Thursday, 28 April 2011

Kasturi & Sons Ltd - family tree and Shareholding pattern

The Hindu battles to transform - by LiveMint

The Hindu battles to transform
Members of this large family were already at odds when McKinsey entered the scene in the middle of 2010

Chennai: Operation Kamadhenu was supposed to help Kasturi and Sons Ltd (KSL) sort out its external problems related to growth and competiton, and internal ones arising from the dynamics of being a family-owned and family-managed enterprise.
Instead, the consulting assignment undertaken by McKinsey and Co. last year may have only served to amplify the discord at the company, which publishes The Hindu and The Hindu Business Line newspapers that compete with the Hindustan Times and Mint, published by HT Media Ltd, in some markets.
McKinsey, which refused to comment for this article citing client confidentiality, earned Rs8 crore for the assignment, Mint learns that it suggested professionalizing the board as well as the business and editorial management, although this didn’t immediately disqualify a family member from being either a senior editor or a senior executive in the company. Currently, all key editorial and managerial positions are held by members of the Kasturi family.
Members of this large family were already at odds when McKinsey entered the scene in the middle of 2010.
Also See | The Kasturi family tree The Hindu Family tree and shareholding pattern
“Some of us thought McKinsey’s entry was ill-timed,” says N. Murali, who was stripped of his powers in a March 2010 board meeting, but reinstated at the end of the year after the Company Law Board (CLB) ruled in his favour, although it didn’t scrap other appointments made in the same board meeting that effectively diminished his powers. “Only if there is normalcy can consultants do something.”
Despite being one of India’s oldest and most respected media companies, and the publisher of two dailies considered newspapers of record by readers, especially those in the southern part of the country, KSL has seen three significant family fights in the past two decades. The latest one, the fourth, threatens to divide the group and stymie its chance to raise private equity (PE) funding or file an initial public offering (IPO) to diversify, double revenue and log 10 times as much profit, internal documents obtained by Mint show.
“Disputes need to be settled amicably and when families wash their dirty linen in public, prospective investors may stay away,” says Chitrangda Kapur, a research analyst with Mumbai-based money management firm Angel Broking.
Besides hurting its struggle to counter competition from The Times of India in Chennai, the internal strife weighs on the existing troubles of the group, whose general newspaper The Hindu has the third largest English readership in the country behind The Times of India and the Hindustan Times, as expansion slows.
While print media revenue in India grew at 10.4% in 2004-09 to an estimated Rs16,000 crore, it’s ascent has slowed. Industry revenue is likely to touch Rs23,050 crore in 2014, signalling a compounded average growth rate of 7%, according to a PricewaterhouseCoopers (PwC) 2009 report.
“The perception is that magazines and newspapers are increasingly going to go online, so people are hesitant to make investments in this space,” says Timmy Kandhari, who leads PwC’s media and entertainment consulting.
Cracks in Maha Vishnu
Founded in 1878, Kasturi and Sons became a partnership run by Kasturi Srinivasan and Kasturi Gopalan, grandfathers of the warring generation. It was incorporated as a private limited company in 1940 and went on to offer an equal 25% representation to four descendant families of the Kasturi brothers, according to CLB documents filed last year. Currently, the 12-member board comprises three members from each family.
In the late 1980s, The Hindu, nicknamed the Maha Vishnu of Mount Road on account of its strong editorials, faced its first stress test when Murali’s elder brother N. Ram was forced into an involuntary exile of sorts by The Hindu’s editor G. Kasturi due to editorial differences on the coverage of the Bofors scandal. The victory was pyrrhic, with Kasturi himself being forced to resign too and hand over the post of editor to N. Ravi, the younger brother of Ram and Murali. In 2003, Ram returned after the board ordered his reinstatement (and this time around, Kasturi voted for Ram).
Ram didn’t meet this reporter despite repeated requests for an interview.
In 2010, Murali, and, subsequently, Ravi, accused Ram of reneging on an informal commitment to resign in May 2010 when he turned 65. During a subsequent board meeting, Murali was eased out, which is when he approached CLB, which ruled that he should continue till August 2011, when he would retire.
“Whether it is a family or professional business, people at the top don’t let go because of their ego,” says an independent consultant close to the Kasturi family, who didn’t want to be named. “There is a power and image associated with the position apart from income and wealth.”
The sacred cow
It was in this context that McKinsey entered the group’s Mount Road headquarters.
The consulting firm’s 2010-11 study of KSL’s business was codenamed Kamadhenu—the name of a sacred cow in Hindu mythology that could fulfil any wish of her owner. After about six-eight months of study, Mint learns that McKinsey recommended a governance model with a nine-member board, including at least three non-family members. It also advised KSL to enter the education business and that of online classifieds. These strategic changes were expected to help take The Hindu’s circulation to 2.3 million in 2016 from 1.6 million in 2011, while at the same time shrinking the company’s dependency on the print media business to 84% from 100%, according to documents seen by Mint. The consultancy prophesied a 2.5 times jump in revenue in five years to Rs2,500 crore, leading to a ninefold jump in profit after tax to Rs320 crore.
When McKinsey wrapped up its study at the newspaper group earlier in 2011, it requested the board to sort out internal differences and reconnect if needed, according to a company source. Thereafter KSL’s board—which meets around the 20th of each month—started discussing succession issues keeping McKinsey’s recommendations in perspective.
“What also emerged clearly in Project Kamadhenu was that KSL would not be able to generate internally the funds required to meet the competitive challenges, and finance expansion and growth,” show minutes of a 16 March board meeting that paraphrase managing director K. Balaji’s comments.
“Funds would have to come from an outside investor (PE or strategic) or through an IPO,” the meeting record shows. “In either case, the restructuring of the management would be a pre-condition. The infusion of funds could not be put off for too long; we have lost a lot of time.”
Searching for new avatar
On 16 April, Ram and six board members, who support him, proposed the appointment of a professional non-family journalist Siddharth Varadarajan in his place. Varadarajan is the national bureau chief of The Hindu. At the same meeting, the seven board members voted in favour of the current editorial directors stepping down from their posts.
Five people opposed this move—Ravi; managing director Murali; joint editor Nirmala Lakshman; executive editors Malini Parthasarathy and Nalini Krishnan. A few days later, Ravi sent out an email expressing his angst at the decision, and citing several instances under Ram’s leadership when the editorial integrity of the paper had been compromised.
The individuals and families represented by the five opposing directors own 40% of the shares in the company and insist that the “ordinary resolution” related to editorial changes, which will be finalized through a vote in a 20 May extraordinary general meeting, should be turned into a “special resolution”.
An ordinary resolution can be passed as long as stakeholders holding more than 50% of the shares support it. A special resolution needs a thumbs-up from holders of at least 75% of the stake, according to the Companies Act of 1956. In private limited companies, a “special resolution” is seldom used; it is largely restricted to events such as a merger or closing down of business.
The opposing directors have also hinted at taking legal action, which could mean filing a civil suit to influence an injunction that will stop the resolution from being passed, a corporate lawyer said. The last option would be for dissenting shareholders to walk out with a share of the business by splitting the 14 editions of The Hindu among the two parties similar to the 1991 split of The Indian Express Group.
That may not be easy.
The Indian Express was a more national newspaper and so it was easier to split it geographically and I’m not sure it will work in the case of The Hindu,” says Chennai-based Senthil Ramamoorthy, a partner at law firm Dua Associates, pointing to the Chennai-based Hindu’s largely south-based readership. “Ultimately, these kinds of disputes cannot be resolved in a court of law. Parties have to sit on both sides of the table and arrive at some kind of a compromise.”
Mint learns there have been efforts to have former ICICI chairman N. Vaghul and Mahatma Gandhi’s grandson and former West Bengal governor Gopal Gandhi as mediators, but nothing has materialized thus far.

Tuesday, 26 April 2011

N.Ravi's rejoinder to N.Ram's defence story...

This letter was sent by N.Ravi as a rejoinder to N.Ram's defence of  TheHindu's coverage of the 2G scam and the denial of quid pro quo.

Dear Ram,
The Hindu of April 23, 2011 carried on Page 15 of the Chennai edition your refutation of a report that was not carried in The Hindu.  Fairness demands that you publish my account of the issue of the coverage of A. Raja relating to the Telecom licences and 2G spectrum allocation that is given below:

At the meeting of the Board of directors of Kasturi and Sons in January, I had specifically raised the issue of the biased coverage of the 2G spectrum scandal.  While Raja was in office, even as evidence was mounting and there were widespread calls for his resignation, The Hindu did not demand his resignation. On the other hand, it functioned as an apologist for Raja and even on the day of his resignation carried an interview with him on the front page, with the transcript published inside. In this interview as well as the one on May 22, 2010, there were no hard questions but only the obvious ones designed to elicit ready, scripted answers. The entire coverage up to the point of his resignation was tailored to make him look good.

This unexplained softness towards Raja contrasted sharply with the coverage and editorial stand on other scams including those relating to the Commonwealth Games, Adarsh Society and land allotment in Karnataka.  In those instances, The Hindu was quick to demand the resignations of Suresh Kalmadi, Ashok Chavan and Yeddyurappa even at a stage when the evidence was far less compelling than the material that was in the public domain on the 2G scam before Raja resigned. All the editorial outrage was reserved for the period after Raja’s resignation.

With regard to the advertisement that was published in The Hindu of May 22, 2010 along with his interview on the front page with the full transcript inside, records in the Central Government, particularly in the Ministry of Telecommunications relating to the clearance of this particular advertisement and of some others would go to establish by whom and how this advertisement was cleared.  Of all the newspapers that are said to have carried the advertisement, only The Hindu published a friendly interview and not the others. People in the media are aware that promotional advertisements of this type unrelated to any occasion or to any specific announcements are issued as much as rewards to the media as for publicity for the Minister. The Minister’s intention to hugely reward The Hindu that had been so friendly to him in its coverage was obvious. Publication in other newspapers was just a cover, it would have been untenable for any Ministry to have issued an advertisement to just one newspaper.

Yours sincerely,

Sunday, 24 April 2011

Saturday, 23 April 2011

Succession battle for The Hindu turns ugly - by The Hindustan Times

April 22, 2011

Another battle has erupted among the family members of Kasturi and Sons, which owns and operates The Hindu newspaper and other publications. This follows a decision of the board to appoint a professional, Siddharth Varadarajan as editor of the flagship daily, The Hindu, in an apparent move to relieve all family members of their editorial responsibilities.Vardarajan has been made editor in place of N Ravi, current editor-in-chief N Ram’s brother, who was to take over from him, according to the family’s succession plan.
In the new plan, Ram will step down from his responsibilities, along with four others on the board, aimed at ending family’s role in editorial decision-making. If the decision is ratified by extraordinary general body meeting (EGBM) on May 20, it would mean the removal of N Ravi, Nirmala Lakshman, K Venugopal and Malini Parthasarathy, all cousins, from their present editorial jobs.But family members allege that the move will ensure Ram’s control over the newspaper even though he will not be editor-in-chief. “The original succession plan was to handover the charge to me. The decision usurps it,” Ravi, who is exploring legal options to challenge the decision, said.Ravi said Ram and his supporters were trying to impose a succession plan that went against the family tradition of 132 years and was in violation of their suggestion of appointing a family business consultation for determining the succession plan.N Ram refuted the claim in a statement saying “separation of ownership and management is a principle many successful organisations maintain... when it comes to newspaper organisations, eight of the top 10 English newspapers in the country have non-family professional as an editor”.Ram’s statement was in response to N Ravi’s email to The Hindu employees on Tuesday, which said: “Ram seems bent on taking all editorial directors --- most are in their 50s — into retirement with him, with a scorched earth policy to ensure no one in the family succeeds him…In a sudden change of rules and under specious plea of separating ownership from management, alongwith my removal as editor, Nirmala Lakshman is forced to step down as joint editor and Malini Parathasarathy as executive editor.’Ravi also questioned Ram’s role as an editor, specifically linking a front-page interview of sacked telecom minister A Raja to a “hurriedly arranged full page advertisement” for the newspaper from the telecom ministry. “News coverage is linked directly to advertising in a way that is little different from paid news,” he said, in his email, while alleging that the newspaper was giving undue coverage to certain “political favourites” and has a distinctive pro-Left and pro-China bias. Ravi has also said Ram was “indulging in an unceasing self-glorification campaign, publishing his own ribbon cutting pictures and speeches with a regularity that would put corporate house journals to shame”. It is not for the first time that a succession battle has hit the Hindu. Last March, managing director N Murali, Ram’s second brother was replaced by K Balaji, another board member and his cousin. Finally, the Company Law Board, Chennai, re-instated Murali quashing the decision of the board.Although Ram described the Monday’s board decision in pursuance of the Company Law Board’s directions, both Ravi and Murali termed the move as “unfair” and said the original succession plan should be enforced.The decision at the board’s meeting will have to be ratified by Extraordinary General Body (EGB) meeting of all shareholders, who are members of Kasturi Ranga Iyengar family, on May 20. Kasturi and Sons have 12 board members and the EGB, 50.

Mount Road Mahavishnu in a succession tangle - Story of "The Hindu"

Mount Road Mahavishnu in a succession tangle. By M. C. Rajan in Chennai

Editor Ram sacks kin as The Hindu boardroom battle spills out in open
IT IS open war within the The Hindu clan, running the familyowned newspaper empire. The present crisis was triggered by Editor- in- Chief N. Ram easing out his brother N. Ravi as editor and replacing him with senior journalist Siddharth Varadarajan. Along with Ravi, executive editor Malini Parthasarathy was also sacked. Now this decision needs only to be ratified by shareholders of Kasturi & Sons Ltd.
Of the 12 directors, seven supported Ram’s move to bring in a non- family editor.
“ At its meeting of April 18, 2011, the Board… decided on a coherent framework of editorial succession, keeping all aspects in mind, and adopted several resolutions. It decided to appoint Siddharth Varadarajan, National Bureau Chief and an outstanding professional, as Editor of The Hindu , reporting to N. Ram, Editor- in- Chief, The Hindu , in such time as the Board of Directors of the Company may decide. It decided further that Siddharth Varadarajan would be The Hindu ’s Editor responsible for selection of news under the PRB Act when N. Ram steps down as Editorin- Chief of The Hindu and N. Ravi steps down as Editor of The Hindu . “ The other Directors working on the editorial side would also step down from their current editorial designations in such time as the Board may decide and become part of a committee of the Board of Directors known as the Editorial Board. The Editorial Board would be available for advising the Editor responsible for selection of news under the PRB Act but would not have any role in the day- to- day editorial functioning of the newspaper,” Ram wrote on Thursday to his colleagues.
Things were never the same in the 132- year- old newspaper ever since Ram became the Editorin- Chief in 2003, by ‘ stealth’ according to Ravi, reviving the battle of the brothers for the overall control of the ` 800 crore empire.
As per an earlier agreement, Ram was to have stepped down on May 4, 2010 on attaining the age of 65. No wonder, his detractors have cried foul, for Ravi was waiting to take over as Editor- in- Chief. Now he finds himself kicked out.
As a prelude to this, N. Murali, another brother of Ram and a joint- MD, was stripped of his powers in March last year.
A deeply anguished Ravi shot off a mail to the employees on Wednesday, a day after the Board meeting.
“ In a shocking display of bad faith, N. Ram and some of the directors have sought to remove me and appoint as Editor Siddharth Varadarajan who joined The Hindu in 2004,” Ravi, who joined the paper as a reporter in 1972, said.
After Ravi’s missive, Ram was forced to explain the rationale for his ‘ mission to modernise the management’. Briefing the department heads on Thursday evening, he came out with a letter listing top 10 newspapers of which only two — The Hindu and The Telegraph — have family editors. To substantiate his argument, he said: “ Separation of ownership and management is a principle many successful organisations maintain.”
BUT Ravi sees the paper entering a second but prolonged phase of conflict and turbulence. “ Almost a year past the agreed retirement date, his position having become untenable in the face of the Company Law Board order, Ram seems bent on taking all the editorial directors — most are in their 50s — into retirement with him with a scorched earth policy to ensure that no one in the family succeeds him,” Ravi argued.
For Ravi, separating ownership from management is only a camouflage to accomplish this as Nirmala Lakshman is to be forced to “ step down” as Joint Editor and Malini Parthasarathy as Executive Editor.
This, according to Ravi, is contrary to the Company Law Board order which has called for a policy of permanent succession corporate governance.
“ We are for a flexible approach of inducting qualified and meritorious people from the family with outside evaluation.
“ Even McKinsey Consultants’s have opined that there should not be any bar on qualified family members joining the management or the editorial. Moreover, when the company spends on the education of the wards by sending them abroad, why not utilise them? Separation of management from ownership per se will not bring in the desired results,” Ravi wrote.
“ Even before finalising the plans for restructuring, he has rushed through the appointments,” he maintained.
But Ram dismissed it saying that the Company Law Board has declined to intervene in the matter of editorial succession and asked the Board and the shareholders to consider it without delay.
And he was careful enough to pitchfork his claim with crediting the staff for the newspaper’s success all these years besides donning the cloak of modernity and professionalism.