Times Private Treaties buys Karuturi stake by paying 380% premium
Moneylife Digital Team 18 November 2011

The media company's infamous 'ads-for-equity' unit bought stake at huge premium in Karuturi Global, a company that is on a free fall with its shares trading 88% below since recent high in October last year

Bennett, Coleman & Co (BCCL), the media group that owns assets like the Times of India, radio and TV channels besides various magazines and online portals, has done a new stake purchase, again at an inflated value. BCCL's unit Times Private Treaties or Brand Capital, as it is now known, has bought 0.4% stake in so-called food processing and rose-growing company Karuturi Global at Rs21.6 per share against its week-to-date average price of Rs4.50 a share, huge premium of 380%.

Brand Capital paid Rs7.51 crore for buying 34.7 lakh shares of Karuturi that based on the average price are valued at just Rs1.56 crore! Incidentally, Karuturi shares are also on a free fall since the past 13 months. Since October last year, (the shares closed at Rs38.15 on 21 October 2010) Karuturi shares have tumbled 88% to Rs4.70 per share as on 17 November 2011.

Earlier this year, three private funds, Emerging India Focus, India Focus Cardinal and Elara India Opportunities, together converted their warrants into equity.
These funds bought the warrants in 2009 for Rs12 per piece and post-conversion hold 22.8% stake in Karuturi. They also seem to have lost about 60% value of their investment. As of September end, 11 investors under the category ‘public and holding more than 1% of the total number of shares’ have 48.34% stake in Karuturi, while the promoters hold 18.15% shares.

During the quarter to end-September, Karuturi said its profit more than halved to Rs17.79 crore from Rs42.61 crore in the same period last year. During the second quarter, Karuturi Global’s total revenues also fell to Rs133.73 crore from Rs151.08 crore a year ago.

Bengaluru-based Karuturi Global is reportedly the world’s largest rose exporter and is engaged into floriculture, processing foods and information technology (IT) business as well. Its operations are claimed to be spread in about 15 countries including India, Ethiopia and Kenya. With an area of over 292 hectares under Greenhouse cultivation, Karuturi annually produces around 555 million stems of quality cut roses, essentially for exports to high-value markets. At least that’s what the claim is.

According to a blog posting, Karuturi bought large portions of land in Ethiopia, a country that still suffers from hunger and is dependent on foreign food support. “The contracts between companies like the Karuturi Global and the Ethiopian government are kept secret. The local farmers are abandoned from their land as it is not privately owned but belongs to the government of Ethiopia. Companies like Karuturi expand and profit from this situation on the back of the local farmers and community management. Land is leased cheaply, machines and equipment is imported without customs and the crops are exported,” the blog said. However, there are whispers in Mumbai market circles that many of Karuturi’s claims are suspect.

Coming back to BCCL and Brand Capital, according to Wikipedia, Times Private Treaties is a barter program in which advertisement space is bartered for equity stakes in new and established companies. This has been an extremely controversial trend started by the Times Group, as it breaches the sanctity of the media. Times Treaties is known for acquiring large stakes at inflated valuations in return for advertising space and articles, which appear as news items. In 2010, Times Private Treaties was relaunched as 'Brand Capital', which, according to the company, reflects its value proposition better.

Currently, Times Private Treaties, BCCL’s private equity arm, has stakes in over 135 companies including Lavasa Corporation, Gujarat NRE Coke, Gini & Jony, Micro Technologies, Refeel Cartridge Engineering, Thyrocare and Raj Oil Mills.

Comments
Ramesh B
1 decade ago
Great!Times group by such tactics does lot of harm to investors/readers.Last year, in an article in EcoTimes, they expressed posative views "Resurgere Mines "shares.It was 76Rs.then. At present, it is 0.30rs.though sub-devided and x-bonus.But it is clear that after publishing the article,the groups off-loaded the share and innocent invested faced the hell!!!
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