Ex-Asianet promoter challenges share valuation

Kumar who accepted the figure of Rs 4.5 crore in December 1999, is now challenging the same on the ground that `the worth of Asianet has been manipulated and fraudulently fixed’. The reason, he claims: his ex-partner Menon, in a matter of four months arrived at a cash-and-stock deal towards selling the channel for Rs 400 crore to Zee Telefilms. Kumar has sent a legal notice asking for the unpaid balance in lieu of Zee’s valuation failing which immediate steps for cancellation of transfer of shares and rectification of register would be mooted. “If the valuation was around Rs 30 crore to Rs 40 crore, I wouldn’t have minded so much. But I object to being made to look foolish,” he told The Financial Express.

Further, in what happens to be another back-to-back deal, Asianet Satellite Communications Ltd which is the cable distribution company and a wholly-owned subsidiary of the main channel company, was sold by Menon to Hathway Investments Pvt Ltd. Hathway had earlier acquired 50 per cent equity of the cable channel distribution company when Kumar was managing director for Rs 35 crore.

These funds were used to run the channel company as the other promoter Menon, could not bring in the requisite funds promised.

Kumar claims he is planning to take every recourse possible to get his worth – from filing a criminal case to approaching the Company Law Board, if need be. Menon is currently not in the country. However, in his response to Kumar’s notice, (a copy of which is with FE) he is gearing up to fight back.

Asianet Communications Ltd was started by Kumar in 1991, his contribution being more by way of sweat equity. He brought in his uncle Dr Menon who contributed Rs 10 lakh. However, this was not adequate for building up the channel. While the Kerala government did its bit to help, the position improved in September 1994 when Hathway took equity in the cable company. Kumar, who engineered this deal, however insisted on management control of the cable company.

Resultant problems on this front also led to a misunderstanding between the two Asianet promoters. Advertisers soon got wind of the situation and started taking advantage of the situation.

As Asianet’s fortunes started taking a downswing, it was decided that only one partner should remain. As Menon opted for staying in command, the other decided to sell his stake. An initial sum of Rs 15 crore was paid, with the final settlement pending the valuation of Korke & Raval.

The valuation exercise dragged on much beyond the stipulated six months, to a full year. Kumar said that he then received a letter stating that he had been over-paid (at Rs 15 crore), though he had expected a figure of Rs 40 crore as the base expectation. Tired of haranguing, Kumar claims that he decided to agree and formally relinquished control. During 1998-99, the channel company had a turnover of Rs 38 crore and was making marginal profits. The cable company had a turnover of Rs 35 crore having more than a lakh of subscribers.