In your interest.
Online Personal Finance Magazine
No beating about the bush.
Private Treaties, the controversial investment arm of Bennett, Coleman & Co Ltd, is now housed under a separate company. However, it seems to have too many dubious investments in its books
Set up in 2005, Times Private Treaties, a part of Bennett, Coleman & Co Ltd, publishers of the Times of India, is now a separate corporate entity called Brand Equity Treaties Ltd. However, its investments not only continue to be controversial but are turning out to be quite unsound as well.
The business model of private treaties is unique. Under a legal arrangement, Brand Equity picks up a stake in the company in return for discounted ads and favourable editorial coverage. Most of these companies subsequently go public. A sample of recent headlines, to name a few, have been: ‘HCC plans Rs50,000 crore investment in Lavasa in a decade’; ‘The Lavasa Women's Drive 2010’; ‘Lavasa city to mimic nature’; ‘Pantaloons Femina Miss India 10 finalists: Lavasa trip’. These appeared in the Times Group’s newspapers. Lavasa of Hindustan Construction Company and Pantaloon Retail (India) Ltd are both private treaty clients.
According to the data available on the Times Treaties website (see here), the company has as many as 119 companies in its portfolio of clients.
Last year, there were media reports that the private treaties business had incurred mark to market losses exceeding Rs1,500 crore, following the market crash of 2008. Then came a nasty controversy about one of its treaty clients Pyramid Saimira Ltd. The market regulator Securities and Exchange Board of India (SEBI) alleged that Pyramid Saimira was banned from trading for seven years in connection with illegally ramping up the share price of Pyramid with the help of few media professionals. The trio attempted to plant a fake order in several newspapers led by a media cabal that included Rajesh Unnikrishnan (assistant editor of The Economic Times and close buddy of Nirmal Kotecha, a co-promoter of Pyramid Saimira) and Rakesh Sharma, a former journalist with Business Standard, who had turned into a PR professional.
Apart from controversy, there are questions also of how smart the investments have been. Shree Ganesh Jewellery, a treaty client, has plunged 45% as on 23 April 2010 from its offer price of Rs260 on 9 April 2010. CARE had assigned an 'IPO Grade 3' to the Shree Ganesh IPO indicating ‘average fundamentals’. Bennett, Coleman & Co had made an investment in this company to the tune of Rs5 crore in June 2007 at Rs150 per share. Moneylife had yesterday reported on how Nitesh Estates Ltd (which opened today) made a pre-IPO placement to Brand Equity Treaties Ltd at Rs143 per share on 19 February 2010 for 10 lakh shares aggregating to Rs15 crore. The stock is being offered at a Rs54-Rs56 price band. Jaiprakash Infratech Ltd which also appears in the ‘portfolio list’ list of Times Private Treaties is set to hit the market on 29 April 2010. Interestingly, there are speculations that Brand Equity Treaties itself would go public.