The first mistake that INX made was what most start-ups do. It splurged. Estimates indicated that the group spent Rs 600-700 crore in the first year, or almost the entire corpus raised by outside investors. Its expenditure on programming was Rs 360 crore, according to a few reports. By the second year, the total costs reached Rs 1,000 crore, said insiders. Something had to give; it did with the Global Financial Crisis of 2008. In India, one of the worst-hit sectors was media.
With a slash in advertising budgets by small, medium and big companies, there was little scope to earn revenue. Inevitably, INX couldn’t pay its vendors. Indrani acknowledged as much in an interview when she said, “It’s not true that we are not paying anyone. Yes, there are some outstandings, but we are making payments every week little by little so over a period of time everyone will be paid.” However, some suppliers claimed that they hadn’t been paid for months.
Peter and Indrani sought to raise another $100-150 million from the market but sources had dried up for several reasons. One, there was a paucity of available funds globally. Two, Indian investors were adopting a wait-and-watch stragegy. Finally, no one wished to increase their exposure to the Indian broadcasting sector, whose fortunes had nosedived in 2008.
By March 2009, Peter and Indrani had relinquished their managerial posts – Chairman and Chief Strategy Officer, and Founder and CEO, respectively – in INX Media. As per a press release issued then, the duo continued to retain their holdings in the company. A few months before, INX Media sold its news channel to Vinay Chhajlani, who also owned Nai Duniya newspaper. It was the beginning of the end of the Mukerjeas’ broadcasting era.
Ever since INX’s beginnings, there were rumours that Mukesh Ambani had advanced money to Peter and Indrani to launch the channels. The Serious Fraud Investigation Office (SFIO), which looked into the group’s transactions, felt that a business conglomerate was involved. It claimed that the Mukerjeas didn’t have the huge sums required to initially launch the three channels. Logically speaking, it must have been extended by a business house.
In interviews he gave after he quit Star, Peter was repeatedly asked about connections with the elder Ambani. He indirectly denied this, saying this was mere speculation. This doesn’t make sense. If Peter and Indrani were able to raise $170 million from the four outside investors, including three global ones, they didn’t need the help of any other investors. Their personal investments in the equities of INX media and INX News would be something they could afford.
For example, in March 2007, the share capital of INX News was Rs 7.5 crore or 75 lakh shares of Rs 10 each. Indrani, who held 68 percent — directly and through INX Media — in the company, required Rs 6.8 crore to buy these shares. With Peter as the India head for Star for seven years, and Indrani’s past practice as HR consultant, they could afford to do so. The Ambani connection arose because Indrani’s major clients were Mukesh Ambaniowned firms.
The second Ambani link emerged when Chhajlani purchased NewsX news channel. In a complaint to the Press Council of India in 2010, Mukesh’s younger brother Anil Ambani alleged that the “Mukesh Ambani Group has lent and advanced over Rs 100 crore to the Vinay Chhajlani Group, M/s Suvi (Info) Management (Indore) Pvt Ltd, and M/s Nai Duniya Media Pvt Ltd.” It added that “Vinay Chhajlani Group owns Suvi Info Management and Nai Duniya, which is a 100 percent subsidiary of Suvi Information Management.” Thus, all the three entities were related.
Further disclosures revealed that there were deeper links between Chhajlani and Mukesh Ambani. In 2006-07, Aarthik Commercials Pvt Ltd advanced an unsecured loan of Rs 38 crore to Suvi Info Management, whose shareholders included Vinay Chhajlani and his wife Sunita. In the same year, Suvi Info Management owned 67,34,700 shares in Nai Duniya News and Network Pvt Ltd. Each share was valued at Rs 57.50; the combined worth of the shares: Rs 38.72 crore, or almost the same as the unsecured loan from Aarthik Commercials.
Aarthik Commercials was owned by several corporate entities, which included Reliance Petromarketing Infrastructure, Jamnagar Kandla Pipeline Company, Agni Fuels, Avalanche Fuels, Jubiliant Autofuels Trading, and Steadfast Fuel Trading. Sources close to the SFIO maintained that all these six firms were owned, either directly or indirectly, by Mukesh Ambani. However, the link between Nai Duniya and Aarthik Commercials don’t show any Ambani connection with NewsX, except that Chhajlani, who owns Nai Duniya, purchased the news channel.
However, there was some evidence to link Mukesh Ambani, Chhajlani and NewsX through Niira Radia, the controversial lobbyist, whose clients included Mukesh Ambani and Ratan Tata. Among Nira Radia’s conversations taped by the income tax office, one of them related to her talks with the late Jehangir Pocha, a journalist who had a minority stake in NewsX after its purchase by Chhajlani.
During the conversation between Radia, Pocha and someone called Yatish, Radia instructed Yatish that “salaries for NewsX have to be released without budget being approved” and asked for “a list of creditors (whose dues have) to be cleared. We cannot have people turning up at the office along with cops.” The last comment stemmed from the fact that “yesterday the vendors turned up with the police. There was a lot of drama at the NewsX office….”
By 2009, some of the global investors, especially Temasek, seemed convinced that Peter and Indrani were involved in financial irregularities. Sources said that an audit found that over Rs 160 crore was siphoned off by the Mukerjeas. Insiders admitted that prices paid to vendors were twice or thrice the market rates; evidently, some of it was paid back to the Mukerjeas. In addition, they earned an undisclosed amount when they sold out their stakes in INX media to New Silk Route.
In March 2009, when the Mukerjeas quit their managerial posts, they retained their shares. Pradeep Guha, the former Zee hand, joined as a consultant; he said that he was there to help the investors for 2-3 months but stayed on. Within a year, Guha became the CEO of INX Media. In 2009-10, New Silk Route negotiated with other investors, including the Mukerjeas, to purchase their shares. In February 2011, this purchase got the requisite government approval.
By this time INX Media’s name had changed to 9X Media; it had sold the Hindi entertainment channel and focused only on the music channels in various languages. New Silk Route owned 80 percent of 9X Media and Guha owned another 15 percent. The focus on music helped. By 2013, New Silk Route’s partners claimed that “9X is a turnaround story that has reverted to profitability over the last few years” and that its revenues grew by 30-35 percent annually.
It was at this stage that the majority owner sought an exit route. It decided to sell out its stake in the ‘profitable’ company. However, it failed to find a buyer at the ‘right’ price. But by this time it was angry with the Mukerjeas, as it felt that they were responsible for the earlier travails. Even Peter was hurt by the manner in which he was treated by the global investors.
In one of his angry moments, Peter wrote a piece which alleged, “If you’re planning to venture out on your own with pe (private equity) partners, my one word of advice is – don’t. Find a strategic partner instead. The guys who work in these outfits are slick dicks and never seem to have enough time…rushing from one meeting to another and even when attending the board meeting of one, they’re on their Blackberries working on another.” Clearly, a case of sour grapes!
However, it was the money that the Mukerjeas earned from INX Media in various forms that is now being seen as a possible motive for the murder of Indrani’s daughter, Sheena. For this money was parked with Sheena, who may have refused to give it back to her mother. So, the funds that came to haunt the private equity players in INX Media also ended up ruining the Mukerjeas’ dream life.