Raina, Jadeja, Ojha managed by firm owned by Dhoni
According
to documents filed by the firm with the Ministry of Corporate Affairs,
Dhoni held 30,000 shares or 15% stake in Rithi Sports as on March 22.
NEW DELHI/MUMBAI: A day after BCCI president N Srinivasan had to step aside because of a conflict of interest, Indian cricket captain Mahendra Singh Dhoni faced a similar charge for holding shares in Rhiti Sports Management Pvt Ltd, a firm that manages three Indian national players—Suresh Raina, Ravindra Jadeja and Pragyan Ojha—besides Dhoni himself.
According to documents filed by the firm with the Ministry of Corporate Affairs, Dhoni held 30,000 shares or 15% stake in Rithi Sports as on March 22. This would indicate an obvious conflict of interest since he has a role in picking the Indian team and the firm would benefit if its clients were to be part of the team.
A sports management firm essentially gets its income from commissions on a player's commercial deals like endorsements, event appearances and so on. Clearly, a Team India player demands higher fees for all of these than somebody who is a domestic player. Rhiti Sports also managed the marketing of Chennai Super Kings of which Dhoni is captain, as well as badminton ace Saina Nehwal.
He had signed up with Rhiti Sports for three years, reportedly for Rs 210 crore in 2010, which translates to an average of Rs 70 crore a year, the costliest deal ever in Indian cricket.
Rhiti Sports sought to refute the allegation on Monday by suggesting that Dhoni is not a shareholder and had only been one for a month in March-April this year. A statement issued by Arun Pandey, the main promoter and a childhood friend of Dhoni, said: "MSD holds no shareholding in Rhiti Sports Management (P) Ltd. It is made clear that shareholding was allotted to MSD on 22.03.2013 only to secure certain old outstandings which were due for more than one year. Further, the payments were cleared in April 2013 and the shareholding was transferred back to promoter of the company on 26.04.2013."
In short, Rhiti Sports' claim is that shares were allotted to Dhoni to raise money for about a month to repay dues and the shares were subsequently bought by either Pandey or one of the other promoters. While pledging shares as collateral for loans is a common practice, their ownership doesn't change.
Former India batsman VVS Laxman said Dhoni should sell off his shares as it could drive him into a "compromising situation." He said: "When such a problem arises, the stakeholder should come out by selling off his shares. I think that can solve all the problems at one go. I am not sure if Dhoni has any share in Rhiti Sports, but if it true, he should sell off shares as it can put him in a compromising situation."
Documents available on the website of the ministry of corporate affairs show that Dhoni was allotted 30,000 shares on March 22 this year for a total price of Rs 3 lakh including share premium. Arun Pandey was also allotted 1.2 lakh shares on the same date for Rs 12 lakh. There were no documents on the website showing the transfer back of Dhoni's shares to Rithi or anybody else.
An experienced chartered accountant told TOI that what Rhiti Sports was suggesting was an extremely unusual business practice. "Companies do not normally allot shares to raise money for such a short period, particularly if they have crores in reserves, as this company appears to have," he said. He added, "If the shares were being allotted to raise money, why were they allotted to an 'outsider'—as the firm claims Dhoni was—at face value? The promoter could be allotted shares at face value, but when an outsider in buying shares in a privately held firm, the question of valuation of those shares is bound to arise." The CA pointed out that in such a situation even the income tax department would normally raise a question about undervaluation of the shares.
On paper, the company has for most of this period had only three shareholders—Pandey, his sister Pratima Tiwary and one Arun Kumar Dass. At the time when the company was set up, Pandey's sister held 1,000 shares of the 10,000 issued, Dass held just one share and the remaining nearly 90% was held by Pandey.
As of September 29, 2012, when the last AGM of the company was held, Pandey held 47,499 of the 50,000 equity shares in the company (about 95%), his sister Pratima held 1,250 shares (2.5%) and a relative Subhawati the remaining 1,251 shares (2.5%). Dass, one of the original promoters, was no longer a shareholder.
This also means that the 1.5 lakh shares allotted in March this year to Dhoni and Pandey would have quadrupled the company's equity base, as already pointed out in the seemingly strange way of tiding over what is claimed to be a temporary cash crunch.
Interestingly, two other firms floated by the Pandey family in 2006—Rhiti Studio Pvt Ltd and Rhiti Production Pvt Ltd—have languished, with no activity worth mentioning. Another firm, Inspired Entertainment, was floated by the same promoters in 2011 to manage corporate events, including fashion shows.
Atul Srivastava, the founder of Gaames Unlimited, that manages R Ashwin and Ajinkya Rahane, said that Dhoni wouldn't push for an inferior talent. "It's just not possible. There's just too much scrutiny and I'm very clear in my mind that Dhoni wouldn't back a lesser talent," Srivastava said.
Interestingly, Rahane had spent 18 months in the squad before getting to play in a Test match against Australia even as the likes of Raina and Jadeja were preferred over him. Or, for instance, Manoj Tiwary who was forced to warm the benches for more than 20 One-Day Internationals after scoring a hundred against West Indies. Srivastava, however, denies that. "What you are saying sounds logical. I can't comment on Tiwary's non-inclusion. But the fact is that Rahane hasn't taken the chances that have come his way."
According to documents filed by the firm with the Ministry of Corporate Affairs, Dhoni held 30,000 shares or 15% stake in Rithi Sports as on March 22. This would indicate an obvious conflict of interest since he has a role in picking the Indian team and the firm would benefit if its clients were to be part of the team.
A sports management firm essentially gets its income from commissions on a player's commercial deals like endorsements, event appearances and so on. Clearly, a Team India player demands higher fees for all of these than somebody who is a domestic player. Rhiti Sports also managed the marketing of Chennai Super Kings of which Dhoni is captain, as well as badminton ace Saina Nehwal.
He had signed up with Rhiti Sports for three years, reportedly for Rs 210 crore in 2010, which translates to an average of Rs 70 crore a year, the costliest deal ever in Indian cricket.
Rhiti Sports sought to refute the allegation on Monday by suggesting that Dhoni is not a shareholder and had only been one for a month in March-April this year. A statement issued by Arun Pandey, the main promoter and a childhood friend of Dhoni, said: "MSD holds no shareholding in Rhiti Sports Management (P) Ltd. It is made clear that shareholding was allotted to MSD on 22.03.2013 only to secure certain old outstandings which were due for more than one year. Further, the payments were cleared in April 2013 and the shareholding was transferred back to promoter of the company on 26.04.2013."
In short, Rhiti Sports' claim is that shares were allotted to Dhoni to raise money for about a month to repay dues and the shares were subsequently bought by either Pandey or one of the other promoters. While pledging shares as collateral for loans is a common practice, their ownership doesn't change.
Former India batsman VVS Laxman said Dhoni should sell off his shares as it could drive him into a "compromising situation." He said: "When such a problem arises, the stakeholder should come out by selling off his shares. I think that can solve all the problems at one go. I am not sure if Dhoni has any share in Rhiti Sports, but if it true, he should sell off shares as it can put him in a compromising situation."
Documents available on the website of the ministry of corporate affairs show that Dhoni was allotted 30,000 shares on March 22 this year for a total price of Rs 3 lakh including share premium. Arun Pandey was also allotted 1.2 lakh shares on the same date for Rs 12 lakh. There were no documents on the website showing the transfer back of Dhoni's shares to Rithi or anybody else.
An experienced chartered accountant told TOI that what Rhiti Sports was suggesting was an extremely unusual business practice. "Companies do not normally allot shares to raise money for such a short period, particularly if they have crores in reserves, as this company appears to have," he said. He added, "If the shares were being allotted to raise money, why were they allotted to an 'outsider'—as the firm claims Dhoni was—at face value? The promoter could be allotted shares at face value, but when an outsider in buying shares in a privately held firm, the question of valuation of those shares is bound to arise." The CA pointed out that in such a situation even the income tax department would normally raise a question about undervaluation of the shares.
On paper, the company has for most of this period had only three shareholders—Pandey, his sister Pratima Tiwary and one Arun Kumar Dass. At the time when the company was set up, Pandey's sister held 1,000 shares of the 10,000 issued, Dass held just one share and the remaining nearly 90% was held by Pandey.
As of September 29, 2012, when the last AGM of the company was held, Pandey held 47,499 of the 50,000 equity shares in the company (about 95%), his sister Pratima held 1,250 shares (2.5%) and a relative Subhawati the remaining 1,251 shares (2.5%). Dass, one of the original promoters, was no longer a shareholder.
This also means that the 1.5 lakh shares allotted in March this year to Dhoni and Pandey would have quadrupled the company's equity base, as already pointed out in the seemingly strange way of tiding over what is claimed to be a temporary cash crunch.
Interestingly, two other firms floated by the Pandey family in 2006—Rhiti Studio Pvt Ltd and Rhiti Production Pvt Ltd—have languished, with no activity worth mentioning. Another firm, Inspired Entertainment, was floated by the same promoters in 2011 to manage corporate events, including fashion shows.
Atul Srivastava, the founder of Gaames Unlimited, that manages R Ashwin and Ajinkya Rahane, said that Dhoni wouldn't push for an inferior talent. "It's just not possible. There's just too much scrutiny and I'm very clear in my mind that Dhoni wouldn't back a lesser talent," Srivastava said.
Interestingly, Rahane had spent 18 months in the squad before getting to play in a Test match against Australia even as the likes of Raina and Jadeja were preferred over him. Or, for instance, Manoj Tiwary who was forced to warm the benches for more than 20 One-Day Internationals after scoring a hundred against West Indies. Srivastava, however, denies that. "What you are saying sounds logical. I can't comment on Tiwary's non-inclusion. But the fact is that Rahane hasn't taken the chances that have come his way."
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