Chidu-Karti-Maxis link: the dotted line is very faint

An apoplectic P Chidambaram told the Lok Sabha on Thursday: “I categorically state that neither me nor any member of my family have acquired or hold any stake in any telecom company. In particular, I categorically state that neither I nor any member of my family have acquired or hold any share in either Aircel or Maxis.”

This spirited denial came in regard to the irrepressible Subramanian Swamy’s allegation that his son Karti Chidambaram owned a 5 percent stake in Aircel Televentures, the company which C Sivasankaran sold to Malaysia’s Maxis Group headed by T Ananda Krishnan. The Central Bureau of Investigation (CBI) has, in its FIR, accused former Communications Minister Dayanidhi Maran of forcing Sivasankaran to sell Aircel to Maxis around end-2005 by blocking Siva’s licence applications in various circles. These licences were cleared after Maxis entered the picture.

Chidambaram, as then finance minister, was one of the key players in clearing the Maxis investment in Aircel since the Foreign Investment Promotion Board is headed by a finance ministry official.

Swamy’s allegation is that Chidambaram delayed clearing the Maxis-Aircel deal in 2006 when he was finance minister in order to benefit his son Karti - which allegedly came through a 5 percent stake in Aircel.

No proof has been offered by Swamy so far, but an Economic Times investigation comes up with intriguing facts that hint at some linkages between Karti’s companies and Aircel, but there is no obvious smoking gun. (Read the full ET report here )

The linkages revealed by the ET report are the following:

One, that Aircel owed Advantage Strategic Consulting (ASC) Rs 26 lakh as per the 2006-07 balance-sheet, but at that stage Karti had no equity stake in ASC. ASC also showed amounts due (under the head “loans and advances”) from Chess Management Services, Chess Healthcare Solutions and Halidon Marketing Pvt Ltd - which were owned or linked to Karti. So both Karti and Aircel appeared to have used ASC’s services at some point. The link between Karti and Aircel, if any, is through ASC as a common consulting partner.

ASC says the Rs 26 lakh shown under “loans and advances” was money earned from Aircel for consultancy services rendered. The company also said it never owned any stake in Aircel.

The significant coincidence is that the ASC-Aircel consultancy link relates roughly to the period when Aircel was being sold to Maxis.

Two, Karti indirectly came to own, and then abruptly exited, ASC recently. Through a company called Ausbridge Holdings, which was 95 percent owned by Karti, 200,000 shares of ASC - accounting for an effective stake of 66 percent - were bought in March 2011. Karti seemed to have owned Ausbridge till at least September 2011, but as on March 2012, he quit as Ausbridge director. ASC now says Karti does not own any equity in Ausbridge.

The question: why did Karti’s company Ausbridge suddenly buy ASC shares in 2011 only to later see the boss himself quit Ausbridge?

Three, according to The Economic Times, the second Karti link to Aircel/Maxis comes through a company called Kriya FMCG Distributors, a company founded by Karti’s wife Srinidhi, who was one of the first two directors. On 1 September 2008, Srinidhi and her daughter transferred their majority stake to CBN Reddy, and 15 days later, Reddy and Kriya bought 50 percent in ASC.

Kriya FMCG apparently had a few business transactions with Sindya Aqua Minerale Pvt Ltd, which is owned by Apollo Hospitals Chairman Pratap Reddy’s daughter Suneeta Reddy and her husband Dwarakanath.

Suneeta and Dwarakanath, through Sindya Securites and Investments Pvt Ltd and Deccan Digital Networks, are the junior partners in Aircel with a 26 percent stake - with Maxis owning the rest.

This, clearly, is another tenuous link between a Karti company and Aircel - but does it mean anything?

The intriguing point is that Karti’s wife and daughter seem to have been transferring shares of Kriya FMCG (around 22,500 of the 25,000 owned by them) to CBN Reddy and back between 2006 and 2008. Why was this done?

The interesting thing about the Sindya holding in Aircel is that it is all about optics. Indian law dictates that an Indian company should have at least 26 percent in a telecom company. But in terms of investment, Maxis accounts for nearly 99 percent of the effective ownership of Aircel. Put another way, Sindya is just a legal figleaf through which Maxis has routed money into Aircel ownership. The legal ownership is with the Reddys, but the effective ownership is that of Maxis.

But coming back to the Chidambaram-Karti-Maxis connection, where does the ET investigation leave us?

Here’s the sum-up: A company (ASC) associated in 2011 with Karti (but not in 2006, when the Maxis deal was cleared by P Chidambaram) had a consulting deal with Aircel Televenture (which had been sold to Maxis) worth Rs 26 lakh. Another company (Kriya) owned by Chidambaram’s daughter-in-law (Srinidhi, Karti’s wife) had a business relationship with a company owned by the junior partners in Aircel.

From a plain reading, it does not look like there is any direct link between Chidambaram and Maxis.

However, this is not to rubbish the Subramanian Swamy allegation altogether. What we have is sketchy evidence derived from skimpy balance-sheets filed with the registrar of companies that may not capture all the transactions that may have happened between ASC and Aircel. Only a detailed forensic scrutiny of the books of both Aircel and ASC will reveal what transpired between 2005 and 2012.

Moreover, the series of back-and-forth share transactions involving Kriya FMCG and CBN Reddy and Karti’s entry and exit from Ausbridge, which held two-thirds of ASC shares, need some explanation. The whys of Karti Chidambaram’s transactions are far from clear.

It is also worth noting that the CBI charge-sheet talks of Maran pressuring Sivasankaran to sell Aircel to Maxis in return for an investment in a family company, Sun Direct. But doubts have been cast on this allegation by one of the main litigants in the case against Dayanidhi Maran - Anil Kumar of Telecom Watchdog (Read here).

Bottomline: the line connecting Karti Chidambaram to Maxis is a tenuous one for now.