Blackburn Rovers finances at mercy of a judge in India
The owners of Blackburn Rovers Football Club are due back in court in their native India this month hoping to renew a special permission agreement to keep funding the Championship club.
It has emerged that in June 2023, the poultry and pharma group Venky’s, which has owned Rovers since 2011, had to apply to the High Court in the capital New Delhi for emergency permission to pay an outstanding tax bill after an application to send £26m to Blackburn was turned down when the Indian government’s Economic Directorate refused to issue a ‘No Objection Certificate’ to payments to Rovers.
The court heard that HMRC were close to issuing Rovers with a Winding up Petition, which could have triggered a number of catastrophic financial events.
The submission from Venky’s, which owns a nationwide chain of chicken takeaways, says: “Great prejudice would be caused and the entire petition would become infructuous” were there to be a default.”
Further, counsel for Venky’s argued: “A huge amount of money has been invested by the petitioner overseas and if they are not permitted to transfer the amount immediately, the entire investments made abroad would go waste, which would not only lead to the financial loss but also a huge loss to the reputation.”
Judge Amit Mahajan agreed to allow the tax bill to be settled, but insisted on a bond for the same amount to be lodged with the Directorate of Enforcement (ED), an arm of the Indian government set up to target money laundering. The bond would be forfeited if it emerged the money was used for another purpose.
Rovers captain Lewis Travis (right) with comedian Tez Ilyas
Venky’s have pumped £184m in total into Blackburn Rovers, who currently sit in 17th position in the EFL Championship and have recently loaned out club captain Lewis Travis to Ipswich Town as a cost saving measure, and have indicated they will be selling further players in the January transfer window.
The brutal reality of smaller EFL club finances was brought home this week with the publication of the financial results of another Lancashire club, Preston North End.
Their parent company Deepdale Holdings published accounts for 22/23 figures showing revenue of £15.5m, but a wage bill of £21.5m Wages, 139% of revenue, translating to an operating loss of £15m (£20m in 2022). The Hemmings family who own North End have made losses over the years of £81m.
Rovers operates on a similar model, but the already tight squeeze on money at the EFL club has been worsened following a crackdown by the Modi government on wealthy Indians taking money out of the country under a new law called Foreign Exchange Management (Overseas Investment) Rules, 2022. It effectively means that the Indian courts are now in control of finances at Rovers, having agreed “an exceptions process” where Venky’s must apply to court to submit funds to the UK if the court agrees with the amounts and purpose detailed.
Supporters group website BRFCS.com has provided an analysis and explainer of the situation saying: “The court allowed sufficient funds to be transferred to the UK to ‘keep the lights on’ – covering overheads like salaries, tax, NI, utilities and the like but – and this is crucial – no amounts for capital expenditure. This means that no money can presently be sent from India to boost the transfer coffers for new players.”
In September TheBusinessDesk.com reported that Venky’s had nine properties worth £7m, across two different Indian states, seized by the government as part of a crackdown on money leaving the country.
Following raids by the Directorate of Enforcement, foreign exchange management and seizing the assets of fugitives, assets worth more than £7m were seized by the state.
The latest development is an extraordinary twist in a bizarre ownership story, even in the context of British football ownership. The Rao family haven’t attended a game at Ewood Park since Mrs Desai’s husband was hit on the shoulder by a snowball thrown by a protesting fan in January 2013, angered at relegation from the Premiership the previous season and the ensuing chaos at the club.
Venky’s have deployed their head of finance to the board of Blackburn Rovers.
M Sreenivasa Rao joined the board alongside chief executive Steve Waggott, finance director Mike Cheston, director Gandhi Babu, non-executive director Robert Coar (the former chairman) and operations and management consultant Suhail Shaikh.
