In a country where it’s not routine for media to report on other media houses (with rare and honourable exceptions), the Private Treaties programme of Bennett, Coleman & Co. Ltd, publisher of The Times of India, was the subject of two stories in leading national dailies this morning. While Business Standard focussed on the erosion in value of BCCL’s PT portfolio, a DNA story raises broader concerns and quotes a number of named and unnamed stock market players, some of whom urge the intervention of capital markets regulator the Securities and Exchange Board of India (Sebi) into the practice.
Private Treaties, a concept pioneered by BCCL and followed by other media houses such as Hindustan Times and the Bhaskar Group, is an investment programme through which a media house picks up equity in a company in exchange for ads. In other versions of the concept, ads are exchanged for products, such as cars or apartments, in what has come to be known as a ‘barter deal’. The ads-for-equities version is more controversial because of the obvious conflict of interests when a newspaper is reporting about a company in which its publisher has financial interests in. Media houses such as BCCL usually defend private treaties saying it doesn’t influence editorial coverage.
According to the BS story, the value of listed holdings in BCCL’s PT portfolio, has declined 50%. The story quotes Private Treaties CEO S. Sivakumar, as saying that the entire portfolio (including unlisted holdings) is down by 40% in value. BCCL has trimmed the PT division to 100 people, from 140, the story says.
The story in DNA Money focuses more on the rising concern among investors and market players about media houses’ practices such as Private Treaties, in the wake of the recent Sebi report on the Pyramid Saimira scam. Promoters of Pyramid Saimira Theatre Ltd were found to have forged a Sebi letter to fraudulently drive up the scrip.
The interim order by the market regulator found that Rajesh Unnikrishnan, an assistant editor with The Economic Times, “also appears to have facilitated the publication in the media of the forged letter…”. At the end of a detailed investigation that has come in for widespread praise from several corners, the report, signed by Sebi member K.M. Abraham, had come to the following conclusion: “In view of the above, I have no hesitation in concluding that Shri Nirmal Kotecha, Shri Rakesh Sharma and Shri Rajesh Unnikrishnan, have jointly played a key role in an arrangement contrived to defraud investors in the market, and derive illegal profits thereof.”
Nirmal Kotecha, a promoter of Pyramid Saimira, was found to have benefitted from a forged Sebi letter asking the promoters to make an open offer, in a successful ploy to fraudulently drive up the scrip. Rakesh Sharma, an employee of the public relations firm Ad Factors, was found to have helped Kotecha publish the news of the open offer in the media, based on the forged letter. Pyramid Saimira is a private treaties client of BCCL, and Ad Factors, a joint venture partner in Tatva Public Relations, a PR firm. BCCL owns 33% in Tatva and Ad Factors owns the rest, according to reports in the media.
The DNA story quotes several named and unnamed market players calling for Sebi intervention to bring in complete transparency and mandatory disclosures of interest along with every story where an investee company is involved. Former Sebi chairman M. Damodaran whipped up a storm when he spoke out against “anchor-investors”, referring to experts who offer stock advice on TV, many of whom have interests in the scrips they are commenting on, but do not say so.
With ethical lines critical to the practice of journalism blurring with each new innovative service being offered by media houses to advertisers, on whom they are almost entirely dependent, media will have a weak defence–even if only a section is guilty–when the government or a regulator steps in to curb its freedoms.
Interestingly, BCCL, which is shortly expected to launch business channel ET Now, has taken down the industry-wide portfolio from the Private Treaties website. The Google cache shows the list was available as on 6 May, but the link is now broken.