Venky's may have to sell Blackburn after all

There’s no doubt about it: Venky’s India’s ownership of English football club Blackburn Rovers has been an unalloyed disaster. The Pune-based poultry firm bought the club in November 2010 for 23 million pounds, making it the first Indian owner of an English football club. It should have been a showcase opportunity to highlight India’s growing overseas influence; instead, 18 months on, all it did was preside over the precipitous fall from grace of a Premier League club. The main accusation against Venky’s is that it was unable to understand the business model of Premier League football, a sport that qualifies as religion for English fans, just like cricket does for Indian fans. [caption id=“attachment_308819” align=“alignleft” width=“380” caption=“Blackburn are a classic case of mismanagement. Getty Images”]  [/caption] Botched management decisions saw a string of highly-experienced players leaving Rovers, which also faced the ignominy of being relegated from the Premier League (for the first time in 11 years) after it lost to Wigan Athletic last week, drastically lowering its potential to earn revenues from ticket sales and sponsorship deals. There is also speculation that senior players such as goalkeeper Paul Robinson and midfielder Morten Gamst Pedersen are set to leave. Not surprisingly, fan discontent is soaring and even senior officials are throwing up their hands in exasperation. Late last week, deputy chief executive Paul Hunt was sacked by Venky’s after UK media reports leaked a letter written by Hunt back in December warning the Indian owners that Blackburn Rovers would be relegated if corrective action was not taken. So bad is the situation that British MP Jack Straw has even called for an investigation into Venky’s takeover. Amid all the turmoil, the club’s debt continues to rise. At last count, it was about  26 million pounds, according to this report by UK-based Telegraph. The mounting troubles at Blackburn have sparked speculation that Venky’s might have no choice but to eventually sell their stake in Blackburn. Venky’s however, has dismissed that idea. “Me, my brother Venkatesh and my sister (Anuradha Desai), our entire family, have fallen in love with the club. We cannot sell it,” B Balaji Rao, wholetime director at Venkey’s told The Times of India. Falling in love is one thing, but as many of us have learnt, love is not always enough. Financially, the group’s listed entity in India, Venky’s India Ltd, isn’t doing very well. The stock has lost 50 percent of its value in the past 12 months on the back of the company’s poor performance. Over the past four quarters, the company’s net profit has been declining steadily. In the quarter ended December 2011, net profit fell a steep 80 percent to Rs 2.9 crore, mainly due to a steep increase in raw material costs.

Its own debt stands at Rs 111 crore, while its cash and cash equivalents totalled Rs 14 crore as of the data available for the September quarter. In other words, Venky’s might not have enough money to throw at Blackburn to improve its financial fortunes. Without additional funding, Blackburn’s future could only go from bad to worse. Venky’s, given its own financial difficulties, will be challenged to help Blackburn. At least in this case, love is unlikely to conquer all.