Despite failing to attend a single board meeting between FY11 and FY14, Godfrey Phillips not only continued to maintain Lalit Kumar Modi, elder son of KK Modi, as a director on its board but also raised his remuneration over three times during the four-year period. If he was paid a total of Rs 50.18 lakh in the year ended March 2010, when he attended one board meeting of Godfrey Phillips India (GPI), his remuneration rose to Rs 1.7 crore in the year ended March ‘14 even as he failed to attend a single board meeting.
Living an extravagant lifestyle in London, Lalit Modi will now see at least one of his cash flows dry — Rs 1.7 crore that he earned as a director GPI board — as he ceased to be on the board of the company since May 28, 2015, by virtue of the new Companies Act that came into effect on April 1, 2014. The new act mandates that if a director fails to attend board meeting for 12 months then he will be disqualified and this led to his ouster from the board where he earned hefty amount in bonus and commissions. In a statement issued on May 30, Godfrey Phillips India informed the Bombay Stock Exchange that, “Lalit Kumar Modi has vacated his office as a director of the Company with effect from May 28, 2015 by virtue of the provisions of Section 167(1)(b) of the Companies Act, 2013, i.e. for non-attendance of the Board Meetings for a continuous period of 12 months.”
In fact, his younger brother Samir Kumar Modi earned less than Lalit, despite being a regular at board meetings and closely involved in running the business operations.
While questions have been raised over how Lalit Modi manages to live an extravagant lifestyle outside the country, there seems to be no answer to it. In recent interviews Modi claimed that Modi Enterprises, owned by his father KK Modi, is a multi-billion dollar enterprise with business interest across various sectors.
With primary interest in cigarette and tobacco chewing products through Godfrey Phillips India, the group has grown over the last five years and from being a Rs 2,500 crore group in 2010, Modi Enterprises now claims to be a $2.8 billion (Rs 16,800 crore) group. Godfrey Phillips contributes the most to its revenues and it has grown from Rs 1,407 crore in March 2010 to Rs 2,482 crore in March 2014.
Though he is credited with making IPL to what it is today, he has not had much luck with running business successfully and that had even been admitted by people who worked with him in his ventures. Before getting into sports, Modi took fancy for entertainment and he launched Modi Entertainment Network (MEN) in early 90’s where he signed deals with Walt Disney and FTV. When Walt Disney entrusted MEN with the responsibility of distributing its popular sports channel ESPN in 1995, Modi set his eyes upon cricket and encouraged ESPN to bet on cricket and buy the broadcast rights of popular cricket events. “Modi has always had an eye for lucrative opportunities. ESPN was one of the first channels in the country to go paid. He managed to convince ESPN that with cricket in their pocket, people will readily pay a fee to see the channel,” said a top executive of a public relations company who was involved in the deal.
While MEN’s revenues started climbing and hit a high of around Rs 70 crore in 2001-02, trouble began soon after as partners started feeling left out. A former senior executive in the company said that the partners felt that they were not being adequately compensated in the businesses.
Later Rupert Murdoch’s News Corp picked up a 50 per cent stake in ESPN and decided to part ways with MEN. Similarly, Walt Disney also decided to enter India on their own. Latest financials of the company show the sorry state of the company formed by Lalit Modi. According to the financial details submitted with the RoC, Modi Entertainment had total revenue of Rs 11.17 crore in the year ended March 2013 and had a net profit of Rs 8.54 crore. It is interesting to note that the entire revenue came in the form of other income and that Modi Entertainment had pending liabilities to be paid to Prasar Bharti Broadcasting amounting to over Rs 40 crore as on March 31, 2013. Modi Entertainment has however challenged the same and the case is pending before Delhi high Court. The company also has disputed Income Tax Assessments, for the AY 2001-02, 2003-04, 2004-05, and 2008-09 and it paid Rs 2.22 crore against the demand of Rs 3.76 crore demanded.
— With inputs from Archna Shukla