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A dream gone sour & an arrest
T N Ninan |
December 11, 2004
Pioneering publisher Ashok Advani has been battling to save his magazine empire for years. Will he now have to do it from behind bars?
The last time a prominent Indian publisher went to jail was more than 40 years ago, when Shanti Prasad Jain of Bennett, Coleman & Co. was arrested on a variety of charges.
Ashok H Advani of Business India is not in the same league, being no more than the publisher of some niche magazines, whereas Jain not only ran the country's largest media company but also a vast business empire spanning everything from banking to cement and jute.
Still, Advani's arrest and denial of bail last week on the charge that he had defrauded an education trust as well as a co-operative bank hit the front pages of many newspapers.
The bank has collapsed and depositors have lost money, while Advani's incarceration marks the latest twist in the story of a UK-educated lawyer who created a successful publishing and media business with borrowed capital of Rs 50,000 -- only to have it all destroyed by a disastrous diversification into a television channel.
Till the mid-1990s, Advani could do no wrong. Back in 1978, the only business and economics magazines were dreary affairs.
No one thought the corporate world was interesting raw material for journalism; indeed, many newspapers as well as Doordarshan discouraged reporters from mentioning either company names or brands when reporting on business!
Into that staid word, Advani launched a Business India that declared openly that it was the magazine of the corporate world. He paid journalists twice as much as the leading newspapers were offering, gave them first class rail passes in Mumbai and the taxi fare home at night, paid generously and without limit if any staffer had a personal emergency, and won the lasting loyalty of many, including his readers.
Business India grew from 12,000 copies at the start to 125,000, and had more advertising pages than any other magazine in the country -- more than 150 pages per issue, sometimes. Indian business simply could not advertise enough in the magazine, it seemed.
Other innovations were equally successful, like Inside Outside. Auto India was the market leader as a car magazine, and he had the contracts to produce both Namaskaar (for Air-India) and Indian Management (for the All India Management Association). Some ventures didn't do as well, like a tabloid news weekly that was quickly shut down.
Everything that he did was an innovation in Indian publishing, and Advani soon diversified into the sunrise cable TV distribution business, pocketing the lucrative south Mumbai market, as well as market research -- when he snapped up first MARG and then merged it with ORG to create yet another market leader.
He then used the Business India brand to diversify into another profitable line, exhibitions and trade shows.
Within 15 years of starting with nothing, Advani had built an entrepreneurial and highly diversified business with revenue of almost Rs 100 crore (Rs 1 billion), and valuation of that much or more.
Then came the fatal diversification into satellite television, which can be a cash-hungry business if it does not go well -- and it didn't for Advani.
The Russian satellite that had been hired was not available as the Russian company went belly up. A back-up deal through Nepal didn't work out and the satellite on which the channel eventually launched gave poor reception.
Cable distribution was unsatisfactory, and it soon became clear that Advani had simply not marshalled the managerial resources to run such a venture.
The money raised from institutional investors (one deal with a well-known firm was at a crazily high price) soon ran out. Advani could have cut his losses, and many friends advised him to do just that.
But he borrowed from all and sundry (including some of the biggest names in the business world, whose social circle Advani had become part of), gave personal guarantees on loans, and dug himself a bigger and bigger financial hole as unpaid interest piled up -- hoping all the time to pull a rabbit out of some hat.
Eventually, he began hawking his profitable assets in order to pay the liabilities on a dead investment, for the TV venture had long since shut down.
The cable business went first to Hathway of the Rahejas, who also took charge of two of the group's titles. ORG-MARG too was then sold.
But nothing was enough to pay off all his creditors, some of whom began filing lawsuits (including fellow-publisher Aroon Purie of India Today).
Advani and some of his senior colleagues began to get non-bailable arrest warrants as he defaulted on loans, negotiated settlement deals and defaulted again.
Somewhere along the line, he finally dipped into the money belonging to an education trust that, ironically enough, his late father had started, and where Advani had succeeded his father as president.
The Hyderabad (Sindh) National Collegiate Board was a Mumbai power base in its own right. Set up to rehabilitate Sindhi refugees who had suffered in the partition of India, the board had become the country's largest education trust, running 16 colleges and 10 schools, with 45,000 students and 2,000 teachers.
As president of the trust, Advani was hugely sought after when it came to school and college admissions, and he was unfailingly helpful to supplicants.
As a friend commented last week, "Don't forget that there was a large-heartedness about the man. He was always chaotic, but that doesn't make him a crook. He always believed he would prevail."
Advani is accused of transferring the trust's money into the Jai Hind Cooperative Bank, a single-branch outfit of which he was a director, and then of transferring the money (some Rs 27 crore -- Rs 270 million) from the bank into his own account -- hoping presumably to be able to repay it when one of the many deals that he was negotiating fructified.
But Advani was succeeded on the Collegiate Board in November last year by Niranjan Hiranandani (of the real estate firm), and soon a case was filed against Advani.
Hiranandani does not mince his words. "This is the largest fraud and embezzlement in the history of education trusts in India. After I filed an FIR which led to his arrest, I received more than 40 phone calls from top industrialists congratulating me, and they said that I should have done this long back."
Stressing the tragic undertones of the development, Hiranandani pointed out: "I have erected statues of his father in my housing complexes, and he as a son has ruined his name."
The trust today is left with just Rs 7 crore (Rs 70 million), while the bank has lost its licence and shut down.
Friends of Advani, however, speak well of him even today. Deepak Parekh of HDFC said: "I have known him for the last 35 years. He is great, he is clever, intelligent and extremely hardworking. He has led a simple life, he is a vegetarian and never touched alcohol. He has not siphoned off any money or defrauded anybody for personal gain. He put his last penny into his TV venture. It seems he had good intentions but something went wrong."
S L Rao, management pundit, electricity regulator and columnist, had similar sentiments. "He's a very fine person, lives simply, doesn't drink or smoke and works extraordinarily hard. I've never seen him raise his voice. He's a very decent person. What's gone wrong is very hard to say."
Added Titoo Ahluwalia, who used to run ORG-MARG when Advani was its largest shareholder: "He's a good guy -- things have just spun out of control."
And how. Advani used to own 70 per cent of the company, and raised some cash by selling 19 per cent to the Dutch firm VNU. He also borrowed $22 million from VNU, in return for which he pledged his balance 51 per cent stock in the firm.
Like so many others, the loan could not be repaid, the shares had been pledged to VNU as well as to a bank, VNU threatened to sue and Advani, in a typically audacious move, tried to buy out VNU. He failed and eventually lost the company.
Insiders say that through all the drama, lasting many months if not years, Advani had even taken to borrowing money from staff, a lakh or so at a time -- while he had begun failing to pay his magazine staff their salaries and allowances, causing many of them enormous financial distress.
Publications other than Business India started skipping issues, he lost the contracts with Air-India and All India Management Association, and found the flagship BI slipping from market leadership to third position in a market of three.
In 2001, when all seemed lost (and the same year in which Advani took the trust's money), Ravi Parthasarthy of IL&FS tried to help out by arranging a restructuring package whereby the lenders would take massive hair-cuts, and what was till then a partnership firm would give way to a joint stock company that would raise money by selling shares to investors.
The plan never got the agreement or did not appeal to the investors who were approached, and after that there was little hope of doing a deal because the assets available were no longer enough to pay even the reduced amounts that creditors were willing to accept.
A month or so ago, Advani knew that the jail was now waiting for him. He had managed to rustle up a cheque for Rs 1.1 crore (Rs 11 million) months before his arrest. But not one to give up even at the eleventh hour, on the day of his arrest he issued another cheque for Rs 5 crore (Rs 50 million). But it was too little too late.
On Friday, Shashi Ruia of the Essar group was helping to marshall resources to try and get Advani out on bail. Other friends too were hoping to get leading lawyers involved and get him out on bail early next week. And in the Business India office, it was business as usual.
The editorial staff held their regular meeting on Friday, planning the next issue, while Pheroza Billimoria as managing director and one of the original Advani loyalists was busy running between the courts and lawyers' offices.
She said there had been a flood of SMS messages of sympathy on her cell phone and "an outpouring of support."
She added, by way of explanation for the mess: "We're not crooks. Maybe we took silly decisions."
There must have been times on his way up to publishing stardom when Advani felt like the king of Mumbai. On Friday, as he waited in the police lock-up, the question was how would he handle what is a serious criminal charge, and what would be the fate of the publishing business that still survives.
There has been speculation that Hiranandani might take charge of the business or bring in a partner, and failing that sell to the highest bidder -- he has admitted to getting an offer from a leading publishing house.
Although Mumbai-based publisher Maneck Davar said "there's been no official bid from our side," he did admit to having sounded someone in the group on a sale some months ago, adding that "the price expectation was outlandish."
And so, for all those who don't believe in miracles, it seemed that the laws of the legal and financial worlds would now take their course.
Business India, the group's flagship brand and the fortnightly business magazine was first off the block among business news magazines in India. At one time BI was the country's largest selling magazine with a circulation of more than 100,000.
Some of the magazine's former employees remember the power and influence it enjoyed in the business community as well as in the government.
"Whether it was the budget analysis or instituting the Businessman of the Year award, there was leadership of ideas," says Dilip Cherian, a senior editor in Delhi in the early 80s.
To be sure, BI was a favourite not only among business news readers but also among advertisers and media planners.
Says a former Business World marketing executive, "Even till 1998, Business India had over 54 per cent share of the total advertising in business magazines." Today, its circulation is lower than its rivals'. The ABC (Jan-June 2003) figure pegs it at 75,673 copies which is lower than Business World at 1,20,548 and Business Today at 1,24,647.
While BW and BT command almost similar advertising rates, Rs 1.75-2 lakh for a full page, BI barely sells for Rs 70,000 for similar space.
Hormazd Sorabjee, editor, Autocar India, has reason to be nostalgic about his stint with the Business India Group. He launched the group's automobile magazine, Auto India, in June 1993 and saw its circulation peak at 1 lakh copies within a couple of years.
But when cash crunch hit the group's print media business as well, Sorabjee quit to launch his own auto mag titled Autocar India.
Today, the five-year-old magazine enjoys a circulation of 90,000. "I owe my success to the Business India Group that allowed me to grow and develop my own creativity," he says.
"It is very sad to see the group decline."
Auto India no longer appears regularly on newsstands and its last reported circulation (January-June 2003) is 44,548.
Inside Outside, the third magazine from the BI stable, was a pioneer in the interior design category. "Several clones followed but it managed to sustain its leadership for many years," says a former executive of Media Transasia that publishes the Indian Design & Interiors magazine.
At its peak, Inside Outside had a circulation of nearly 100,000 copies. But in the last ABC, its circulation has dropped to 54,443. "The magazine was a money-spinner and may still be profitable," he adds.
Additional reporting with Tamal Bandhyopadhyay, Rumi Dutta, Aparna Krishnakumar & Shuchi Bansal