I know, I know...every charlie in town is saying he had seen it coming. But it took a Twitteroor to precipitate matters, to shake the foundations of IPL. But, why now? Is the government trying to get even with Lalit Modi because he had the gumption to take on a minister in the government? Or, is there something else? Mocha is also throwing its hat into the ring with its version of what might have brought government tolerance to its tipping point (read here) . For a smart man, Lalit Modi has been quite foolhardy in his choice of enemies. Consequently, he may have bitten off more than he can chew...he is now being force-fed humble pie.
Sunday, 25 April 2010
Friday, 16 April 2010
Games People Play
The ownership mess surrounding the Kochi franchise of the Indian Premier League, along with all its suggested subterranean filth, is what happens when you put together all the unholy elements of Big Business, Bollywood, Betting syndicates and Ballot champions into a box and shake hard. Now that this vile-looking genie is out and at large, it’s time to raise some issues, ask some questions:
1. Is Lalit Modi going to come clean? He has painted himself into a bit of a corner by forcing the new Kochi franchise to reveal its shareholding details. Now all the other franchises might have to follow suit; plus, the government agencies are reportedly investigating the web of companies that camouflages the real shareholding. Some of the powerful franchise owners might not be happy with Modi for precipitating matters. Things were going smooth so far and, for some inexplicable reasons, Lalit Modi has rocked the boat. Unpardonable.
2. The Income tax department has already showed up in force and any information they get gives them a handle. Some leverage that.
3. This raises questions over Lalit Modi’s managerial capabilities. Or, as they say in India, his ability to manage the “environment”. If he had wanted a certain corporate house to be awarded the franchise (as has been speculated in media), existing Indian management ethos (adopted wholesale from the Indian political narrative) would have expected him to have delivered the result. No questions asked about the means adopted; the ends matter more than anything else. He had managed to have his way so far; what went wrong this time? Time for the ungainly heave-ho, going by unconfirmed reports that a BCCI factotum is likely to be installed alongside Lalit Modi?
4. Why was Kochi selected for the franchise and not Ahmedabad as had been planned a year ago? Did Shashi Tharoor influence the decision? Was there any quid pro quo? The story of how a South African model was denied a visa by the ministry of external affairs – reportedly on a request from Lalit Modi -- remains incomplete.
5. Was Lalit Modi under pressure from Narendra Modi to scuttle the Kochi deal?
6. Clearly, not all IPL team owners have stumped up hard cash. They could be just faces on hire, proxies lending their names for a fee to some moneybags who prefer staying in the shadows for the obvious reasons. How does IPL rid itself of this stigma?
7. Going by reports so far, only the IPL organizers seem to have made any money so far. Most teams still seem to be languishing in the red zone. So far, the league looks like a one-way funnel for pouring in cash with no guarantee of returns. What’s the big rush then for acquiring a franchise? Valuation game? Or, is there a pay-off somewhere else?
8. Sunanda Pushkar’s role is likely to come under closer scrutiny – getting a 5% sweat equity stake, apparently “undilutable in perpetuity (sic)”, according to some news channels, is bound to raise some eyebrows.
1. Is Lalit Modi going to come clean? He has painted himself into a bit of a corner by forcing the new Kochi franchise to reveal its shareholding details. Now all the other franchises might have to follow suit; plus, the government agencies are reportedly investigating the web of companies that camouflages the real shareholding. Some of the powerful franchise owners might not be happy with Modi for precipitating matters. Things were going smooth so far and, for some inexplicable reasons, Lalit Modi has rocked the boat. Unpardonable.
2. The Income tax department has already showed up in force and any information they get gives them a handle. Some leverage that.
3. This raises questions over Lalit Modi’s managerial capabilities. Or, as they say in India, his ability to manage the “environment”. If he had wanted a certain corporate house to be awarded the franchise (as has been speculated in media), existing Indian management ethos (adopted wholesale from the Indian political narrative) would have expected him to have delivered the result. No questions asked about the means adopted; the ends matter more than anything else. He had managed to have his way so far; what went wrong this time? Time for the ungainly heave-ho, going by unconfirmed reports that a BCCI factotum is likely to be installed alongside Lalit Modi?
4. Why was Kochi selected for the franchise and not Ahmedabad as had been planned a year ago? Did Shashi Tharoor influence the decision? Was there any quid pro quo? The story of how a South African model was denied a visa by the ministry of external affairs – reportedly on a request from Lalit Modi -- remains incomplete.
5. Was Lalit Modi under pressure from Narendra Modi to scuttle the Kochi deal?
6. Clearly, not all IPL team owners have stumped up hard cash. They could be just faces on hire, proxies lending their names for a fee to some moneybags who prefer staying in the shadows for the obvious reasons. How does IPL rid itself of this stigma?
7. Going by reports so far, only the IPL organizers seem to have made any money so far. Most teams still seem to be languishing in the red zone. So far, the league looks like a one-way funnel for pouring in cash with no guarantee of returns. What’s the big rush then for acquiring a franchise? Valuation game? Or, is there a pay-off somewhere else?
8. Sunanda Pushkar’s role is likely to come under closer scrutiny – getting a 5% sweat equity stake, apparently “undilutable in perpetuity (sic)”, according to some news channels, is bound to raise some eyebrows.
Monday, 12 April 2010
War Of The Lords
What an unholy row! The unseemly spectacle of India's two financial sector regulators locking horns in public, and sparring with flailing fists, can only spell disaster for the country’s financial sector and its "orderly" development.
These two regulators should also realize that, with this spat, they have played into the hands of the government. It is well known that North Block in New Delhi, which houses the Finance Ministry, is keen to play mid-wife to the birth of a new super-regulator for the financial sector.
Pranab-babu’s Budget speech in February had promised a new super-regulator for the financial sector but was conspicuously silent on the details. Since then speculation has mounted about this new creature and its genetic make-up. The latest spat between securities markets watchdog Sebi and the insurance regulator, Insurance Regulatory and Development Authority, has now fuelled rumours that the ministry might use this seemingly intractable row to insert itself and lay the foundations for a government controlled super-regulator. SEBI and IRDA will then have to report to this new organization.
It is strange that such a disagreement was not sorted out in the High Level Coordination Committee on Financial Markets, an informal body created to specifically sort out similar issues of turf between different regulators. In fact, the coordinated action by Reserve Bank of India and Sebi recently against Bank of Rajasthan proves that this apex level committee can stymie designs of those who want to profit from regulatory arbitrage. However, there could be one possible weakness: this organization lacks legislative teeth. Various committees have recommended that the HLCC should either be given legislative powers or a super-regulator be set up.
This has become necessary since institutional activities and products increasingly straddle multiple markets today. Also, as the recent crisis has shown, achieving overall financial stability – which means ensuring that risks in each and every part of the inter-connected financial system are within manageable limits – has now been accorded greater importance than ensuring the stability of the banking system alone. And, it is believed that a super-regulator with a 30,000-feet-helicopter-view alone can perform this job. But, the important question that arises is: is the government the right agency to undertake this responsibility? And, if all the regulators in the financial system are to report to this omniscient regulator, what are the consequences?
Conclusion: there should be a widespread debate before finalizing the DNA structure of the yet-to-be-born institution.
These two regulators should also realize that, with this spat, they have played into the hands of the government. It is well known that North Block in New Delhi, which houses the Finance Ministry, is keen to play mid-wife to the birth of a new super-regulator for the financial sector.
Pranab-babu’s Budget speech in February had promised a new super-regulator for the financial sector but was conspicuously silent on the details. Since then speculation has mounted about this new creature and its genetic make-up. The latest spat between securities markets watchdog Sebi and the insurance regulator, Insurance Regulatory and Development Authority, has now fuelled rumours that the ministry might use this seemingly intractable row to insert itself and lay the foundations for a government controlled super-regulator. SEBI and IRDA will then have to report to this new organization.
It is strange that such a disagreement was not sorted out in the High Level Coordination Committee on Financial Markets, an informal body created to specifically sort out similar issues of turf between different regulators. In fact, the coordinated action by Reserve Bank of India and Sebi recently against Bank of Rajasthan proves that this apex level committee can stymie designs of those who want to profit from regulatory arbitrage. However, there could be one possible weakness: this organization lacks legislative teeth. Various committees have recommended that the HLCC should either be given legislative powers or a super-regulator be set up.
This has become necessary since institutional activities and products increasingly straddle multiple markets today. Also, as the recent crisis has shown, achieving overall financial stability – which means ensuring that risks in each and every part of the inter-connected financial system are within manageable limits – has now been accorded greater importance than ensuring the stability of the banking system alone. And, it is believed that a super-regulator with a 30,000-feet-helicopter-view alone can perform this job. But, the important question that arises is: is the government the right agency to undertake this responsibility? And, if all the regulators in the financial system are to report to this omniscient regulator, what are the consequences?
Conclusion: there should be a widespread debate before finalizing the DNA structure of the yet-to-be-born institution.
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