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This article was first published 8 years ago  » Business » Govt action against Sun Group is legally untenable'

Govt action against Sun Group is legally untenable'

By TE Narasimhan and Gireesh Babu
July 20, 2015 12:24 IST
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Dayanidhi Maran with his brother Kalanithi

Image: Dayanidhi Maran with his brother Kalanithi. Photograph: Rediff Archives

Pressure is mounting on media tycoon Kalanithi Maran’s Sun Group.

Following media reports that the security clearance for 33 of its television channels would be denied, the government has refused the application of its radio channels for participation in FM radio’s phase-III auction.

S L Narayanan (photographed below), the group’s chief financial officer, talks to Business Standard.

Edited excerpts:

You have received the first communication from the government last week. What did it say?

It says our application was rejected for want of receipt of security clearance, denied by the ministry of home affairs since there are cases pending before the Central Bureau of Investigation (involving Astro's investments in Sun Direct) and the Enforcement Directorate (involving the same Astro investment that is alleged to be money laundering), and the ongoing CBI investigations into the installation of a telephone exchange at the residence of former Union telecom minister (and Kalsnithi's brother) Dayanidhi Maran.

What is your reaction to the government's decision denying the application to bid for FM radio licences?

We believe it is harsh and legally untenable, since the disputes referred to are (a) unconnected with our FM radio companies and (b) more important, sub judice and yet to be heard for final disposal.

There is every possibility that the persons named in these proceedings will be able to defend themselves and get fully exonerated.

Hence, a hasty decision to dis-entitle our FM radio entities from bidding in these auctions is very oppressive. Last but not the least is the fact that neither Sun TV nor its promoter/directors are named in the BSNL (telephone exchange) matter.

What will be the impact of Sun Group not participating in the FM licensing auction, for the sector? What is the impact on Sun Group? What is the revenue from the FM radio business at present?

It will be very unfortunate that the nation's largest FM network in terms of geographical spread is not participating in these auctions.

The absence of Red FM/Suriyan FM through our radio subsidiaries will mean a sum of Rs 350 crore (Rs 3.5 billion) we have allocated for the bidding of fresh licences will be left idling, thereby reducing the intensity of rivalry among bidders and sub-optimising the gains that would have accrued to the national exchequer.

It will also be a fatal blow for us, since our inability to grow our FM radio footprint will have serious ramifications for our competitive positioning in the market and adversely impact our growth prospects.

Our consolidated FM radio business revenues were Rs 305 crore (Rs 3.05 billion) in 2014-2015, up 19 per cent from the previous year.

The operating profits were Rs 165 crore (Rs 1.65 billion), up 29 per cent over the previous year.

Red FM is among the most loved brands. Our Vizag Red FM staff were notably mentioned in the AP assembly discussions for the exemplary work they did in assisting relief works by using their radio equipment after a cyclone hit the town.

Sun Group CFOOn what grounds will the group move court?

We will move the high courts at both Delhi and Chennai.

We believe the actions initiated against Maran (Kalanithi) in the Sun Direct issue have no bearing on the operations of our FM radio subsidiaries.

Even assuming the charges alleged by the state get proven ultimately, where is the justification to put our legitimate business interest in such grave peril so hastily today?

We have the opinions of the current attorney-general and the earlier solicitor-general, both men of great eminence, that forcefully vindicate our positions.

We are hopefu the courts will give us the reliefs we will be seeking.

You have said foreign investors have moved out from the company. How many? How much is the impact?

We cannot disclose those details.

Reports stated the Zee Group is looking at acquiring Sun TV, partially or fully.

Sun TV is not for sale. Period.

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TE Narasimhan and Gireesh Babu in Chennai
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