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.Chaudhuri has four main businesses: management education, consulting, human resources and media. Each is housed in a separate company. In 2010-11, the latest available publicly, these four companies earned revenues of Rs 533 crore.Its education arm, which offers management courses that are not recognised by the government, is the biggest of the four, with revenues of Rs 349 crore in 2010-11. In a recent TV interview, uploaded on the IIPM website, Chaudhuri says the institute admits 3,500 students each year.A recent IIPM ad says its course fee is between Rs 14.75 lakh and Rs 18.75 lakh. In the last two years, revenues of the education arm have grown at 32% a year. Yet, on revenues of Rs 533 crore, the group posted a net loss of Rs 4 lakh, after paying less than Rs 5 crore as income tax. A possible explanation for this lies in two traits endemic to its operating style: big cost heads and many transactions between group companies.The IIPM ad template is large and flashy, full of claims and the larger-than-life presence of Chaudhuri. His website describes him as an “economist, management guru, author, speaker and transformational leader”, who charges $100,000 (Rs 55 lakh) for a speaking engagement of 90 minutes. In the past few years, several IIPM claims on tie-ups with foreign universities and job placements have been proven untrue. At times, an examination of those claims or media reportage have become part of court cases filed by IIPM or its associates in places far from its base of New Delhi—Silchar in Assam, Dehradun in Uttarakhand and Gwalior in Madhya Pradesh.The books of the education arm show that, in 2008-09, it spent Rs 120.5 crore of its Rs 202 crore revenues on ads. Further, it spent Rs 16.6 crore to pay its educators under, as per Chaudhuri, three heads: salary (Rs 9.4 crore), professional charges (Rs 2.5 crore) and faculty remuneration (Rs 4.7 crore). In other words, for every rupee it spent on salary in 2008-09, IIPM directed Rs 7.2 into ads. “There are far too many industries globally with that high marketing budgets in comparison to salaries,” says Chaudhuri.In 2009-10, though, IIPM’s ad spend halved to Rs 54 crore, while its payments to educators shot up four-fold to Rs 65.7 crore (Chaudhuri says it was above Rs 85 crore).Seen another way, as a percentage of revenues, IIPM’s ad spend of 60% in 2008-09 was higher than all the companies in the BSE-500 index; according to Capitaline data, Mahindra Holidays and Resorts was the highest, at 24.7%, while FMCG majors like Hindustan Unilever were at 11.4% and Colgate-Palmolive at 14.7%.Even in absolute ad spends, only 38 companies from the BSE-500 were ahead of IIPM. At Rs 120.5 crore, its stated ad spend left behind some of India Inc’s biggest advertisers like DLF, Axis Bank, Raymond and Gitanjali Gems. Some of IIPM’s ad spends would have gone to group’s publications, which raises the issue of how they were priced (more on this in Point 4).Placement of ads in group publications is one of the many kinds of transactions between group companies. The education arm, the group’s cash cow, is a major source of revenue for its sister firms. For example, in 2010-11, the education arm paid Rs 37.6 crore to the consulting arm, Planman Consulting—Rs 31 crore for services received and Rs 6.6 crore as rent.For Planman Consulting, which claims to have done work for the who’s who of India Inc, these two transactions accounted for 84% of its Rs 45.8 crore turnover. That year, it was the most profitable company in the group, posting a net profit of Rs 7.8 crore on a net margin of 17%.Chaudhuri and his wife, Rajita, who are executive directors in Planman Consulting, drew a total remuneration of Rs 6.96 crore from the company that year. (Between them, they control nearly 100% shares in 20-odd Indian firms, some of which have floated overseas subsidiaries.) Chaudhuri did not specify what services Planman provided to the education arm. But, on the group’s related-party transactions in general, he says: “There is nothing wrong in each and every transaction you have mentioned as all are scrutinised by regulatory bodies every year.”An accounting expert, speaking on the condition of anonymity, says it’s a common industry practice for the education arm to show losses and group companies that provide services to this company to earn profits. “Promoters adopt this to circumvent Indian regulation, which prohibits profitmaking companies in the education sector,” he says. “But firms that provide services to the company that runs the education business are not bound by it.”In 2010-11, IIPM’s education arm, while actively transacting with group companies, posted a net loss of Rs 2.3 crore on revenues of Rs 349 crore. By comparison, the Indian School of Business (ISB), which has no subsidiaries and no related-party transactions, earned a net surplus of Rs 15.1 crore on a turnover of Rs 197.5 crore.Planman Media, IIPM’s publishing arm, brings out several magazines and journals. Chief among them are three magazines: The Sunday Indian, 4Ps Business and Marketing, and Business & Economy (B&E).Chaudhuri’s website says the first is published in 14 Indian languages, and describes it as “the world’s largest newsweekly” and “the nation’s greatest news magazine”; the other two magazines as “best-sellers”.In 2008-09, the latest year for which financials were available for Planman Media, it earned revenues of Rs 41.4 crore. Of this, just Rs 1.6 crore came from magazine sales. The IIPM website claims The Sunday Indian has a readership of 2 million (which would make it more popular than India Today and Outlook) and B&E has a print run of 110,000 copies (which would be more than any business magazine in India). “We sell 5-6 copies of The Sunday Indian each week, against 40-50 copies of India Today and Outlook,” says a sales representative of Bahri Sons, in New Delhi’s Khan Market.“And 2-4 copies per issue of 4Ps and B&E.” Despite low circulation revenues, Planman Media recorded ad sales of Rs 39.6 crore in 2008-09, amounting to 96% of its revenues. The latest issue of The Sunday Indian had 44 edit pages and 19 ad pages (including 10 pages of group ads). Prominent names were missing from the list of external advertisers, which included Flowguard Pipe and Fittings, V Mart, OPTM Healthcare and Hyderabad House.If IIPM magazines don’t sell much, if big external advertisers are not placing ads in them, how much are these magazines billing IIPM for in-house ads? And, is IIPM using its magazines arm to reduce profits in its education arm? Chaudhuri did not disclose how much ad revenues of Planman Media came from group firms or how these were priced. He says: “All transactions are well within the provisions of the IT Acts and are regularly scrutinised by authorities.”Since 2009, IIPM’s education business has moved to a new legal entity thrice. There’s a pattern here. Each time, a skeleton company, controlled by Arindam and Rajita Chaudhuri, acquires the entity controlling the education business, and the two are eventually merged.Thus, the education business went from being in the Indian Institute of Planning and Management Pvt Ltd to being in the International Institute of Planning and Management Pvt Ltd in September 2009. In March 2010, the second change took place. Planman Financial—which said it was a registered mutual-fund distributor and wanted to become a non-banking financial company, but had negligible revenues—bought the International Institute of Planning and Management.Planman paid Rs 3 crore to buy a business that had revenues of Rs 201 crore and fixed assets of Rs 171 crore, and debt of Rs 109 crore. “Generally, for unlisted companies, the benchmark is book value of assets or earnings multiple,” says an accounting expert, not wanting to be named. “If the amount paid is less than book value, then it’s undervalued.”Six months later, the two were merged, and Planman took the name of the expiring entity. In May 2011, it converted itself into a Section 25 company—it cannot distribute profits to its shareholders— and renamed itself Center for Vocational and Entrepreneurship Studies (CVES).“These were strategic decisions to consolidate our group activities that were being undertaken over the last few years and are as per the provisions of the Companies Act,” says Chaudhuri.The third metamorphosis is significant. IIPM’s education business has gone from being a company that can distribute profits to one that can’t—a pre-condition to accreditation from the University Grants Commission (UGC), the regulator for higher education, and the All India Council for Technical Education (AICTE), which regulates business schools in India.Only last month, Chaudhuri had accused UGC, which has released ads saying IIPM is not recognised by it, and AICTE of corruption. “UGC and AICTE are full of bribeseeking, corrupt officials where, even at the top, they have a track-record of being caught red-handed and being jailed. The standard of education they have created in the nation is shameful, to say the least,” he said in a statement issued by IIPM on February 16.Is Chaudhuri now trying to comply with government regulations to get his B-school recognised? A Planman Financial resolution said this was one of the reasons to convert itself to a Section 25 company. But, Chaudhuri says: “As of now, we do not plan to seek any approval from any regulators.”According to Chaudhuri, plans for CVES have since changed, and so has its role in the group. The original idea, he adds, was it to offer management programmes cheaper than the IIPM flagship courses. “It didn’t shape up the way we wanted it to,” he adds. “For about three years now, I am not the director of this company and I am not a shareholder for about a year now.”Chaudhuri says CVES now aims to offer new and affordable educational programmes to cater to rural and semi-urban sections. He, however, did not specify where the education arm is now housed, though he did say that IIPM is now a “not-for-profit education society and not a company”.Recently, IIPM came out with an ad that invites applications to set up a branch of its “new initiative” IIMM (IIPM Institute of Marketing & Management), which is pitched as a low-cost alternative to IIPM (course fee of Rs 3.75-4.75 lakh). The ad asks franchises to invest Rs 5-15 crore, in addition to infrastructure, to set up an IIMM franchise and projects a return on investment (RoI) of 24-33% a year.“We have not acquired IMM,” says Chaudhuri, adding that it’s a “strategic alliance”, a descriptor also used by the website of the Delhi-based Institute of Marketing and Management (IMM), which has AICTE approval to admit 360 students a year. However, Gaganjit Singh, director general of IMM, denies any collaboration with IIPM or knowledge about this ad.According to Singh, IIPM has no say in running IMM. “We don’t offer any joint programme with IIPM,” he says. “AICTE regulations don’t permit us to collaborate with IIPM to offer any educational programmes. The only relationship we have with IIPM is that they have rented one floor in our campus.And last year, we tied up with IIPM for admissions and placements.” IIPM would act as “an agent” to bring students to IMM, and also help in placing students. “IIPM promised us 200 students, but brought in 40-50. No placement was done,” he adds.Chaudhuri’s education business is the cash cow. Choking it will squeeze all his other businesses. There are signs that IIPM is facing a squeeze. Speaking on the condition of anonymity, two employees of Planman Consulting and another of IIPM said the staff had not received salaries for six months. “IIPM does not have any salary delays whatsoever,” says Chaudhuri.“However, yes, almost every business house is going through challenging times as the market sentiment is not the most exciting. Certain other verticals of ours are going through slightly challenging times, but we are confident that we will be able to meet all our commitments sooner than expected.”Many IIPM pass-outs are absorbed in IIPM companies. “Those who do not have financial backing eventually resign,” says one of the employees of Planman Consulting. Adds the IIPM employee: “Three years ago, a lot of top companies came for campus recruitment. Now, it’s only the small companies and they hardly hire anybody.” ET contacted seven companies listed on the IIPM website as “recent recruiters”.Three responded—Coca-Cola, Essar Group and HSBC—and all three denied participating in campus placements in IIPM. “While there may have been stray cases of lateral hiring of IIPM alumnus in the past, they do not form part of our list of top B-schools from which we hire for our entry-level management-trainee programme,” says Sujaya Banerjee, chief talent officer, Essar Group. Adds Vikram Tandon, head of HR, HSBC India: “We have not hired from IIPM campuses—at least not in the recent past.”Meanwhile, IIPM’s website still lists, for example, Cornell University’s School of Industrial and Labor Relations as one of its international tie-ups. “The last time ILR School provided training for IIPM students was in 2011,” Mary Catt, assistant director, communications, Cornell University ILR School told ET.