The Press Distrust of India

Ad-edit ratio touches a new high as Times goes on acquisition spree

The Times group is assuring the companies of publicity and visibility
for the preferential allotment of their shares. A worrying trend

By Naresh Minocha
New Delhi | Tehelka | 10 December 2005
http://www.tehelka.com/story_main15.asp?filename=Bu121005Ad_edit.asp

A presentation: 'PR and Media Solutions' by the Times Group says,
"We're here to offer a range of pr solutions for your products and
services through publicity in our own media vehicles i.e The Times of
India, Economic Times, Radio Mirchi, Zoom Television, Times Now and
Medianet Online." Companies are excited at the prospects of riding on
the Times vehicles. About ten companies including Videocon and Kinetic
Motors have already joined the vehicles through preferential allotment
of their respective equity shares to Times group owner Bennett,
Coleman & Co Ltd (BCCL).

The new dimension here is preferential allotment of shares by client
companies for assured publicity and visibility in Times publications
and online services. The equity stakes acquired by BCCL vary from 4.4
percent in Videocon Industries Limited (vil) to 16.55 percent in a
low-profile IT company called iiht Ltd. Apart from vil, Kinetic and
iiht, the other companies in which BCCL has acquired or is acquiring
stakes include jewellery major Rajesh Exports Ltd, Celebrity Fashions,
Todays Writing Products, and Pantaloon Retail.

Preferential allotment is legal but has been misused by the corporate
sector so much that it is hurting public shareholders. Ironically, the
Economic Times (ET) itself published on the subject of preferential
issue. 'Face-Off' on April 1, 2005 in which both distinguished
contributors agreed preferential issues should be discontinued as they
hurt the interest of all shareholders except the ones receiving the
favours.

Preferential allotment over the last year has degenerated to the level
of erstwhile promoters' quota. In the 80s and early 90s, promoters
allotted shares to journalists, politicians, bureaucrats and other
influential segments of society at the time of the initial public
offer. Stock market regulator finally banned such allotments. About
two-and-a-half years ago, the Times group rocked journalism by
introducing paid editorial content service. This service was
originally aimed at Page three wallas who wanted to acquire fame and
name in a jiffy.

BCCL has a wholly owned subsidiary, Optimal Media Solutions Pvt Ltd
for this purpose. Operating under the brand Medianet, the subsidiary
provides "comprehensive media coverage and content solutions to
clients from all walks of life." Medianet provides editorial coverage
for products, services and events with true newsvalue. It says: "We
mean real newspaper articles and TV, radio programs, not
advertisements."

Real it is as evident from a main story in toi on November 25, which
says: 'Times Group to buy stake in iiht.' The news carried the
photograph of iiht ceo. Would the daily give the same editorial
coverage to a company that settles for a single advertisement instead
of lapping up the media solutions?

The purists shudder at the idea of top newspapers going the Bombay
Times way. Neither BCCL nor the companies have made public the
respective shareholders' agreement underlying the preferential issues.
The limited information available suggests that all such deals are not
equity-for-advertising swaps. Such swap deals would logically mean
staggering allotment of shares in lieu of cash for advertisement
published over the years. Most companies have reported upfront, the
investment by BCCL and the consequent allotment of shares. Pantaloon
Retail, for instance, has shown an allotment of 953,653 equity shares
at a price of Rs 734.02 per 10 shares (4.34 percent stakes) on
February 11, 2005 for "cash" consideration. This has left business
analysts wondering whether there is more to such deals than meets the
eye.

With no editorial watchdog in the country, it's obvious whether such
deals have a tacit understanding on editorial space. Kinetic Motors
has told its shareholders that the object of the preferential issue of
8.59 percent shares to BCCL is "to meet requirements of funds for
launching new models and working capital requirements." vil, on other
hand, has told its shareholders that BCCL has "intended to subscribe
to the equity capital of the company for an aggregate sum not
exceeding Rs 100 crore." The editorial space is compromised not by
merely publishing stories that help the clients push their business
but also by blocking negative stories. A business newspaper can do a
great favour to a company by simply turning a blind eye to audit
objections or tax disputes in its annual report.

According to a business analyst, BCCL's business interests and the
editorial coverage move in tandem. They cite the case of Mesco group
getting favourable stories in ET before the group's meltdown. After
the meltdown, BCCL issued an advertisement, offering sale of 16.6
percent equity stake in Mideast India.Another analyst also finds a
correlation between the ET's coverage of economic reforms and the
coveted banking licence to BCCL. Reserve Bank of India (RBI) issued
the licence by overlooking other biggies but BCCL didn't benefit and
had to merge Times Bank with hdfc Bank five years ago. Analysts say
that the readers should be on gaurd due to the Times group's growing
interest in the companies and their shares. The readers should
consider BCCL's disclosed and undisclosed interests in different
companies while reading fairy-tale stories.