Paint The Sun Red

The Canadian broadcaster wasn’t related to the Chennai-based Sun TV Network, the television company owned by the reclusive billionaire Kalanidhi Maran. And certainly poles apart when it came to profitability, market share and distribution. But here’s the coincidence—mighty Sun TV too faces the threat of its channels being taken off air. And with the same suddenness and no less ignominy. For a media baron who has seen much political turbulence affecting a sensitive business, it can’t get any more dire than this. Kalanidhi Maran is currently fighting the battle of his life.

Many are asking just why the Union home ministry is denying security clearance to a broadcaster that has been in business since 1993, controls nearly half the large Tamil Nadu market and its film distribution industry and is top dog in southern India. “While the Sun TV affair comprises the most outrageous case of refusal to? renew security clearance, many broadcasters are hurting because of this,” says Uday Shankar, president of the Indian Broadcasting Foundation and the CEO of Star India.

The reasons behind Sun TV’s grim situation are partly driven by politics, given the war of letters between Union home minister Rajnath Singh and Union finance minister Arun Jaitley. Worryingly for Maran, business interests could well lurk behind the turmoil his media empire is facing.

The markets have reacted with distress. Sun TV’s shares took a beating at the stock exchanges on June 8, eroding its market capitalisation by Rs 3,052 crore, or 21.73 per cent. As a wag observed, Sun’s market-cap loss is more than what the DMK ‘gained’ in the 2G scam. Given that the security clearance for uplinking and downlinking Sun’s 33 TV channels is up in the air, most brokerages have downgraded the stock, citing uncertainty over operations.

On the face of it, the reason cited by unnamed home ministry officials is along the lines used to deny clearance to the company’s 45 FM radio channels last month. The ministry points to the ongoing CBI investigations that Kalanidhi and his brother, former Union communications minister Dayanidhi Maran, are facing (the charges are not against the Sun TV network). That said, these allegations bear repetition.

In 2006 Dayanidhi, as then Union telecom minister, is alleged to have leaned on Aircel owner Sivasankaran to part with his holding in the company to Malaysia-based Anandhakrishnan, who is close to the Marans. Sivasankaran claimed that Anandha-krishnan, as a thank-you gesture, invested Rs 900 crore in Sun’s DTH operations via a UK-based company, Astro. It is acting in this case that the Enforcement Directorate attached property and shares of Sun TV worth Rs 742.58 crore (the order was upheld on June 10, and the company will probably approach the Supreme Court) in April. Besides this, Dayanidhi Maran is also? accused of running a 300-line private exchange from his residence when he was the telecom minister in the UPA government.

“Until now, most regulatory issues for Sun TV have been at the promoter level, with business continuity largely ensured. However, with the possibility of license cancellations, regulatory issues now seem to be overflowing into business operations,” brokerage house Motilal Oswal said in a report. It sees the cancellation of the TV channel licenses as a low probability event, given the channel’s dominant share in the Tamil Nadu market.

“I don’t think we have done anything so horribly scandalous that the network has to be shut down,” says S.L. Narayanan, group chief financial officer at Sun Group to Outlook. “It is a fact that Mr Kalanidhi Maran has been named in a CBI chargesheet related to the Astro investment in Sun Direct TV Pvt Ltd and those proceedings are sub judice; but there is every possibility that his name will be cleared. If the mere pendency of a criminal investigation is sufficient to invoke such extreme measures, I don’t think any TV channel will be functioning in this country,” he says, stressing that the company will have to approach the courts for protection, as it has done in the case of the radio channels.

In August last year, the Madras High Court had set aside an order by the Union information and broadcasting ministry that cancelled the registrations granted to Kal Cables, the multi-system operator run by the group, on the basis of a denial of security clearance by the Home Ministry. The court, while noting that it was up to the government to decide what constituted security, had observed that the information available in the MHA’s files was already in the public domain. In its ruling, the court said the government should spell out clearly whether the acts revealed in the file would constitute security and if so, the same yardstick would apply at all levels not only against msos but also against the television channels.

Of course, the truth is that it isn’t easy to separate Kalanidhi Maran’s businesses from Tamil Nadu politics, especially the fortunes of the DMK, the party run by his grand-uncle M. Karunanidhi, which is currently out of power both in the state and in New Delhi. It would seem Maran’s business empire is now increasingly coming under pressure from different quarters, although some of these probes had been initiated at least three years ago. Earlier this year, Maran transferred the ownership and management control of SpiceJet, the troubled airline which required huge funds to be pumped in to revive operations, back to its former promoter, Ajay Singh. Given Singh’s closeness to the BJP, the deal has come into the spotlight for regulatory due process and full disclosure (see https://bit.ly/1GAna89).

Given the SpiceJet affair, market watchers are concerned that Sun TV is being hammered down on the stock markets before a potential change of ownership. In March, a media report suggested that Reliance Industries Ltd was considering acquiring Sun TV. Asked for a clarification by the Bombay Stock Exchange, the broadcaster had trashed the news as totally false and baseless. An official Reliance Twitter handle, @flameoftruth, put this denial out: “No truth in #RIL acquiring Sun TV Network: Story by a website is incorrect”.

Just why Sun TV probably appears attractive may have to do with its position in the southern market, where it is the leader in three out of the four states (in Kerala it is a close second). The southern regional market accounts for more than 35 per cent of the cable and satellite subscribers in the country and Tamil Nadu is the largest advertising market among the four southern states, according to a 2014 kpmg report. Also, the 33 TV channels account for most of the group’s profits. Its DTH operations—where it claims 10 million subscribers—is the icing on the cake, and would be an obvious target for any firm looking at launching digital data-led operations in the lucrative south India markets.

Sun has been fighting off competition in its southern bastion, incl-uding a tussle with Tata Sky nearly a decade ago over signal sharing. It appears that the business scenario has changed in recent years, with rivals like Star and Reli-ance-owned ETV (now branded as Colors) entering these markets and snapping at its heels, says social scientist and author Nalin Mehta. “In that sense, what we are seeing is perhaps the last cable war being fought in south India and you can’t understand this in context without und-ersta-nding the larger politics playing out in Tamil Nadu leading up to next year, as also the fact that the television landscape in south India is changing,” he says.?

Mehta reckons that the Sun group—whose growth and expansion since the 1990s has been in tandem with the toehold that the DMK had had in New Delhi for most of this time—is in a vulnerable position now but the prospect of it shutting down is still a long way off. For that matter, industry observers don’t seem to recall any instance of the i&b ministry having revoked the licence of a running channel on these grounds, though some have been forced to shut down in the past because of issues like content code violation.

In Tamil Nadu, the political situation doesn’t look promising for the beleagured DMK: Jayalalitha returning as chief minister last month with popularity intact, after being acquitted in the disproportionate assets case and winning the BJP’s friendship. All of this makes elections earlier than 2016 a possibility, except for the uncertainty stemming from the Karnataka government’s decision to appeal against the High Court verdict.

DMK spokesman T.K.S. Elangovan reckons that the Marans’ woes won’t have much of an impact on the political scenario in the context of the assembly elections. “Politically, I don’t know what will be the impact on the party. We are going against Jayalalitha and not against BJP. There is nothing to go against the BJP in the state,” he says.

“Dayanidhi Maran will have negligible influence in the next elections. Even the DMK has virtually distanced from him,” says Chennai-based chartered accountant M.R. Venkatesh, who is known to be close to the AIADMK. Still, he’s not convinced by the reasons that have been cited for the denial of clearances. “As long as it’s a genuine action, I have no issues. But it shouldn’t be any political vendetta which is half-baked or which is done basically to terrorise people in the stock market because it could be very much possible that rivals are playing on fears and hammering down the stocks,” he said.

Over the past week, when Sun TV’s share price tanked amid unc-e-rtainty, there were newspaper reports suggesting that the ministry may be willing to consider giving the clearances if the board of directors, or ownership, changes. “From a shareholder perspective, it will be good to have a bit more detail so that one can have a first-hand sense of the seriousness of the charges. Then, by extension, it could mean that a lot of other businesses are vulnerable to the same, so it’s good for the market to know,” says Amit Tandon, founder and managing director of the proxy advisory firm Institutional Investor Advisory Services India.

The issue of security clearances has been causing a bit of consternation in the industry. “This was just a design to essentially gag the broadcast media. It’s totally irrational. Nowhere in the world do you need a licence to launch a channel,” says the CEO of Star India Uday Shankar. While current i&b minister Arun Jaitley has been sympathetic to the various demands of the Indian Broadcasting Federation and has asked for many regulatory provisions to be relaxed and streamlined, it hasn’t helped so far, he says.

Nevertheless, some political observers are of the view that it is still tough to take on the Marans politically or financially—even if they may not be as powerful as they used to be—simply because of the enormous clout wielded across print, television and cinema. It is to be seen if they have nimble political acumen and resilience to strike compromises in proportion to their storied clout.

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Sun Group’s Bits And Bytes

The Digital Business

• Sun TV 33 channels

• 45 Radio stations

• DTH Sun Direct claims 10 million subscribers

• Multi system operator Sumangali Cable Vision

Sun TV’s Marketshares

• All-India 10.5%

• Andhra Pradesh 26.3%

• Karnataka 36.9%

• Kerala 28.5%

• Tamil Nadu 47.9%

Source: TAM CS4 data for Jan-Sept 2012

Sun TV Network’s Financials

• Revenues Rs 2243.62

• Net profits Rs 737.23

• Market capitalisation Rs 11,324.02*

• Drop in market cap since June 1 20.78%

*Figures are in Rs crores and for FY 2014-15;