‘ columnist Anand Giridharadas wrote of why the Indian media does not take on the Ambanis of Reliance Industries in an article titled “Indian to the core, and an oligarch“.

“A prominent Indian editor, formerly of The Times of India, who requested anonymity because of concerns about upsetting Mr Ambani, says Reliance maintains good relationships with newspaper owners; editors, in turn, fear investigating it too closely.

“I don’t think anyone else comes close to it,” the editor said of Reliance’s sway. “I don’t think anyone is able to work the system as they can.”

***

First things first, the RIL-Network18/TV18-ETV wedding is an unlikely menage-a-trois.

Reliance Industries Limited is a behemoth built by Dhirubhai Ambani and his sons Mukesh Ambani and Anil Ambani using a maze of companies and subsidiaries built on a heady cocktail of mergers and demergers, using shares, debentures, bonuses and other tricks in the accounting book—and many beyond it.

The only known interest of the Ambanis in the media before this deal was when they bought a Bombay business weekly called Commerce and turned into the daily Business & Political Observer (BPO) to match the weekly offering, The Sunday Observer, which they had acquired from Jaico Publishing.

(Top business commentators like John Elliott and Sucheta Dalal have alluded to a blog item to convey that Mukesh Ambani’s media interest goes beyond the recent announcement.)

Anyway, BPO, launched under the editorship of Prem Shankar Jha, was long in coming unlike typical Reliance projects. Suffice it to say that in 1991, when India was at the cusp of pathbreaking reforms, some of India’s biggest names in business journalism were producing dummy editions of BPO.

The Ambani publications were under the gaze of the more media-savvy younger brother, Anil Ambani, who operated with R.K. Mishra, the late editor of The Patriot, as chairman of the editorial board. The Observer group shuttered before the beginning of the new millennium.

As Mani Ratnam‘s film Guru based on Sydney Morning Herald foreign editor Hamish McDonald‘s book The Polyester Prince makes clear, the Ambanis have always cultivated friends across the political divide, but they have been identified with the Congress more than the BJP.

Raghav Bahl‘s Network18/TV18 is in some senses an ideal fit for RIL.

Till its latest cleanup came about a year and a half ago, it was difficult to understand which of its myriad companies and subsidiaries came under which arm. It too has friends on either side, but suffice it to say, CNN-IBN‘s decision not to run the cash-for-votes sting operation in July 2008 revealed where its political predilections lay.

Eenadu and ETV, on the other hand, is a long, different story.

***

The ETV network of channels was launched by Ramoji Rao, the founder of the Telugu daily Eenadu. Rao has many claims to fame (including launching Priya pickles), but he is chiefly known as the media baron behind the transformation of the Telugu film star N.T. Rama Rao into a weighty non-Congress politician.

Rao and his men are known to have crafted speeches that tapped into dormant Telugu pride for the politically naive NTR. The massive media buildup in Eenadu—Ramoji Rao pioneered multi-edition newspapers with localised supplements—saw NTR become the chief minister of Andhra Pradesh just nine months after launching the Telugu Desam Party (TDP) in 1982.

Two years later, when NTR was removed from office by a pliant governor (Ram Lal) working at the behest of Indira Gandhi‘s rampaging government, Ramoji Rao played a key role in protecting the numbers of TDP MLAs by having them packed off to Bangalore and Mysore, and building public opinion through his newspapers.

When NTR’s son-in-law N. Chandrababu Naidu walked out of TDP to “save” TDP, Ramoji Rao backed Naidu and played a hand in his ascension as CM. Thus, Ramoji Rao galvanised non-Congress forces in the South leading to the creation of the National Front, which installed V.P. Singh as PM in 1989 after the Bofors scandal claimed Rajiv Gandhi.

In 2006, Ramoji Rao placed his political leaning on record:

“I submit that until 1983 the Congress was running the State in an unchallenged and unilateral manner for the past 30 years. The Congress party became a threat to democracy and in view of the single party and individual rule by Indira Congress, the opposition in the state was in emaciated condition. It has been reduced to the status of a nominal entity. The dictatorial rule of the Congress proceeding without any hindrance. I submit that as the opposition parties were weak and were in helpless situation where they were unable to do any thing in spite of the misrule by the ruling party, Eenadu played the role of opposition. I submit that in the elections of the State Assembly held in 1983, the Congress for the first time did not secure a majority in the elections and lost the power to the newly formed Telugu Desam Party. I submit that on the day of poling i.e. January 5, 1983, I issued a signed editorial on the front page of Eenadu supporting the manifesto of Telugu Desam Party and calling on the electorate to vote for Telugu Desam Party giving cogent reasons for the stance taken by me.”

In short, the marriage between RIL-Network18/TV18 and Ramoji Rao is one between a largely pro-Congress duo and a distinctly non-Congress one.

***

Indeed, Ramoji Rao’s troubles that has resulted in substantial sections of his ETV network getting out of his grasp and into RIL’s, are largely because of his consistently anti-Congress stance, which gained an added edge in 2005 when the Congress under Y.S. Rajasekhar Reddy (YSR) trumped the TDP under Chandrababu Naidu in the assembly elections.

Reported The Telegraph:

A slew of news reports in Eenadu and programmes on ETV since 2005 have accused Congress ministers, politicians and senior government officials of corruption and hanky panky. One report, for instance, debunked the official claim that the number of suicides by farmers had dropped. Another attacked construction by Y.S. Vivekananda Reddy, the chief minister’s brother, on disputed land. A third said that Eenadu had discovered, based on a survey, that voter lists for elections for local bodies had omitted the names of opposition party sympathisers.

It didn’t take long for YSR to hit back.

It was a two-pronged attack: his son Y.S. Jagan Mohan Reddy launched a project to own launch his own newspaper and newschannel house to take on the might of Eenadu and ETV. Simultaneously, a Congress MP from Rajahmundry attacked Ramoji Rao where it hurt most: his finances.

Arun Kumar Vundavalli, the MP, revealed that Rao’s Margadarsi Financiers had started dilly-dallying about repaying depositors, even after their deposit period had expired. Kumar showed that Margadarsi Financiers—a Hindu Undivided Family (HUF) company, of which the karta was Ramoji Rao—had collected deposits from the public, although a 1997 RBI law forbade HUFs from doing so.

Margadarsi Financiers owned a 95% stake in Ushodaya Enterprises, Ramoji Rao’s company which owned Eenadu and ETV.

A one-man committee of enquiry constituted by the Y.S. Rajasekhara Reddy government revealed that Rs 2,600 crore of money was collected from the public in violation of RBI norms. Although his companies were not in great shape, Ramoji Rao assured the Andhra Pradesh high court that he would repay the full amount of Rs 2,600 crore due to the depositors.

Enter Blackstone.

In January 2007, the world’s largest private equity player indicated that it wanted to pick up 26% in Ushodaya Enterprises group for Rs 1,217 crore. At the time, it was reported to be India’s single largest foreign direct investment (FDI) in the print media.

The Blackstone offer placed the value of Ramoji Rao’s company at Rs 4,470 crore.

But the FDI proposal got stuck in the I&B ministry for months, allegedly at the behest of Vundavalli, who raised a variety of concerns over the Blackstone-Eenadu deal. In January 2008, when the clearance for the Blackstone investment was still not coming, Mint asked:

“Does the promoter of an Indian company, who is selling a stake in his family’s media firm to a foreign investor, have the right to do what he wants with that money, in this particular case, pay off liabilities of another company that his family separately also owns?….”

“FIPB records then show that the finance ministry, specifically citing Vundavalli’s claims, ‘has observed that prima facie, it appears that the purpose of securing funds from M/s Blackstone is not for advancing the business of Ushodaya Enterprises Ltd, but for repaying the deposits taken by M/s Margadarsi Financiers.”

When the Blackstone deal did not materialise, Nimesh Kampani of JM Financial stepped in as Ramoji Rao’s white knight although, as Sucheta Dalal writes, Kampani was never known to have any interest in the media except in deal-making.

According to VC Circle, Kampani picked up 21% of Ushodaya Enterprises for Rs 1,424 crore, which valued the company at Rs 6,780 crore, or over 50 per cent more than what Blackstone was willing to accept.

“The first public report of Kampani’s investment came in early February 2008, or around 10 days after stock markets crashed globally.”

Now, YSR got after Kampani.

Andhra Pradesh police issued a “look-out” notice for Kampani. Nagarjuna Finance, of which Kampani had been director, had allegedly defrauded depositors. Although Kampani had resigned from the independent directorship of the company nine years earlier, it was a sufficient handle to beat him with.

For months, Kampani had to stay out of India, fearing arrest. It was only after his bete noire YSR met with a bloody death in a helicopter crash in September 2009 that Kampani could return home. In May 2010, rumours surfaced of Mukesh Ambani buying up JM Financial but they soon fizzled out.

Shortly before buying into ETV, Kampani had recently sold his stake in a joint venture with Morgan Stanley to his foreign partner for $440 million and had the cash. The Margadarsi bailout, it was assumed, was in his personal capacity. It took a petition in 2011 filed by YSR’s widow seeking an inquiry into Chandrababu Naidu’s assets assets for the penny to drop.

Enter RIL.

YSR’s widow, Y.S. Vijayalakshmi, an MLA, alleged that when gas reserves were found in the Krishna Godavari basin in Andhra Pradesh in 2002, the Chandrababu Naidu government wilfully surrendered its right over the discovery in favour of Reliance, “while allowing Naidu’s close associate Ramoji Rao to be the vehicle of the quid pro quo.” (page 32)

“In consideration for the favour done by the Respondent No. 8 (Chandrababu Naidu) in allowing the State’s KG basin claim to be brushed under the carpet, the Reliance group facilitated the payout of Ramoji Rao’s debts to his depositors. This was carried out through known associates and friends of Mukesh Ambani.

“Two of these known associates of Ambani and the Reliance Group are Nimesh Kampani (of JM Financial) and Vinay Chajlani (of Nai Duniya).

“Kampani extended himself in ensuring that Ramoji Rao would be bailed out. Within a short span of 37 days between December 2007 and January 2008, six “shell companies” were floated on three addresses, which are shown as Sriram Mills Compound, Worli, which is the official address of Reliance Industries Limited. Reliance diverted Rs 2,604 crores of its shareholders money through the shell companies to M/s Kampani’s Equator Trading India Limited and Chajlani’s Anu Trading.”

In other words, RIL’s involvement in Eenadu through Kampani became known only recently in response to Vijayalakshmi’s petition, but it was market gossip for quite a while.

T.N. Ninan, the chairman of Business Standard and the president of the editors’ guild of India, wrote in a column in January 2011:

“If reports in Jagan Reddy’s Saakshi newspaper are to be believed, Mukesh Ambani is a behind-the-scenes investor in Eenadu, the leading Telugu daily.”

Vijayalakshmi’s 2011 petition makes several serious allegations.

That Ramoji Rao entered into the deal with Kampani’s Equator just 23 days after it was registered although it had no known expertise or business; that Ushodaya sold Rs 100 shares to Equator at a premium of Rs 5,28,630 per share; and that Ushodaya’s valuation had been pumped up by Rs 1,200 crore by its claims over a movie library.

Vijayalakshmi’s petition concluded:

“The interest shown by Reliance group in coming to the rescue of Ushodaya Enterprises headed by Ramoji Rao is clearly in defiance of any prudent profit-based corporate entity (since) Reliance does not gain any returns by virtue of that investment.”

***

It is this RIL baby that is now in Network18/TV18’s lap.

The timing of the RIL-Network18/TV18-ETV deal also hides a small story.

It comes when the probe into the assets of Naidu and his associates (including Ramoji Rao) has moved from the High Court to the Supreme Court. It comes when a parallel probe into Vijayalakshmi’s son Jagan Mohan Reddy’s assets has entered a new and critical phase. It comes when the KG basin gas controversy is heating up. And, above all, it comes when 2014 is looming into the calendar.

Several questions emerge from this deal which has politics, business and media in varying measures:

1) What does it mean for Indian democracy when India’s richest businessman becomes India’s biggest media baron with control over at least two dozen English and regional news and business channels?

2) What kind of control will Mukesh Ambani have over Raghav Bahl’s Network18/TV18 when and if RIL’s optionally convertible debentures (OCDs) are turned into equity?

3) What kind of due diligence did the financially troubled Network18/TV18 do on the Kampani-Ambani investment in ETV before agreeing to pick up RIL’s stake for Rs 2,100 crore?

4) How will CNBC-TV18, which incidentally broke the news of the split among the Ambani brothers in 2005, report news of India’s biggest company (or its political and other benefactors) now that it is indirectly going to be owned by it?

5) Is there a case for alarm when one man has a direct and indirect stamp over three of the five major English news channels (CNN-IBN, NewsX and NDTV 24×7), three business channels (CNBC-TV18, IBN Awaaz, NDTV Profit), and at least five Hindi news channels?

6) Do Raghav Bahl and team who ran a handful of channels heavily into debt, have the expertise to run two dozen or more channels, especially in the language space where there are bigger players like Star and Zee?

7) Is the ETV network really worth so much, especially when Ushodaya’s most profitable parts, Eenadu and Priya Foods, are out of it? Or is RIL using Network18/TV18’s plight to turn a bad asset into a good one?

8) Is RIL really tying with Network18/TV18 with 4G in mind, or is this just spin to push an audacious deal past market regulators such as SEBI and the Competition Commission of India (CCI)?

9) How immune are Mukesh Ambani and Raghav Bahl from political forces hoping to use the combined clout of RIL-Network18/TV18 to blunt negative coverage ahead of the 2014 general elections?

10) And have Network18/TV18 investors got a fair deal?

***

Infographic: courtesy Outlook

Also read: The sudden rise of Mukesh Ambani, media mogul

The Indian Express, Reliance & Shekhar Gupta

Niira Radia, Mukesh Ambani, Prannoy Roy & NDTV

Not everybody loves a good stock market story

23 August 2010

Nearly half a dozen English channels and a couple more in Hindi cover India’s stock markets. Another half a dozen English newspaper catch its every cough and sneeze. The treasury benches exult if the index rises; the opposition benches exult if it falls.

Signals on the state of the overall economy are read from tea leaves on Dalal Street. On budget day, the dalals in grey suits give marks to the honourable finance minister. Fear and greed are supposed to drive it. Its scams stars (Harshad Mehta and Ketan Parekh) are legends.

Gordon Gekko is god.

But what really is the state of the Indian capital markets, after 20 years of economic liberalisation and market development?

“Narrow, shallow, illiquid and concentrated in the hands of a few individuals located in a few centres…. A casino frequented by a small closed club,” is the clear-eyed verdict of Sucheta Dalal’s personal finance magazine, Money Life.

In unstarred question number 1669, BJP member Sukhdev Singh Dhindsa asked the finance ministry for details. On August 10, Minister of state for finance, Namo Narain Meena, provided the answers. They are little short of eye-popping in a nation of 18 million plus a billion:

# No. of investors who traded on the National Stock Exchange’s cash market in the first quarter of 2010 (April-June): 30.90 lakh

# Retail investors, high networth individuals and corporate customers who traded in this period: 52%

# Institutional investors and proprietary traders who traded: 48%

In other words, the big bogey about institutional investors, Indian or foreign, is a big bogey. Truth is retail investors are more in number in institutional investors, although their quantum of participation may be smaller.

# Of the 30.90 lakh investors, 90% of the trading in the April-June quarter came from a grand total of 192,200 investors

# 80% of the turnover came from 41,654 investors

# 1,50,546 investors (that is 78% of the 30.90 lakh investors) accounted for 10% of the trading turnover

# 8,727 investors accounted for 70% of turnover of which 413 were proprietary trades, mainly brokerage houses

# 60% of trading from 1,563 traders

# 50% of the trading turnover came from 451 traders, of which 156 were proprietary traders.

***

The numbers are equally dismal in the much-vaunted derivatives segment which saw trading of Rs 58,31,715 crore in the first quarter of the current financial year. In response to question 1692 from Mohammed Adeeb, the minister revealed:

# Only 5.75 lakh clients traded in derivatives in the three-month period

# Of these, 90% of the trading came from 18,035 players. Meaning 97% accounted for 10% of trading, while 3% accounted for 90%

# 2,188 investors accounted for 80% deriatives turnover

# 537 investors accounted for 70% of trading

# 223 investors accounted for 60% of trading, of which over half were proprietary brokerage firms

# 50% of NSE derivatives trading came from just 106 investors, of which 58 are proprietary traders

# 67% of all tansactions in the derivatives markets are by day-traders

Infographic: courtesy Money Life

Read the full articles here: Part I, Part II

Also read: Has the ‘India Story’ changed inside a week?

CHURUMURI POLL: Is the India Story over?

CHURUMURI POLL: Has the dream team been exposed?

BBMP poll kicks off decentralisation of Paid News

24 March 2010

The election commission of India likes to pretend that it came to know of the phenomenon of “paid news”—advertisements being slipped in under the garb of news to circumvent expenditure norms— only after recent reports of its widespread use during the 2009 recent general elections.

Well, here’s more news for the EC.

A journalist with Citizen Matters, a civic awareness magazine published from Bangalore, writes that she was offered money to write about candidates from three mainstream political parties contesting elections to the civic body in India’s IT capital.

Vaishnavi Vittal writes that an aide of a first-time candidate in ward no. 177 (J.P. Nagar)  tried to slip her a bunch of 100-rupee notes neatly folded in his palm. “Nimma expenditurege (for your expenditure), madam”, he said sheepishly. Less than an hour later, in the same ward, another candidate pulled out wads of 500-rupee notes from his pocket and asked me, “Hana yenadaru kodabeka? (Should we pay you any money?)”

“A similar incident occurred with a party candidate contesting from Sarakki (Ward 178). After the interview, the candidate’s spouse and campaign coordinator repeatedly asked me if they need to pay me for the interview. They went on to add, laughing all the while, that they are ready to pay money even if we don’t ask for it.

“The two of them gave me a copy of a local Kannada publication in which there were several reports, profiling some of the candidates. They told me that they had paid for a report on their party candidate on the front page.”

Read the full article: Cash for coverage comes to BBMP elections too

Link via Kanchar Kaur-Hariharan

Complete coverage: Editors’ Guild on paid news, private treaties

Pyramid Saimira, Tatva & Times Private Treaties

Times Private Treaties gets a very public airing

SUCHETA DALAL: Forget the news, you can’t believe the ads either

Does he who pays the piper call the tune?

SALIL TRIPATHI: The first casualty of a cosy deal is credibility

Selling the soul? Or sustaining the business?

PAUL BECKETT: Indian media holding Indian democracy ransom

Does he who pays the piper call the tune?

PRATAP BHANU MEHTA: ‘Indian media in deeply murky ethical territory’

The scoreline: Different strokes for different folks

A package deal that’s well worth a second look

ADITYA NIGAM: ‘Editors, senior journalists must declare assets’

The brave last words of Prabhash Joshi

‘Only the weather section isn’t sold these days’

It takes 3 Idiots to call the bluff of Pauper Tigers

If you trust polls, trust in Indian media dips

It takes 3 Idiots to call the bluff of Pauper Tigers

16 March 2010

The prostitution of Indian journalism by pimps, promoters and proprietors selling editorial space without letting the reader know what is independently verified news and what is a paid-for advertisement in the garb of news, has attained pandemic proportions.

“Paid News”, as the trend has been sadly named, happens not just during election time, but in between elections too. It afflicts not just the language media, but mainstream English media too. It is not just political news that is coloured, but business, sport, cinema and everything else, including the TV listings.

Above all, it is not something that small papers and extortionists are indulging in to keep their business going; it has become a revenue stream for profitable media organisations to keep the ink black on the bottomline, as trust and credibility are thrown to the wolves by suited-booted “managers”.

The Rajya Sabha, the election commission and the press council are all seized of the issue.

The country’s #1 business investigative journalist Sucheta Dalal who has written fearlessly on the subject—a trend that has deep implications for Indian democracy and reader trust in the media in the long run—throws light on a scandal in which India’s top filmmaker was held to ransom by “a leading media house”.

***

By SUCHETA DALAL

Moneylife has often commented on the brazen sale of news by a leading media house. However, we also acknowledged that the group usually made a win-win offer which was tough for companies to refuse. After all, which company would want to say no to something as lucrative as assured positive coverage, plus a steep discount in advertising tariffs, in return for a small equity stake?

However, in recent times, companies complain about the strong-arm tactics used by the group’s media arm.

Several companies have reported that they are told to appear first on the group’s media channel, during the quarterly results announcements. A print interview is thrown in as a carrot. Or they can face the stick: the prospect of being black-listed by its large circulation dailies.

As for the group’s city supplement, it is not only common knowledge that all its pages are for sale, but it has even dropped the pretence that its news and photographs are anything but paid publicity material.

Yet, the group still managed to shock us, with its recent strong-arm tactics against a top-grossing Hindi movie.

Its director told us how the media-selling arm of the publishing house approached him with a ‘publicity package’ which offered a number of articles and photographs for a price.

The director said a polite ‘No’. He would buy advertisements to publicise the movie, but the editorial would be up to the publication. But he was in for a shock. He was told that if he did not accept the package, there would be no editorial coverage of the movie in any of the group’s publications.

Given the stakes involved in the movie business, the director consulted his partners and friends in Bollywood. Many supported his stand, while there were others who were quite happy to accept the offer. However, our director-friend put his foot down and invited several like-minded producers to discuss the implications of what he calls the ‘dadagiri of this brand’.

The publishing house representative apparently said the director was making a needless fuss. After all, “film journalism is not serious journalism” (suggesting there are no ethical issues in buying editorial coverage).

What is most heartening is that, unlike wimpy corporate India, a dozen top producers and directors got together, discussed the issue and had the courage to say no, even though their stakes are significantly higher. The media house, realising that the issue could get out of hand, then backtracked and actually wrote a letter of apology for trying to pressure the industry.

The story had a happy ending, because the movie went on to set success records.

Why has this not made news? Because Bollywood also realises that it needs big media and is not idiot enough to shoot itself in the foot. Moneylife doffs its cap to the producers who had the guts to say ‘No’.

Also read: Editors’ Guild on paid news, private treaties

Also read: Pyramid Saimira, Tatva & Times Private Treaties

Times Private Treaties gets a very public airing

SUCHETA DALAL: Forget the news, you can’t believe the ads either

Does he who pays the piper call the tune?

SALIL TRIPATHI: The first casualty of a cosy deal is credibility

Selling the soul? Or sustaining the business?

PAUL BECKETT: Indian media holding Indian democracy ransom

Does he who pays the piper call the tune?

PRATAP BHANU MEHTA: ‘Indian media in deeply murky ethical territory’

The scoreline: Different strokes for different folks

A package deal that’s well worth a second look

ADITYA NIGAM: ‘Editors, senior journalists must declare assets’

How much do readers distrust us? Not enough

The brave last words of Prabhash Joshi

‘Only the weather section isn’t sold these days’

How much do readers distrust media? Not much.

26 May 2009

The 2009 general elections were marred by widespread accusations and whispers of media hanky-panky.

The Wall Street Journal‘s India bureau chief Paul Beckett accused reporters, editors and newspaper owners of holding the Indian democratic process to ransom. Women journalists in Andhra Pradesh wrote to the Election Commission drawing attention to Telugu dailies selling news space to political advertisers.

How much of all this buying and selling affect reader trust in media vehicles? Not much.

The National Election Survey 2009 compiled by the Lokniti team of the Centre for Study of Developing Societies (CSDS) for The Hindu asked precisely the question:

Question: “Do people trust the news they read in newspapers?”

Answer: “Forty-five per cent of respondents said that they greatly trusted what they read in newspapers. A similar number said that they somewhat trusted newspaper reports. Around 10 per cent had little faith in what was reported in the papers.” (emphasis added)

Also read: In prosperous Gujarat, everybody can buy media

Sucheta Dalal on selling news and buying silence

Salil Tripathi: The first casualty of a cosy deal is credibility

Tarun J. Tejpal: Media is now part of conspiracy of silence

‘Indian media holding Indian democracy ransom’

7 May 2009

The Wall Street Journal‘s bureau chief in India, Paul Beckett, has a major piece on the rampant corruption in the media in the election coverage, with advertising masquerading as news for a fee, and  neither readers nor voters being told about the transaction.

Brokers, he writes, are offering package deals for coverage in newspapers, for front-page pictures, for interviews, for printing press releases verbatim, etc.

Thankfully, Beckett reassures us that “the best-known English-language dailies typically don’t do it so blatantly”.

Beckett quotes the former chief election commissioner N. Gopalaswami as saying that he had heard of newspapers having a rate card for positive coverage and another for not negative coverage, and that this is not something that can be ignored.

“The nation’s newspapers usually play either vigilante cop exposing wrongdoing in the public interest (on a good day, at a few publications) or spineless patsy killing stories on the orders of powerful advertisers. Many papers also engage in practices that cross the ethical line between advertising and editorial in a way that is opaque, if not downright obscure, to readers.

“But it is of another order of magnitude to see reporters, editors and newspaper owners holding the democratic process to ransom. A free (in every sense) press is an integral part of a vibrant democracy. A corrupt press is both symptom and perpetrator of a rotten democracy.”

Read the full article: Want press coverage? Give me some money

Also read: Forget the news, you can’t trust the ads either

Sucheta Dalal on selling news and buying silence

The scoreline: different strokes for different folks

Salil Tripathi: The first casualty of a cosy deal is credibility

In prosperous Gujarat, everybody can buy media

The next time you see this face on CNBC-TV18…

2 April 2008

The Supreme Court has issued a notice to CNBC-TV18 financial analyst Mathew Easow, and asked him to disclose his contract with the TV channel after the stock market regular found him advising viewers to buy stocks which his associate companies were selling in the market.

The court has also stayed an appellate tribunal’s order overturning a ban on his media activities.

In April 2006, Easow—a Calcutta-based “chartered accountant with 18 years experience in the capital and financial markets”—had been directed by the Securities Exchange Board of India (SEBI) to “cease and desist” from recommending any investment in the public media, after finding him guilty of violating regulation 4(2)(f) of the SEBI (prohibition of fraudulent and unfair trade practices relating to securities market) regulation.

Easow successfully appealed against the SEBI order with the Securities Appellate Tribunal which imposed a penalty on the market regular. Challenging the SAT order, SEBI said the tribunal had failed to appreciate that Easow had recommended “a very impressive price appreciation in certain scrips” (between June and December 2005) within a short term, while he himself had sold those very shares on the same day.

Easow had sent six e-mails to TV 18 giving stock advice with buy and sell recommendations regarding four listed companies. The advice had also appeared on the channel’s website moneycontrol.com

While enquiring into the trading pattern of Easow, SEBI found that he had taken an opposite trading pattern to what had been recommended to the investors. “It is axiomatic that a person who recommends others to buy securities must himself be either passive or buy such securities rather than sell them,” the SEBI petition said. “The only circumstance when a person would sell securities after telling lay investors to buy would be a person who is taking advantage of his misleading information in the first place by giving stock tips, thereby inflating the price of the stock and then offloading such securities after the recommendation is aired,” it added.

Only recently, outgoing SEBI chairman M. Damodaran had expressed concern at media figures talking up or talking down the markets.

“When we heard the term anchor-investors first, I thought an anchor investor was the guy that brings in a lot of money initially into a project around whose reputation others invest. I am beginning to believe at the end of my three-year tenure that an anchor investor is one who is an anchor and an investor put together.”

Photograph: courtesy moneycontrol.com

Also read: Ethical journalism is a bad word at CNBC-TV18

Business journalism or business of journalism?

SUCHETA DALAL: Invest at your own risk

‘The first casualty of a cosy deal is credibility’

28 January 2008

The Times of India group’s decision to make strategic investments in mid-level companies, in return for guaranteed advertising and editorial exposure in the group’s publications and media vehicles, through the quaintly named “Private Treaties“, has had several other media houses following suit.

Hindustan Times is said to be well on its way to establishing a similar division. Television majors like NDTV and CNBC are following suit. And as if to show that language publications are not lagging behind, influential Hindi groups like Dainik Bhaskar and Dainik Jagran are also off the blocks.

SALIL TRIPATHI, the London-based journalist formerly with India Today and The Indian Post, whose work has appeared in Wall Street Journal, Far Eastern Economic Review, and International Herald Tribune, among other publications, writes of the damage these wheels-within-wheels deals cause.

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By SALIL TRIPATHI in London

Most serious and professional newspapers recognize the need to separate editorial and advertising. The Wall Street Journal goes further, separating fact and opinion. So do other major US newspapers, but WSJ‘s distinctness stems from separate management structures for both.

At the convention of the South Asian Journalists’ Association (SAJA), New York Times editor Bill Keller said that the management structure of the edit page and news pages at the NYT, too, were separate. Which is how it should be, but all newspapers don’t have the luxury of such a roster of writers and management structures.

When editorial and advertising blend, the first casualty is credibility. A reader simply cannot know if a particular company, product, or an idea being promoted is because there’s a mass base of support for it, or because some experts like it, or is it because of financial considerations.

The Times of India‘s new business concept, Private Treaties, is audacious, innovative, and breathtaking. And incredibly underwhelming. It trades advertising for equity in companies.

As described on its poorly-designed, shoddily-edited, and jargon-filled website, it creates intangible value for companies in which the TOI group has a stake, by highlighting its intangible qualities, through the medium of TOI‘s publications.

If all that it means is a promotion restricted to discounted rates for advertising in the TOI, that would be simple enough, and acceptable to most purists in journalism. But with the Times you are never sure. In the past, it has encouraged its reporters to go on junkets to tourist resorts, and not always revealed the nature of the hospitality received.

When the Times group has launched its own businesses such as music, entertainment and so on, using prominent Indian performers, the newspaper’s page 1 has to give way to stories about that event, as though it is the most talked about event in town, if not the only event in town.

I recall in the mid-1990s, there were days of reporting on a modern ballet called Yes!, being staged under the choreography of my classmate from college in Bombay, the gifted dancer Shiamak Davar. The editor-in-chief would call senior Times editors to get hold of writers who’d say nice things about Yes!

A tax raid on TOI‘s owners in the 1980s got barely a mention in the newspaper.

When things got tough, the Jain family’s tax battles with the Indian government were cast as a human rights issue. A writer on the TOI edit page went on a junket with a European pharmaceutical company, and wrote an edit page piece extolling the medicine. Nothing wrong with a story about health on the TOI‘s edit page, but something was rotten in the state of Bori Bunder, if such a story appeared out of the blue, and no rival brand got similar coverage, or even comparison in that piece.

Then, the Times went the whole hog, with features like Impact and Spotlight, when news articles appeared on news pages, which were essentially advertisements.

When a plucky blog, Mediaah! ridiculed some of the practices at the Old Lady of Bori Bunder, the Times‘s legal eagles threatened to sue the website. Pradyuman Maheshwari, the spirited journalist who kept it going, decided to close shop. It is, therefore, refreshing to see Times‘s Gautam Adhikari writing that his paper believes in publish-and-be-damned liberalism.

It is against this background that the Private Treaties are highly suspect.

However much the Times might claim that it keeps editorial and advertising separate – when we know that’s not really the case—there will be an impact. A reporter chasing a story against a company in which the Times group has an equity stake will feel obliged to go softly. A reporter chasing a scandal involving a film star whose music is marketed by the Times group, will view the release of the CD differently.

It is so obvious, that it does not even need stating.

A property scandal, or a scam, involving a company that advertises in the newspaper may be problematic for some editors; how much more complicated it can get when the Times group has an equity stake in that company? And wouldn’t the negative story drive down the value of the investment?

There are sound reasons why across the world, editors try to keep editorial and advertising separate, to enhance the credibility of the editorial matter. When I worked with a US-owned magazine (Far Eastern Economic Review) and wrote an extensive piece on conflict of interest within some leading US investment banks, even though those banks were prominent advertisers in my magazine, at no stage did any editor tell me to go easy on that story.

At the Dow Jones group, reporters cannot own stocks in companies they write about. Other major US papers have similar codes.

In my reporting days in Bombay in the 1980s, I’ve seen, with great dismay, financial reporters of several leading Indian dailies rushing out of a press conference where a company has declared its results, to make phone calls to their brokers to buy or sell shares (there were no cell phones then).

Mint, the new business daily launched by the Hindustan Times group, has transparently placed its code of conduct on the web. It also recently declared to its readers how it would publish advertorials, and how they would be distinct from edit pages, and how edit staff would not be involved in preparing them. (The International Herald Tribune and other American publications do likewise).

Unless the Times institutes similar safeguards, it would seem that Private Treaties marks another step in the journey the Times—“the leader [that] guards the reader”—has taken, transforming the nature of journalism.

In the late 1980s, the Times group had begun distributing promotional products in a plastic bag, together with the magazine, Illustrated Weekly of India, which the Times used to publish. We used to throw those products away, preferring to read the magazine. Now the magazine is gone; the toothpaste remains.

Hopefully, the Times, in its drive to enhance the value of companies it invests in through this innovative mechanism, will also attach some value to its readers.

Disclosure: I write frequently for Mint, and the Wall Street Journal‘s international editions; often for the International Herald Tribune, and on rare occasions for the Times of India. But this is not a case of sour grapes.

Photograph: courtesy saliltripathi.com

Also read: SUCHETA DALAL: Forget the news, you can’t trust the ads either

Forget the news, you can’t trust the ads either

9 January 2008

The selling of the news columns in Indian newspapers, a pernicious practice that deliberately blurs the distinction between independently generated news and paid advertisements, has assumed pandemic proportions with language publications unabashedly apeing the market-leader The Times of India, which pioneered the move.

But, it now turns out that even paid advertisements are no longer what they seem in the Times group. Very often, they are tied to the group’s investments in select companies. The news and advertising exposure these companies get in its publications, boosts their stock prices, that swells the bottomline of the investing company.

It’s a win-win but guess who loses?

SUCHETA DALAL, India’s numero uno business investigative journalist who cracked open the Harshad Mehta case, and who now runs the personal finance magazine MoneyLIFE, throws light on a new strategy of the group that “tears down every shred of the wall between editorial, advertising and public relations”, and takes readers and investors for a royal ride.

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By SUCHETA DALAL

If you are an investor who depends on India’s largest-selling economic newspaper for unbiased news, then you must know and understand the concept of “private treaties” (PT). Since The Times of India (TOI) far outsells every other English newspaper and The Economic Times is by far the market leader in the economic news category, the concept is of universal interest.

Although PTs sound like agreements between two sovereign nations, they are, in fact, pacts between the Times of India group and approximately 100-odd companies, under which TOI buys shares of small and fast-growing companies. The list is expanding rapidly.

In an article for India-Seminar on “The changing Indian media scene“, T.N. Ninan, editor of Business Standard, described PTs as “basically the transfer of shares in return for advertising.” He said, Bennett Coleman & Co, which owns the Times of India group of publications, “invests in usually mid-rung companies that are keen to jump into the big league but are perhaps without the big bucks to spend on marketing. The share purchase money is immediately taken back against the promise of guaranteed advertising in Bennett publications—to build the investee company’s brand(s). Part of the deal is even said to be editorial coverage, though this remains unconfirmed.”

Ninan goes on to say, “If true, by definition, this will have to be positive coverage” because “the brands have to be built up, so that the shares bought by Bennett gain in value and can be sold.”

Well, reports of guaranteed editorial coverage are no longer “unconfirmed”, as Ninan put it.

MoneyLIFE has in its possession a document to prove that journalists are being designated as “champions” for PT clients to tailor editorial coverage to enhance the value of these companies and TOI‘s investment.

An e-mail by The Economic Times editor Rahul Joshi (dated 29 November 2007) says:

“At ET, we are carving out a separate team to look into the needs of Private Treaty clients. Every large centre will have a senior editorial person to interface with Treaty clients. In turn, the senior edit person will be responsible, along with the existing team, for edit delivery. This team will have regional champions along with one or two reporters for help—but more importantly, they will liaise with REs (Resident Editors) and help in integrating the content into the different sections of the paper. In this way, we will be able to incorporate PT into the editorial mainstream, rather than it looking like a series of press releases appearing in vanilla form in the paper.”

Joshi then goes on to name the PT “champions” for each region, who will “advise” the regional editorial chief to carry ‘stories’ about PT clients. He also designates “trouble shooters” in each region, probably to ensure that no PT client is offended with negative coverage.

While this kind of support for advertisers in the editorial pages is extraordinary anywhere in the world, it is important to remember that there is nothing clandestine about what TOI is doing. The PT arrangement, along with all the “benefits” that would accrue to those who sign up, along with testimonials from successful PT customers such as Nirmal Jain of India Infoline and others is on two group websites. These are www.privatetreaties.com and timesprivatetreaties.com.

In the past two years, TOI has invested over $500 million (approximately Rs 2,000 crore) in 114-odd companies in diverse businesses. It is a private equity firm.

TOI claims that when these companies are mentioned editorially, its investment in them is mentioned. Indeed, one occasionally notes such a mention, but how many investors understand what PT stands for or the relationship that is implied? Moreover, while such a disclaimer may work when a press release is published, will it be followed when journalist “champions” work hard to “integrate the content” to ensure that it does not look like “vanilla” press releases?

Typically, the Times group buys a 5%-10% stake in mid-sized companies that are planning to go public or looking for private equity. The investment can vary from Rs 10 crore to Rs 100 crore. The company agrees to invest an equal amount in advertising in Times publications over a three-to-five-year period at a steep discount to the normal advertising rates.

Most companies that sign PTs are those planning public issues, selling expensive realty projects or looking for private equity. All of them are looking for publicity and an assurance of positive editorial coverage. For the Times, it is usually a double bonanza: significant capital appreciation and tax-free income (since there is no long-term capital gains tax)—on the other hand, advertising revenue is fully taxed.

Investors must know the exact list of Times PT clients (which is available on their website for easy reference) because you are least likely to hear any bad news about these companies. They include:

# Deccan Aviation
# Sobha Builders
# India Infoline
# Emaar MGF
# Celebrity Fashion Ltd
# The Home Store
# Amity Education
# Media Video Ltd
# Vishal Retail Pvt Ltd
# Zicom
# Ezeegol.com
# Avesthagen
# Bartronics Ltd
# Paramount Airways
# Almondz
# Archies
# Future Group
# Thyrocare
# Raja Rani Travels
# Sahara One
# Percept Pictures, etc.

It offers “advertising support, branding support and corporate image development.”

PT’s vision is stated as follows:

# We dare to go where no one has dreamt of venturing before.
# We seek advertising clients that no one wants.
# We look for value that no one sees.
# We co-create wealth that no one imagines.

All this is fine from the business perspective of the Times. Where does the group’s “win-win relationship” with PT customers leave the readers/investors? They clearly do not figure in the equation at all. The group indeed tests the limits in what passes off as news, but in the cut-throat fight for the advertising buck, what exactly is an “advertising client that no one wants”? Surely, not India Infoline?

The PT website lists every press release issued on behalf of PT clients. The headlines alone reveal the slant. For instance:

# ‘Skyscrapers all set to change Noida skyline’ (TOI)
# ‘Milk & Honey Towns’ (ET)
# ‘Companies rake in big moolah serving NRIs’
# ‘Sai Info to come up with 18 e-malls by March’
# ‘Airline mergers is bad news for consumers’ (for Paramount Airlines)
# ‘What you get is exactly what you have paid for’ (for Gitanjali)
# ‘Parajia has ability to swing big deals’ (for India Infoline)
# ‘Gitanjali Lifestyle to ride high on luxury’
# ‘Reason to Smile’ (for GTL, earlier Global Telesystems)
# ‘Pantaloons rolls out the red carpet to woo the last minute Durga Puja shopper in Kolkata’
# ‘Bajaj bros resume legal battle over empire’ (this one for Bajaj Hindusthan is particularly interesting) and finally check this one for Osian—‘India’s brush with soccer is all set for a change. History is being re-written on a new canvas and the view looks optimistic’.

This unique “win-win” situation indeed works wonderfully well in a monster bull run. While companies and the publishing group are the real winners, the investors are losing nothing at the moment. But remember this is a two-year-old concept and the implications of tearing down every shred of the wall between editorial, advertising and PR will be evident only when things look less sunny for the markets and the economy.

Photograph: courtesy suchetadalal.com

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Crossposted on sans serif


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