Kochi franchise remains mired in trouble

Time is running out on Kochi, the most faction-ridden of all IPL franchises. The BCCI's deadline asking the franchise owners to register themselves as a company is only a week away but instead of sorting out the ownership wrangle, Kochi's owners have entangled themselves in fresh problems.

Rendezvous Sports, led by Satyajitsinh Gaekwad, has made a fresh offer to buy the whole 25% of free equity, granted to them 'for life' when the franchise was set up earlier in the year. There has been no response to the offer in three weeks and an official involved in the discussions said, "Both factions have failed to resolve the dispute."

The biggest investors of the consortium, Mehul Shah of the Anchor group (26% ownership), had earlier offered Gaekwad and the other Rendezvous co-owners payment of 10% of the free equity in cash to exit the consortium.

"They [Rendezvous] have made a fresh offer and are waiting for a response," said one of the Kochi officials involved in the emergency meetings.

After an emergency IPL governing council meeting last Sunday, the BCCI served a show-cause notice to Kochi, giving the franchise 10 days to resolve the internal disputes which, Manohar said, had split the five-partner consortium into two groups. In the same meeting, the BCCI also terminated the contracts of Rajasthan Royals and Kings XI Punjab over their ownership patterns, thus indicating to Kochi that the consequences of inaction were severe.

Rendezvous' argument is that they took a risk in deciding to incur all the costs leading up to the bid until they won it, a proposal agreed to by the other investors in exchange of 25% of free equity. According to a Kochi insider, Rendezvous got the equity in consideration other than cash. "This was offered as per the unincorporated joint venture agreement made before the bid for Kochi," he said, "with the responsibility to manage all the processes including outsourcing to win the bid."

It was Gaekwad who put up all of the Rs 4 crore (US$ 905,000) initial investment till the bid was won, the source said. "If they [Kochi] had lost the bid, the money would have been lost." The terms of the sweat equity were offered in exchange of Gaekwad's "intangible services" in the run-up to the bid along with the risk of losing Rs 4 crores.

The other faction in the franchise, led by Anchor's Shah, is against both the involvement of Rendezvous and the appointment of Gaekwad as CEO. The Kochi source revealed that the Shah group are offering Rendezvous 10% of the equity as an exit payment from the consortium. Rendezvous, however, had remained adamant: "Their latest offer is that they are willing to invest 100% of the free equity to save Kochi from falling apart." This is an increase from Rendezvous' initial offer of investing 15% of the equity to end the feud.

The Kochi franchise has been controversial from its very inception in March. Rendezvous Sports World, a consortium of five companies, became the tenth IPL franchise after a successful bid of US$333.33m but almost immediately ran into trouble over the composition of its ownership, after the discovery of a few "secret partners" in the consortium. A new agreement was then signed by both the parties but fresh controversy broke when Lalit Modi, the then IPL chairman, made the ownership details public on his Twitter feed.

Even then Modi had categorically questioned the 25% "free equity" granted to Rendezvous Sports. "25% of Kochi team is given free to Rendezvous sports for life. The same equity is non-dilutable in perpetuity. What does that mean?" Modi had asked. Kochi can either solve its problems within a week or face an even more troubled future.