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How IIPM's Arindam Chaudhuri built the Rs 533 crore business
15 Mar, 2013, 08.34AM IST, The writer has posted comments on this article John Samuel Raja D John Samuel Raja D ,ET Bureau

Please go to the Internet and fill it up. If you say Arindam Chaudhuri is ugly and has a bad sense of dressing, I will not say anything. But if you say anything to harm my business, then I will sue you," raged Chaudhuri on a recent CNN-IBN show, defending his penchant to file court cases against people and publications critiquing his management institute and operating style, and having those articles blocked on the Internet. The business that he is trying to protect, through means that are derided by believers of free speech, generated revenues of Rs 533 crore in 2010-11, mainly from his management institute, Indian Institute of Planning & Management (IIPM). John Samuel Raja D dives deep into regulatory filings by Chaudhuri's companies to unravel eight facts about his businesses. T hey Pay 1% of Rs 533 cr Revenues in Tax Chaudhuri has f our main businesses: management educat ion, consult ing, human resources and media. Each is housed in a separat e company. In 2010-11, t he lat est available publicly, t hese f our companies earned revenues of Rs 533 crore. It s educat ion arm, which of f ers management courses t hat are not recognised by t he government , is t he biggest of t he f our, wit h revenues of Rs 349 crore in 2010-11. In a recent T V int erview, uploaded on t he IIPM websit e, Chaudhuri says t he inst it ut e admit s 3,500 st udent s each year. Arindam Chaudhuri's response to ET Questions: 'We don't plan to seek any approval f rom any regulator' A recent IIPM ad says it s course f ee is bet ween Rs 14.75 lakh and Rs 18.75 lakh. In t he last t wo years, revenues of t he educat ion arm have grown at 32% a year. Yet , on revenues of Rs 533 crore, t he group post ed a net loss of Rs 4 lakh, af t er paying less t han Rs 5 crore as income t ax. A possible explanat ion f or t his lies in t wo t rait s endemic t o it s operat ing st yle: big cost heads and many t ransact ions bet ween group companies. IIPM Spends More on Ads than DLF T he IIPM ad t emplat e is large and f lashy, f ull of claims and t he larger-t han-lif e presence of Chaudhuri. His websit e describes him as an "economist , management guru, aut hor, speaker and t ransf ormat ional leader", who charges $100,000 (Rs 55 lakh) f or a speaking engagement of 90 minut es. In t he past f ew years, several IIPM claims on t ie-ups wit h f oreign universit ies and job placement s have been proven unt rue. At t imes, an examinat ion of t hose claims or media report age have become part of court cases f iled by IIPM or it s associat es in places f ar f rom it s base of New Delhi—Silchar in Assam, Dehradun in Ut t arakhand and Gwalior in Madhya Pradesh. T he books of t he educat ion arm show t hat , in 2008-09, it spent Rs 120.5 crore of it s Rs 202 crore revenues on ads. Furt her, it spent Rs 16.6 crore t o pay it s educat ors under, as per Chaudhuri, t hree heads: salary (Rs 9.4 crore), prof essional charges (Rs 2.5 crore) and f acult y remunerat ion (Rs 4.7 crore). In ot her words, f or every rupee it spent on salary in 2008-09, IIPM direct ed Rs 7.2 int o ads. "T here are f ar t oo many indust ries globally wit h t hat high market ing budget s in comparison t o salaries," says Chaudhuri.

In 2009-10, t hough, IIPM's ad spend halved t o Rs 54 crore, while it s payment s t o educat ors shot up f our-f old t o Rs 65.7 crore (Chaudhuri says it was above Rs 85 crore). Seen anot her way, as a percent age of revenues, IIPM's ad spend of 60% in 2008-09 was higher t han all t he companies in t he BSE-500 index; according t o Capit aline dat a, Mahindra Holidays and Resort sBSE 0.45 % was t he highest , at 24.7%, while FMCG majors like Hindust an UnileverBSE 0.49 % were at 11.4% and Colgat e-PalmoliveBSE -0.27 % at 14.7%. Even in absolut e ad spends, only 38 companies f rom t he BSE-500 were ahead of IIPM. At Rs 120.5 crore, it s st at ed ad spend lef t behind some of India Inc's biggest advert isers like DLFBSE -4.20 %, Axis BankBSE -0.90 %, RaymondBSE -3.01 % and Git anjali GemsBSE -1.38 %. Some of IIPM's ad spends would have gone t o group's publicat ions, which raises t he issue of how t hey were priced (more on t his in Point 4). T hey Transact a Lot Among T hemselves Placement of ads in group publicat ions is one of t he many kinds of t ransact ions bet ween group companies. T he educat ion arm, t he group's cash cow, is a major source of revenue f or it s sist er f irms. For example, in 2010-11, t he educat ion arm paid Rs 37.6 crore t o t he consult ing arm, Planman Consult ing—Rs 31 crore f or services received and Rs 6.6 crore as rent . For Planman Consult ing, which claims t o have done work f or t he who's who of India Inc, t hese t wo t ransact ions account ed f or 84% of it s Rs 45.8 crore t urnover. T hat year, it was t he most prof it able company in t he group, post ing a net prof it of Rs 7.8 crore on a net margin of 17%. Chaudhuri and his wif e, Rajit a, who are execut ive direct ors in Planman Consult ing, drew a t ot al remunerat ion of Rs 6.96 crore f rom t he company t hat year. (Bet ween t hem, t hey cont rol nearly 100% shares in 20-odd Indian f irms, some of which have f loat ed overseas subsidiaries.) Chaudhuri did not specif y what services Planman provided t o t he educat ion arm. But , on t he group's relat edpart y t ransact ions in general, he says: "T here is not hing wrong in each and every t ransact ion you have ment ioned as all are scrut inised by regulat ory bodies every year." An account ing expert , speaking on t he condit ion of anonymit y, says it 's a common indust ry pract ice f or t he educat ion arm t o show losses and group companies t hat provide services t o t his company t o earn prof it s. "Promot ers adopt t his t o circumvent Indian regulat ion, which prohibit s prof it making companies in t he educat ion sect or," he says. "But f irms t hat provide services t o t he company t hat runs t he educat ion business are not bound by it ." In 2010-11, IIPM's educat ion arm, while act ively t ransact ing wit h group companies, post ed a net loss of Rs 2.3 crore on revenues of Rs 349 crore. By comparison, t he Indian School of Business (ISB), which has no subsidiaries and no relat ed-part y t ransact ions, earned a net surplus of Rs 15.1 crore on a t urnover of Rs 197.5 crore. No 'Best-sellers', Yet Rs 40 cr f rom Ads Planman Media, IIPM's publishing arm, brings out several magazines and journals. Chief among t hem are t hree magazines: T he Sunday Indian, 4Ps Business and Market ing, and Business & Economy (B&E). Chaudhuri's websit e says t he f irst is published in 14 Indian languages, and describes it as "t he world's largest newsweekly" and "t he nat ion's great est news magazine"; t he ot her t wo magazines as "best -sellers". In 2008-09, t he lat est year f or which f inancials were available f or Planman Media, it earned revenues of Rs 41.4 crore. Of t his, just Rs 1.6 crore came f rom magazine sales. T he IIPM websit e claims T he Sunday Indian has a readership of 2 million (which would make it more popular t han

India Today and Out look) and B&E has a print run of 110,000 copies (which would be more t han any business magazine in India). "We sell 5-6 copies of T he Sunday Indian each week, against 40-50 copies of India Today and Out look," says a sales represent at ive of Bahri Sons, in New Delhi's Khan Market . "And 2-4 copies per issue of 4Ps and B&E." Despit e low circulat ion revenues, Planman Media recorded ad sales of Rs 39.6 crore in 2008-09, amount ing t o 96% of it s revenues. T he lat est issue of T he Sunday Indian had 44 edit pages and 19 ad pages (including 10 pages of group ads). Prominent names were missing f rom t he list of ext ernal advert isers, which included Flowguard Pipe and Fit t ings, V Mart , OPT M Healt hcare and Hyderabad House. If IIPM magazines don't sell much, if big ext ernal advert isers are not placing ads in t hem, how much are t hese magazines billing IIPM f or in-house ads? And, is IIPM using it s magazines arm t o reduce prof it s in it s educat ion arm? Chaudhuri did not disclose how much ad revenues of Planman Media came f rom group f irms or how t hese were priced. He says: "All t ransact ions are well wit hin t he provisions of t he IT Act s and are regularly scrut inised by aut horit ies." Its Education Business Keeps Moving to a New Skeleton Company Since 2009, IIPM's educat ion business has moved t o a new legal ent it y t hrice. T here's a pat t ern here. Each t ime, a skelet on company, cont rolled by Arindam and Rajit a Chaudhuri, acquires t he ent it y cont rolling t he educat ion business, and t he t wo are event ually merged. T hus, t he educat ion business went f rom being in t he Indian Inst it ut e of Planning and Management Pvt Lt d t o being in t he Int ernat ional Inst it ut e of Planning and Management Pvt Lt d in Sept ember 2009. In March 2010, t he second change t ook place. Planman Financial—which said it was a regist ered mut ual-f und dist ribut or and want ed t o become a non-banking f inancial company, but had negligible revenues—bought t he Int ernat ional Inst it ut e of Planning and Management . Planman paid Rs 3 crore t o buy a business t hat had revenues of Rs 201 crore and f ixed asset s of Rs 171 crore, and debt of Rs 109 crore. "Generally, f or unlist ed companies, t he benchmark is book value of asset s or earnings mult iple," says an account ing expert , not want ing t o be named. "If t he amount paid is less t han book value, t hen it 's undervalued." Six mont hs lat er, t he t wo were merged, and Planman t ook t he name of t he expiring ent it y. In May 2011, it convert ed it self int o a Sect ion 25 company—it cannot dist ribut e prof it s t o it s shareholders — and renamed it self Cent er f or Vocat ional and Ent repreneurship St udies (CVES). "T hese were st rat egic decisions t o consolidat e our group act ivit ies t hat were being undert aken over t he last f ew years and are as per t he provisions of t he Companies Act ," says Chaudhuri. T he Last Change Saw it Acquire a 'Non-Prof i t' Identity T he t hird met amorphosis is signif icant . IIPM's educat ion business has gone f rom being a company t hat can dist ribut e prof it s t o one t hat can't —a pre-condit ion t o accredit at ion f rom t he Universit y Grant s Commission (UGC), t he regulat or f or higher educat ion, and t he All India Council f or Technical Educat ion (AICT E), which regulat es business schools in India. Only last mont h, Chaudhuri had accused UGC, which has released ads saying IIPM is not recognised by it , and AICT E of corrupt ion. "UGC and AICT E are f ull of bribeseeking, corrupt of f icials where, even at t he t op, t hey have a t rack-record of being caught red-handed and being jailed. T he st andard of educat ion t hey have creat ed in t he nat ion is shamef ul, t o say t he least ," he said in a st at ement issued by IIPM on February 16. Is Chaudhuri now t rying t o comply wit h government regulat ions t o get his B-school recognised? A

Planman Financial resolut ion said t his was one of t he reasons t o convert it self t o a Sect ion 25 company. But , Chaudhuri says: "As of now, we do not plan t o seek any approval f rom any regulat ors." According t o Chaudhuri, plans f or CVES have since changed, and so has it s role in t he group. T he original idea, he adds, was it t o of f er management programmes cheaper t han t he IIPM f lagship courses. "It didn't shape up t he way we want ed it t o," he adds. "For about t hree years now, I am not t he direct or of t his company and I am not a shareholder f or about a year now." Chaudhuri says CVES now aims t o of f er new and af f ordable educat ional programmes t o cat er t o rural and semi-urban sect ions. He, however, did not specif y where t he educat ion arm is now housed, t hough he did say t hat IIPM is now a "not -f or-prof it educat ion societ y and not a company". It Now has T ies with a Recognised B-school Recent ly, IIPM came out wit h an ad t hat invit es applicat ions t o set up a branch of it s "new init iat ive" IIMM (IIPM Inst it ut e of Market ing & Management ), which is pit ched as a low-cost alt ernat ive t o IIPM (course f ee of Rs 3.75-4.75 lakh). T he ad asks f ranchises t o invest Rs 5-15 crore, in addit ion t o inf rast ruct ure, t o set up an IIMM f ranchise and project s a ret urn on invest ment (RoI) of 24-33% a year. "We have not acquired IMM," says Chaudhuri, adding t hat it 's a "st rat egic alliance", a descript or also used by t he websit e of t he Delhi-based Inst it ut e of Market ing and Management (IMM), which has AICT E approval t o admit 360 st udent s a year. However, Gaganjit Singh, direct or general of IMM, denies any collaborat ion wit h IIPM or knowledge about t his ad. According t o Singh, IIPM has no say in running IMM. "We don't of f er any joint programme wit h IIPM," he says. "AICT E regulat ions don't permit us t o collaborat e wit h IIPM t o of f er any educat ional programmes. T he only relat ionship we have wit h IIPM is t hat t hey have rent ed one f loor in our campus. And last year, we t ied up wit h IIPM f or admissions and placement s." IIPM would act as "an agent " t o bring st udent s t o IMM, and also help in placing st udent s. "IIPM promised us 200 st udent s, but brought in 40-50. No placement was done," he adds. It is Facing a Squeez e on the Business Front Chaudhuri's educat ion business is t he cash cow. Choking it will squeeze all his ot her businesses. T here are signs t hat IIPM is f acing a squeeze. Speaking on t he condit ion of anonymit y, t wo employees of Planman Consult ing and anot her of IIPM said t he st af f had not received salaries f or six mont hs. "IIPM does not have any salary delays what soever," says Chaudhuri. "However, yes, almost every business house is going t hrough challenging t imes as t he market sent iment is not t he most excit ing. Cert ain ot her vert icals of ours are going t hrough slight ly challenging t imes, but we are conf ident t hat we will be able t o meet all our commit ment s sooner t han expect ed." Many IIPM pass-out s are absorbed in IIPM companies. "T hose who do not have f inancial backing event ually resign," says one of t he employees of Planman Consult ing. Adds t he IIPM employee: "T hree years ago, a lot of t op companies came f or campus recruit ment . Now, it 's only t he small companies and t hey hardly hire anybody." ET cont act ed seven companies list ed on t he IIPM websit e as "recent recruit ers". T hree responded—Coca-Cola, Essar Group and HSBC—and all t hree denied part icipat ing in campus placement s in IIPM. "While t here may have been st ray cases of lat eral hiring of IIPM

alumnus in t he past , t hey do not f orm part of our list of t op B-schools f rom which we hire f or our ent ry-level management -t rainee programme," says Sujaya Banerjee, chief t alent of f icer, Essar Group. Adds Vikram Tandon, head of HR, HSBC India: "We have not hired f rom IIPM campuses—at least not in t he recent past ." Meanwhile, IIPM's websit e st ill list s, f or example, Cornell Universit y's School of Indust rial and Labor Relat ions as one of it s int ernat ional t ie-ups. "T he last t ime ILR School provided t raining f or IIPM st udent s was in 2011," Mary Cat t , assist ant direct or, communicat ions, Cornell Universit y ILR School t old ET. With Shreya Biswas and Martin Thomas Read the full transcript of Arindam Chaudhuri's response to ET Questions

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