17th July 2010: Questions for Mr Badale

A) The word 'mysterious' has been used unsparingly in all reports, documents, investigations and observations related to the IPL franchise Rajasthan Royals. How harmful is the term to the franchise's prospects in the tournament?

Clearly, it is not helpful to have unfounded insinuations based on partial facts, but in some respects it has brought the franchise even closer together. I think the term has been used primarily to generate media interest and hype, and not as it actually pertains to the facts. A moment’s reflection would reveal that we structured, named and set up the franchise, not only in accordance with our bid submission, but in the only way that was possible in the circumstances at the time. For example, it was described as “mysterious” that we set up our Indian operating subsidiary after we had won the bid, but that is also the case with five other franchises. Would it have not been more “mysterious” if we had set up the entity before we had won it? As an overseas bidder, we did not know if we would win so how could we set up and name the Indian entity that would own it. In another example of such reporting, it has been described as “mysterious” that we have a corporate entity that involves a holding company in Mauritius. This is strange since this is standard practice for foreign investment in India and besides, the Mauritian entity also allows us to pursue other cricket related activities overseas very efficiently – not least Royals2020. If this is viewed by certain sections of the Indian media as “mysterious”, then they might as well question some of the largest global companies and brands as they have exactly the same structures for investing in India. Another supposed mystery is the ownership of the franchise at the time of signing the franchise agreement. Again, the explanation is simple. The Franchise Agreement was signed by JIPL, the Indian operating subsidiary whose directors and shareholders were Ranjit Barthakur and Fraser Castellino, both of whom are 10 year colleagues of mine. They were holding the shares in trust until we had completed the set up of the Mauritian entity whose structure and shareholders were the same as disclosed in the bid document. All of this was done in full consultation, and with full disclosure to the IPL. In the most frequent example, it has been suggested that there is an implied “mystery” about the fact that our bidding vehicle name is different to the name of the entity that has signed the franchise agreement. Again, we have never sought to hide this and the explanation is very simple. We bid as a consortium, the structure of which was fully disclosed in our bidding document, after we had sought clarifications (which were provided ahead of the auction) that we could set up an Indian entity after the auction, if successful. When we discovered we had been successful we had to set up an Indian entity. As you know, this takes time and cannot be done overnight. The fact that we named this entity Jaipur (IPL) Cricket Pvt Ltd was because we won the franchise in Jaipur, and it gave us the structural flexibility to acquire or launch other businesses if needed. There is no mystery in the operating structure as many other investments into India are structured in the same way. The Jaipur (IPL) Cricket Pvt Ltd entity is owned by Emerging Media Sporting Holdings in Mauritius with the exact same consortium structure behind it as laid out in the original bid submissions. Later there was the addition in the consortium of Raj Kundra’s family (for which we obtained approval). The fact that we voluntarily disclosed all of our information in our FIPB application submitted in July 2009, well in advance of the recent controversy, would suggest that we have only ever been thoroughly transparent with our corporate governance.

B) Primarily because Lalit Modi's co-brother-in-law Suresh Chellaram happens to be an investor in RR, the accusations -- whether on record or source-based -- have added more fuel to the fire. How in the first place did Mr Chellaram get to associate himself with the franchise (in detail please). Considering that Mr Modi himself was at the helm of affairs, was it not the duty of the franchise to come clean on all these relations because allegations of a conflict of interest were always looming large.

Mr Suresh Chellaram got involved because we invited him to participate in our consortium. I met him through Lalit Modi, whom I have known since 2005, when we, as Emerging Media, had sought to get BCCI endorsement of our reality television talent hunt, Cricket Star. We have been investing in cricket since that time, and our investment in 2020 cricket is well documented, staging a mini-champions league tournament in Sept 2006, and partnering with Leicestershire County Cricket Club.

However, the funds required for the IPL were significant, and so we set about leading and assembling a consortium, with other passive financial investors who were happy with us as the operating lead. I contacted Lachlan Murdoch, and Suresh Chellaram both of whom I knew were interested in passive financial investments, and both of whom were happy to invest behind us. We should not forget that there was considerable risk attached to the IPL at the time – with a significant financial commitment required to take part in what was essentially a start up venture with no guarantee of success.

It was perhaps natural that Suresh Chellaram should express an interest in participating in a franchise and being more willing to take this risk, given his relationship with Lalit Modi. Perhaps he also had some confidence that Lalit Modi would be able to get the IPL off the ground and make it work, which he did manage to do.

 As a franchise, we sought clarifications on the participation of BCCI relatives well ahead of the auction. Several other franchises have had to seek similar assurances that they would not have conflicts of interest and as with our franchise, these were given.. It seems strange that so much is being made of this only after the IPL has become a global success.

 Suresh Chellaram has been regularly named in the Indian media, alongside Lachlan Murdoch and me as a co-owner. He attended all of the early IPL owner workshops along with the BCCI. He and his family have been visible at most IPL matches, and his wife was on the stage when we won in the 2008 season  – one of the most watched moments in cricketing history. We have even made and sold a DVD featuring Suresh Chellaram as one of the franchise owners. These are hardly the actions of a franchise not coming clean about his involvement.

C) Mr Modi was president of RCA at the time when the franchise was bought by Emerging Media. If Mr Chellaram's association with the franchise was just a coincidence then wasn't it too much of a coincidence considering that Mr Modi personally planned and organised the auctions.

Suresh Chellaram's involvement with the franchise was not a coincidence. We invited him to participate as a successful Indian business figure in his own right. Clearly he would have been keen to participate in what he saw as a potentially exciting opportunity, though not without risk. Remember, at the time, there was no guarantee the IPL would be successful at all. As for the auction process, it was organised and managed not just by Lalit Modi, but by the international sports management company IMG as well as BCCI and IPL personnel. It was a very public process, with multiple parties involved. Surely if there would have been an issue, you would have heard something at the time of the original if it had not been done properly.

 We bid specifically for Jaipur, as we had experienced the facilities a year before during the shooting of cricket star, and we knew that our bid price would probably be too low for the major metros. As all the franchises have discovered over the last 3 years there is considerable advantage of having a close working relationship  between the local cricket association and the franchise. It naturally makes for closer working relationships and as a result leads to improved operations, which ultimately benefits the fans themselves.

D) FEMA has reportedly said that its rules have been violated in terms of the funding. What does JIPL have to say about this? Has Rajasthan Royals franchise in particular been approached by any of these authorities related to the matter of financial irregularities? In specific, has RR been asked for any further explanation from any investigating authority other than what all nine franchisees had to submit?

In common with other franchises, the Rajasthan Royals have received enquiries from the I-T Department , and the Enforcement Directorate .  We have been fully cooperative and have provided detailed responses with all documentary evidence. We have always operated openly and transparently in all our dealings with the authorities. We have always abided by the procedures set out by the relevant authorities and will continue to do so ,  as demonstrated by our  2009  submission to the FIPB, and it is important to point out that we initiated this ourselves even though it was not a requirement. 

We have always taken professional advice on our corporate set-up, and foreign exchange transfers.  Neither we, nor our professional advisors, are aware of any violation, although the rules around this are quite complex. There was some issue about the initial deposit required to participate in the auction process back in 2007. Any bidder who wanted to participate in the auction needed to make a deposit with the BCCI within a given time period, which was only days after the tender documents and clarifications were finally published. As we did not have an Indian entity incorporated at the time (as we did not know if we would win or not), we transferred our monies from our overseas account directly to the BCCI. If we had been unsuccessful these monies would have been transferred back. As we were successful these monies were retained by the BCCI. 

E) (If you answer this, I shall put the quote on record as mildly as possible) Does Rajasthan Royals believe that it is being made into a scapegoat because of any proximity to Mr Modi or any of his relatives (such as Mr Chellaram) ?

 Maybe so, though I would hope that the Rajasthan Royals are not treated differently to other franchises. We have a transparent corporate structure and have been completely open in our disclosures. However, we are the only foreign-owned franchise. Perhaps for that reason and maybe since we are the least expensive team, we are the easiest target for some, but we know that we have played a significant part in the league’s successes to date. We will continue to uphold our values and work with all the stakeholders to improve and strengthen the league as it is something that all Indians can be very proud of.  The controversy surrounding the league is much larger than just our franchise and something that we hope comes to a rapid end. The IPL has been such a huge success for India, and its handling is something that is globally visible. Now that it is a proven concept everyone now wants to be a part of it, but this should not be at the expense of the founders. We believed in the vision of the league from inception and we have continued to support that collective vision whilst competing with our fellow franchises on the cricket field as strongly as possible. 

F) Mr Shashank Manohar, the BCCI president, has gone on record saying that the Rajasthan Royals franchise investments and those behind it are still not clearly mentioned in the IPL records. For example, Mr and Mrs Raj Kundra's 11 per cent stake in the franchise is yet to be ascertained. Can you please elaborate on this?

 We do not comment on matters between the franchise and BCCI publicly. The BCCI has every right to seek any clarification and we have always provided responses. We too have rights as a major stakeholder. However, we believe that any such correspondence is between us and the BCCI.

 Our franchise has been set up and structured in accordance with our original bid submission and with the consortium members as originally proposed, and our franchise agreement was signed on that basis. For clarity  Raj Kundra’s family does have an interest in 11% of the franchise, and we received permission for this at the time of the Kundra investment .

G) Mr Lachlan Murdoch who is also a stake holder in the franchise has never been seen around in the IPL circuit nor has made himself heard. Considering that he's one of the investors, was the franchise never bothered about being vocal on this front?

 We have never tried to be either vocal or quiet about who any of our investors are. The IPL should be about the cricket players and the teams not the investors.

 Lachlan's board representative has visited the IPL on multiple occasions, and Lachlan has twice had to cancel trips due to family commitments.

H) More than once, Rajasthan Royals had approached the concerned revenue department to request for overseas funding for the franchise (reportedly routed back to a tax haven). The request was turned down. Is this true? If yes then please elaborate.

If there's anything more you'd like to talk about, please add to your replies. I shall call after receiving your email.

In accordance with regulatory filings, we initiated ourselves a full disclosure application (in July 2009) through the Government's FIPB (Foreign Investment Promotion Board) process. Our application was not initially accepted due to a misunderstanding of submission timings. On 1st June we received formal confirmation that our application to issue new shares had been rejected by the FIPB.  The rejection has nothing to do with our corporate structure, which is a standard holding company structure in Mauritius, with an Indian operating subsidiary.  This is a common approach for many foreign companies investing in India. Far from Mauritius being a tax haven, it has very transparent, effective and cooperative tax treaties with India. The rejection appears to be based on the treatment of the original funds paid directly to the BCCI as a  deposit required to participate in the auction process. We transferred these monies from overseas directly to the BCCI as we did not have an Indian entity at the time. However, we are working with our advisors to understand why this is an issue. It does not impact the running of the franchise, but we are working with our advisors and the RBI to ensure the full and correct procedures are applied.

So what do you say to suggestions that the future of the franchise being in doubt?

 The future of Rajasthan Royals is extremely exciting. We have long term commitments to a number of partners around the cricketing world, and we are working closely with the Boards. Consistent with our policy of promoting young Indian talent, we are working with our local cricket associations on strengthening our grass roots programmes within our catchment areas. Importantly we enjoy fantastic support from our sponsors. The loyalty of our fans has been uplifting for us all and added to the desire from many young Indian and experienced international players, to come and represent the team. It is heartening how many players say that they want to join the Royals.

We feel that the popularity of the IPL has led, perhaps rightly, to greater scrutiny of the various franchises. We believe that we have been clear and transparent with the authorities in our structure and approach. We have adopted the same approach that other overseas investors in India follow so we do not understand why certain sections of the media have tried to make it an issue.

Do you feel that the Enforcement Directorate is systematically undermining the franchise through leaking this information?

The ED had addressed queries to us to which we responded duly, and to date they have been very fair and clear in their investigations. We have no complaints. We have complied with their requirements in full, and we will continue to do so.

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