WOULD YOU HAVE INVESTED IN INX IPO?

By Ruma Dubey

No. This is not one more story about Peter Mukerjea and his dysfunctional family. We are getting an overdose of it as such from the media, who is being the investigator, forensic expert, judge, jury and all.

This gruesome story continues to remain “breaking news” because we, the ordinary people, somewhere, get this pervert satisfaction in seeing someone “who has it all” brought down to earth. Yes, our undying interest is not out of fascination for the murder but more because we want to know how much more dysfunctional this “high-class” really is. Surely the Indrani story would inspire a few movie directors as it has all the masala and more.

But more than us, the ordinary people, India Inc and we the investors should be more shocked with the story. The lesson which this story has taught is path breaking.

Imagine this scene. If INX Media, in 2008 had gone public, would you have invested in the IPO or not? A promoter like Peter Mukerjea, his 14 years of experience with Star Plus and the way he resurrected the channel is stuff which is taught in management schools; this was the USP of the INX. Indrani, we would have looked on as a wife, not as the one in charge; that is what we, like the rest of the world, would have assumed.

Apart from Peter, for us the IPO would have been appealing also because of its big bag of very reputed investors. PE investors bought 50% stake in this media company, helping bring in a whopping Rs.750 crore. It had Singapore based Temasek which brought 20%, New Sill Route Advisors with 20%, Kotak Mahindra Bank came in with 10% and so did New Vernon PE. The balance 50% was owned by the “famous” Mukerjeas. Icing on the cake - INX Media managed to rope in high profile editor, Vir Sanghvi to lead news operations at NewsX.

With all these strappings, naturally, the IPO would have been a huge success, oversubscribed for sure, despite the hefty price tag it would have come at. Just like the PE investors, we all would have fallen, hook-line-and sinker for the company.

And that brings us to the crux of our story – should we invest in a company, solely on the reputation of the promoter? Now that expounds the entire way in which we invest – would you invest in company run by Narayana Murthy or Prannoy Roy or for that matter, Arnab Mukherjee? The answer would most certainly be “yes” which is what the PE investors also banked on. So irrespective of this fall of a ‘star’, the reputation of a promoter is of prime importance before we invest; that stays.

Then we are also forced to think if we should blindly invest only because PE funds like Temasek and Kotak invested. Actually, following PE funds is never a prudent way to invest as they look at companies as mere opportunities. They get a price advantage when they get in before an IPO and once it gets listed, they are the first to get out; that is their business, so we cannot blame them for jumping the boat.

What this INX Media teaches us is that even if we invest in a company based solely on the reputation of the promoter, it is pertinent to constantly monitor the performance. Any organization that is opaque, whosoever might lead it, is surely not worth putting a penny in. What shocks us here is that the PE funds never monitored how their money was being spent? The company was on ventilator within a year of its operations; did the PE funds not see this coming? Do they not oversee how their money is being spent? Were they so charmed by Peter that they continued to believe that the company would do well? When Vir Sanghvi left, weren’t the alarm bells ringing loud and deafening?  There is talk of money being siphoned off, huge tracts of this Rs.750 crore. But a very basic question here – if it was in the character of Peter, based on whose reputation INX could come up, to cheat and embezzle, it would have shown one time or the other in last 14 years. Honesty is a very core trait. Thus it is difficult to believe that he connived with his wife to siphon off money. Well, he was smitten enough to not question her daughter being passed off as sister, then what else can we say?

Here, another big lesson – even if the promoter was Peter, the show was run by his inexperienced wife. And therein lay the message – even if you invest in a company promoted by Narayana Murthy, be sure about who is managing the day-to-day operations; ultimately it is that person and not Murthy who will take the company to new peaks or sink into an abyss.

Yes, reputation of core promoter is prime but check his/her role in the company. Do not follow PE funds, ever. And always, always monitor the workings of the company in which you have invested – if you see lack of transparency, get out.

INX is a one-off case for India Inc. But it is such cases which will change the way you have conventionally looked at things. And if it is pervison whick keeps us glued to the Indrani story, it is greed which traps us in stock market - both are two sides of the same coin.