1 Amitabh Bachchan Corporation Limited (ABCL)

Vivekanand Education Societys Institute of Management Studies and Research PGDM 20011-13 Subject - Financial Accounting Topic Bankruptcy and Scams Company Selected Amitabh Bachchan Corporation Ltd (ABCL) Group Members Komal Talreja Reshma Sachdev Sunil Jagwani Sunny Karia Vanita Sachdev Preeti Keswani Roll No 26 47 58 59 62 70

2 Amitabh Bachchan Corporation Limited (ABCL)

Amitabh Bachchan Corporation Limited (ABCL)

3 Amitabh Bachchan Corporation Limited (ABCL)

Table of Contents
SR. No 1. 2. 3. 4 5 6 7 8 Contents Introduction Company Profile Background of the case Main Scam Findings of the case Current state and future of the company Conclusion Bibliography Page No. 5 6-7 8 9-10 11-12 13 14 15

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Acknowledgement
We would like to acknowledge to madam for providing us with such an informative topic related to scams and bankruptcy. We not only understood how scams happen but also how one overcomes these scams and bankruptcy. We would also like to thank all those who directly and indirectly helped us in making the project.

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Thank You.

Introduction:Bankruptcy can be defined in simple terms that when ones liabilities are more than ones assets. It can also be defined as Being a bankrupt or in a condition of bankruptcy; unable to pay, or legally discharged from paying, one's debts; as, a bankrupt merchant. Or A person who, in accordance with the terms of a law relating to bankruptcy, has been judicially declared to be unable to meet his liabilities One of the best examples in the Indian financial history, where there are more scams and bankruptcy than the success rate of any industry, is of ABCL now known as AB Corp. Since its venture in the year 1995 ABCL hardly faced any success till its bankruptcy, but it never opted to leave it mid way and give up hopes, it fought all the odds that came all their way they bounced back and became an example not of bankruptcy but of how overcoming crisis. No one needs any introduction to the great star, the living legend, Star of the Millennium, Padam Bhushan, Shri. Amitabh Bachchan founder of ABCL never ever thought in his life that he will ever face any such part in his life.

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Company Profile:Amitabh Bachchan tried his fate in politics and won the Allahabad parliamentary seat representing Congress. But soon after he retreated to the film industry as he could not stand for long as a politician on account of acute political complications and allegations of corruption charged on him. Then he started with Amitabh Bachchan Corporation Ltd (ABCL).

Amitabh Bachchan Corporation Ltd (ABCL)

In 1995 Amitabh Bachchan started Amitabh Bachchan Corporation Ltd (ABCL) that specialized in film production event management. It was pioneering attempt to evolve a corporatized entertainment company on the lines of Hollywood Studios. The company burst into the limelight in 1996 when it brought to India the Miss World Peagent. But in its tearing hurry to grow and expand, it seemed to have spread itself into thin without proper planning and management control. ABCL what did it do? What was it all about? Anything and everything to do with the entertainment business for eg:- Make films, once you make films you distribute them, you sell the music of the film, you manage the actor who act in the films, and you have an event management group that could leverage on the actors brand equity as well. Then in related areas you get into television production, as also in the lucrative areas of selling commercial time on television. In keeping with the vision the group moved fast, recruited 150 people, launched 15 films with cost per film ranging from Rs 3 to 8 crores, got distribution rights for Bombay and Bandit Queen both of which were successful at the box office got into the music with Aby Baby, Diljale, Rakshak, Tere Mere Sapne, etc and of course on the event side the miss world Pageant & the BPL Dandia. ABCL was Bachchan's most ambitious project after a string of modest business attempts. He reportedly lost over Rs 20 crore in a television channel he had started in the UK and discontinued. Another direct-to-home channel started in the US has yet to yield profits. ABCL was a pioneering attempt to evolve a corporatised entertainment company on the lines of the Hollywood studios. But in its tearing hurry to grow and expand, it seemed to have spread itself too thin without proper planning and management control. Says an industry source: "Bachchan couldn't make out where a business endeavour was not close enough to the film business he knew best about." In the absence of right personnel to spearhead the diverse entries, resources were spread thin and mismanagement ensued. Take, for instance, the company's foray into television time buying and selling. Typically, private parties buy free commercial time (FCT) from producers or Doordarshan and sell it to advertisers.

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The life again took a turn with the BBC Online Poll in 1999 proving Big B as the Superstar of the Millennium even ahead of other international stars all over the world. In June 2000, Amitabh Bachchan became the first ever Asian to be shaped in wax at the Madame Tussaud's Museum in London. In 2000 only came the KaunBanegaCrorepati, the mega hit TV game show at Star Plus making him reach the zenith of popularity, regard and fame. With this game show came the fortune of Amitabh and since then there is no looking back.

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Background of the case:"If things happen as you wish it's good, if they do not it's better." Amitabh Bachchan In the year 2000, when the entire world was celebrating the new century, I was celebrating my disastrous fortune. There were no films, no money, no company a million legal cases against and the tax authorities had put notice of recovery on my home. In 2000, at the age of 57, when common man thinks of retirement, Amitabh Bachchan had Financial Crisis when he almost lost all that he had. Financial Crisis doesnt discriminate among people in any income bracket or line of work and can affect us at any time in our lives. ABCLs attempts at event management threw up more fits than profits. The miss world contest, its first such attempt, was riddled with controversies, beginning with protests from womens groups and ending with Spastics Society publicly denouncing the companys inability to pay up its promised charity. The Miss World International Organisation expected a fee of $2 million from ABCL. ABCL went into media buying services. The only account it got for a long while was BPL, that too for TV alone, not print. It is well-known in the financial world that BPL is among the worst paymasters in the industry. "There was a sword hanging on my head all the time. I spent many sleepless nights. One day, I got up early in the morning and went directly to Yash Chopraji and told him that I was bankrupt. I had no films. My house and a small property in New Delhi [ Images ] were attached. Yashji listened coolly and then offered me a role in his film Mohabattein," Bachchan told an attentive gathering at Mumbai's Intercontinental The Grand Hotel. "I then started doing commercials, television and films. And I am happy to say today that I have repaid my entire debt of Rs 90 crore and am starting afresh," Bachchan said. Asked about mistakes, he said, "There is no point in going into those details now. This time I will be careful to keep financial accountability. At board level we will have a committee and we will not take any individual decision. We had 200 employees at ABCL earlier and now we have only two people." During those days life again took a turn with the BBC Online Poll in 1999 proving Big B as the Superstar of the Millennium even ahead of other international stars all over the world. In June 2000, Amitabh Bachchan became the first ever Asian to be shaped in wax at the Madame Tussaud's Museum in London. In 2000 only came the KaunBanegaCrorepati, the mega hit TV game show at Star Plus making him reach the zenith of popularity, regard and fame. With this game show came the fortune of Amitabh and since then there is no looking back.

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Main Scam:ABCL's margin was 2.5 per centquite a shock for the division head who hailed originally from the print media and was used to an 85 per cent margin. (On every ad a publication prints, it keeps 85 per cent of the revenue and returns 15 per cent to the advertising agency. This 15 per cent is often divided between individual creative and media companies.) ABCL also overestimated the worth of its trump card. The company tried to get the Coca-Cola media account. To ensure success it informed Coke that Bachhan himself would like to come and negotiate. Coke, however, didn't seem impressed and ABCL did not get past the preliminaries. In business areas outside of films the Bach-chan equity was, apparently, not selling. To this says Manchanda of MAD: "Every company goes through ups and downs. In the case of ABCL, a lot of the speculation would have ceased and controversies put to rest if Bachhan himself could come out and make a statement regarding the present affairs of the company." Simultaneously, the company went into several 'related' fields like television time marketing, celebrity management, music, event management and media buying. Says an industry source: "Bach-chan couldn't make out where a business endeavour was not close enough to the film business he knew best about." In the absence of right personnel to spearhead the diverse entries, resources were spread thin and mismanagement ensued. Take, for instance, the company's foray into television time buying and selling. Typically, private parties buy free commercial time (FCT) from producers or Doordarshan and sell it to advertisers. To be successful, the marketer needs to know what programme or serial will draw audiences and must accordingly negotiate rates on both ends. ABCL started with a comedy serial but couldn't sell a single second of FCT for the first six weeks. Then in a gross unprofessional move, it opted out of the agreement at one day's notice, deserting the producer. The story was repeated with its next serial. Then it took on a newsbased programme; here it could sell hardly half the FCT allotted. Another morning breakfast news show was sold at a big discount. Yet ABCL managed to sell just about two-thirds of the allotted time, a chunk of which was devoted to house ads. Then came its ambitious venture during the Olympics. With a guarantee of Rs 6.12 core to be paid to DD, it could have broken even at an earnings of about Rs 7.5 core. Reliable market sources estimate their sale at about half the figure. Says a senior film industry source: "The Bachchans themselves, like successful film-stars, are used to having large, personal coffers. It requires extreme discipline to let your money be managed professionally and not at personal whim." Sources reveal that Gupta had clamped down on indiscriminate expenditure; he wanted to complete a few projects so that they could generate money for the rest. Gupta refused to speak on the affairs of the company but sources say though he was successful to an extent, he didn't manage to save the day.

Canara Bank had advanced a loan of INR 100 million to ABCL in 1996 as credit facilities. On July 19 1999, canara bank moved the BIFR to appoint a court receiver for the attachments of

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two flats of ABCL in Mumbai to recover its dues of INR 140 million. Canara bank in consortium with Allahabad Bank, had extended credit facilities of INR 140 million including INR 100 million from its coffers to entertainment company ABCL floated by Amitabh Bachhan.The flats measuring 1700 sq feet each are located at juhu and are nalved at over INR 100 million.

However Amitabh Bachhan did not quit his company when it was reeling under enormous financial burden. After bankruptcy procedures started, he could have left it under BIFR and followed his own way. However he chooses to fight for it.

In the process to cover up the debt burden of ABCL, Amitabh Bachhan choose to act in a few Prasar Bharti videos and be a brand ambassador for doordarshan and mainly DD news when it was to open up in united kingdom, albeit only to clear part of dues ABCL owed Prasar Bharti for the telecast of 1996 Miss World Pagent.

On Nov 29,2000 canara bank withdrew its suit filed in the debt recovery tribunal against ABCL for the recovery of INR 100 million advanced to entertainment company floated by the megastar. This was initiated as the actor adopted for an out of court settlement and repaired the entire loan obtained by ABCL in 3 installments. In 2004, with efforts of promoter Amitabh Bachhan and his corporate friends ABCL became debt free and started preparations to tap the capital market through an initial public offer. The company is expected to float an IPO in the capital market in near future.

Now ABCL has come out of purview of BIFR. Company has become debt free. In 224, BIFR had given a time period of 8 weeks to income tax authorities and public services broadcaster Prasar Bharti to resolve outstanding issues. With ABCL a move expected to facilitate rehabilitation of company.

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Findings:It seems a far cry from last year when ABCL proudly announced a turnover of Rs 64 crore, against a projection of Rs 57 crore, and a profit of Rs 15 crore. Its turnover projection for 1996-97 is Rs 100 crore. The figures didn't impress too many. Now to bail out his company, Bachchan has conjured up a successor to Gupta, Gautam Berry, and is selling off his stake in Ipca Laboratories. This should yield close to Rs 45 crore, more than his Rs 19-crore seed capital in ABCL. The gravest mistake was the lack of control on the purse strings. ABCL ran up overhead expenses of Rs 2 crore a month, or roughly 40 per cent of its annual turnover. Says Sunil Man-chanda, joint managing director, MAD Entertainment Ltd, and a minority shareholder: "A company cannot afford overheads of more than 10 to 12 per cent of its turnover to be financially stable." Overpaid, often underperforming executives did the rest of the damage. Top executives took home annual salaries from Rs 18 lakh to over Rs 40 lakh. Expense accounts were plundered and facilities misused. A senior executive, heading one of the worst-performing divisions, is alleged to have run up astronomical cellphone bills. The coffers ran dry after ABCL failed to raise enough money from the market. Its public issue came with a bang, backed by the Big B's name and Kotak Mahindra Capital (KMC) as underwriters for the issue. KMC also provided Rs 4 crore out of the Rs 32-crore seed capital. KMC vice-president K. SatishShenoy had said then: "We are on the right track." Despite market indications that the expected price of Rs 250 would have been too optimistic. In fact, even at Rs 150 there weren't enough takers. The Miss World international organisation expected a fee of $2 million from the local event manager. Along with other costs, ABCL would have run up a bill of an estimated $5 million (Rs 17.5 crore). Even a modest estimate puts ABCL's loss at about Rs 4 crore. Cine star Amitabh Bachchans debt-ridden company, Amitabh Bachchan Corporation Limited (ABCL), on Friday secured a reprieve from creditors after being declared sick by Board for Industrial and Financial Reconstruction (BIER). The BIER directed ABCL to submit a revival package to IDBI, appointed the operating authority in the case, by August 20. The sick status implies that assets of the company, including Mr BachchansRs 8-crore worth bungalow in Mumbai, cannot be auctioned for the time being to recover dues owed to the creditors. The revival package for the company will have to be eventually cleared by the companys creditors, the ABCL management and employees of the company. Only when the revival package fails can BIER intervene to direct the auction of the assets. ABCL, set up five years ago to market the Amitabh Bachchan brand, never recovered from the loss it suffered in organising the Miss World pageant in Bangalore in 1996, The company, engaged in film production and distribution, video and audio cassette production and celebrity and event management suffered further reverses with the failure of certain Amitabh-starrers. It

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had liabilities of Rs 70.82 crore against assets of Rs 60.52 crore on September 30, 1998. ABCLs creditors took the plea that the company did not come under the purview of BIER since it was not a manufacturing unit as required under the Sick Industrial Companies Act, 1985. But the 2-member bench of the board comprising Mr NP.Singh and NP.Bagchi turned down their plea. ABCL officials said they were able to convince the board that the company was engaged in manufacturing through its audio cassette unit in Goregaon, Mumbai. Further, the company had over 50 members on its rolls, making it eligible for consideration by the BIER, the officials said. ABCL fulfils the other requirement to be a BIER case: a negative net worth. The next step is to sit together with IDBI and submit the revival package in the next six weeks, chartered accountant to ABCL M.P. Narang told The Times of India. The ABCL case was referred to the BIER after the Mumbai High Court directed one of ABCLs creditors, Canara Bank, to seek approval of BIER for appointment of court receiver. Canara Bank had moved the court to recover its dues of around Rs 10 crore from ABCL through auction of Bachchans bungalow, Prateeksha, and two flats.

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Current state and future of the company:Bearing huge loses and spending sleepless nights Amitabh Bachchan realized where he went wrong and what steps were to be taken to come back from this nightmare. Currently the company has realized what were their severe mistakes and now overcoming those mistakes is earning good profits. In the current competitive market the company is earning huge profits by investing in the right place at the right time. Now the company is currently being handled by the new comer in the family Mrs. Aishwarya Rai Bachchan and Abhishek Bachchan. Facing loses in films like Mryitudata, Tere Mere Sapne, now the company has not only moved ahead in terms of finance but also in critics acclaims and general audience acclaims with release of a major hit like PAA.

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Conclusion:Being awarded with Star of the Millennium during the time when he was going through the most difficult phase of his life. Changing the television scenario by hosting the Indian version of, Who Wants To Be A Millionaire, he changed the concept and life of many people. Isnt it strange a person who himself was in great crisis wasnt able to pay-off his debts still changed the life of many people. Well there is something really what is known as confidence. Shri Amitabh Bachchan had that inner confidence to face the harsh things that came in his life. Having his whole property mortgaged and having a loan of around Rs. 90 crore, he never tried to back out from the crisis. His courage is taller than his height and that was seen very well at this time, even big names like Lehman Bros., Raju Ramalingam failed at the time of such crisis. There is no doubt why is the person being called a living legend, why was he the first Asain to be waxed at Madame Taussads, he not only returned every single penny of each and every people linked with ABCL, but also created a trust in their hearts which is very hardly build. ABCL is a very strong example for everything from financial crisis, to mismanagement, to building trust, to bouncing back in the market, etc As they say- One doesnt Succeeds until one faces failure Financially speaking ABCL bounced from a loan of nearly Rs. 90 crores to making profits of nearly the same amount. Though the amount of bankruptcy was less compared to the other major scams that took place nationally and globally, but is a perfect example of how can one fight back in the times of financial crisis

With regards - ABCL

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Bibliography:1)www.thisismyindia.com 2)www.rediff.com 3)www.outlookindia.com 4)www.personal.psp.edu 5) www.liveindia.com