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Business rivals could leverage the political risk faced by Maran brothers
10 Jul, 2011
Sun TV and its officials are attracting troubles and lawsuits in a hurry. The dominant Chennai-based media group, which has close links to the DMK party and has often been accused of using that clout, seems to top the to-do list of Tamil Nadu Chief Minister J Jayalalithaa , who took over the reigns of the state barely two months ago.
She has since announced the revival of a government-run cable distribution service, aimed at curbing the distribution backbone that has been so crucial to Sun's dominance all these years. The head of Sun Pictures, Hansraj Saxena, a close aide of Sun TV founder Kalanithi Maran and a man who understands the business of South Indian films like no other, is in jail for alleged non-payment of over `80 lakh on film rights.
He was picked up on a Sunday evening, and there's another similar case that has been slapped on him. That's not all. The chief minister has said she would examine whether Kalanithi's younger brother Dayanidhi Maran did, as media reports suggested, run a virtual telephone exchange from his home that was used for free by Sun TV. Dayanidhi Maran is alleged to have sanctioned this when he was telecom minister .
It isn't that all their troubles are at home. The younger brother has just resigned as textiles minister, amid news that the Central Bureau of Investigation is probing his role in the sale of Aircel to Malaysia's Maxis. The earlier owner of Aircel, C Sivasankaran, has alleged that Dayanidhi Maran had forced him to sell to Ananda Krishnan's Maxis. The CBI is also probing whether Krishnan invested in the Kalanithi Maran-owned DTH business, Sun Direct, as a quid pro quo. Right at this point of time, the DMK's power at the Centre seems to be on the wane.
Too Early To Make a Call
After all this, even the harshest critics of 47-year-old Kalanithi Maran won't write him off so soon. The wily businessman, who started Sun TV with a three-hour dose of daily content 18 years ago, has built enough strength in his entity, they say. His empire now has 20 channels in four South Indian languages. In its bread-and-butter Tamil market, it has left competitors far, far behind in the leadership race. The empire now extends to a slew of radio channels, which are right now turning profitable. What's more, Sun is estimated to have rights to 60% of the over 4,700 movies made in Tamil till date.
Of course, no one denies the unprecedented risk Maran's business is facing. The closest the current situation has for comparison is what happened during his 2007 ugly fallout with M Karunanidhi, who was ruling the state then, and his family. It took less than two years for the patch-up to happen. But his business didn't get boxed on all sides then, something that's happening now. Also, there is a lot of uncertainty over which way the CBI investigations would go.
Analysts, who at some levels still consider Sun a good bet, though with attached risks, are waking up to corporate governance issues in the company. Ambit Capital, in a research note last month, pointed out to two such matters. One related to purchase of aircraft for management use. The company had aircraft worth `264 crore at the end of FY10. Against this, it had charter revenues of just `6.5 crore. Two, what Ambit called "punchy remuneration for promoters". In FY11, "managerial remuneration accounted for almost 74% of total employee expenses". Sun's closest peer Zee, it said, had a comparable percentage of just 2.2.
The stock market has also stopped the special treatment generally reserved for Sun TV. On the day the media reported the CBI interest in the Aircel controversy, Sun TV lost more than a fourth of its value. The stock managed to reclaim a good bit of lost territory. But subsequent bad news has chipped away at the market value again. Analysts, who not long ago predicted great things, are waiting and watching as well as wondering about the political risk that has finally made it count.
She has since announced the revival of a government-run cable distribution service, aimed at curbing the distribution backbone that has been so crucial to Sun's dominance all these years. The head of Sun Pictures, Hansraj Saxena, a close aide of Sun TV founder Kalanithi Maran and a man who understands the business of South Indian films like no other, is in jail for alleged non-payment of over `80 lakh on film rights.
He was picked up on a Sunday evening, and there's another similar case that has been slapped on him. That's not all. The chief minister has said she would examine whether Kalanithi's younger brother Dayanidhi Maran did, as media reports suggested, run a virtual telephone exchange from his home that was used for free by Sun TV. Dayanidhi Maran is alleged to have sanctioned this when he was telecom minister .
It isn't that all their troubles are at home. The younger brother has just resigned as textiles minister, amid news that the Central Bureau of Investigation is probing his role in the sale of Aircel to Malaysia's Maxis. The earlier owner of Aircel, C Sivasankaran, has alleged that Dayanidhi Maran had forced him to sell to Ananda Krishnan's Maxis. The CBI is also probing whether Krishnan invested in the Kalanithi Maran-owned DTH business, Sun Direct, as a quid pro quo. Right at this point of time, the DMK's power at the Centre seems to be on the wane.
Too Early To Make a Call
After all this, even the harshest critics of 47-year-old Kalanithi Maran won't write him off so soon. The wily businessman, who started Sun TV with a three-hour dose of daily content 18 years ago, has built enough strength in his entity, they say. His empire now has 20 channels in four South Indian languages. In its bread-and-butter Tamil market, it has left competitors far, far behind in the leadership race. The empire now extends to a slew of radio channels, which are right now turning profitable. What's more, Sun is estimated to have rights to 60% of the over 4,700 movies made in Tamil till date.
Of course, no one denies the unprecedented risk Maran's business is facing. The closest the current situation has for comparison is what happened during his 2007 ugly fallout with M Karunanidhi, who was ruling the state then, and his family. It took less than two years for the patch-up to happen. But his business didn't get boxed on all sides then, something that's happening now. Also, there is a lot of uncertainty over which way the CBI investigations would go.
Analysts, who at some levels still consider Sun a good bet, though with attached risks, are waking up to corporate governance issues in the company. Ambit Capital, in a research note last month, pointed out to two such matters. One related to purchase of aircraft for management use. The company had aircraft worth `264 crore at the end of FY10. Against this, it had charter revenues of just `6.5 crore. Two, what Ambit called "punchy remuneration for promoters". In FY11, "managerial remuneration accounted for almost 74% of total employee expenses". Sun's closest peer Zee, it said, had a comparable percentage of just 2.2.
The stock market has also stopped the special treatment generally reserved for Sun TV. On the day the media reported the CBI interest in the Aircel controversy, Sun TV lost more than a fourth of its value. The stock managed to reclaim a good bit of lost territory. But subsequent bad news has chipped away at the market value again. Analysts, who not long ago predicted great things, are waiting and watching as well as wondering about the political risk that has finally made it count.