IndiaWorld deal has many loose ends

IndiaWorld deal has many loose ends
Sucheta Dalal

Satyam Infoway's acquisiton of Rajesh Jain's IndiaWorld the oldest internet portal from India for a whopping Rs 500 crore, is touted as the biggest internet deal ever. A triumph of entrepreneurship and a shining example for millions of Indians. The incredible valuation has had people gasping, and now, a closer look at the deal suggests that it may be premature to dub Jain a new icon. There is so much to IndiaWorld that has not been secret, that it now raises several uncomfortable questions about the valuation.

Let's start with the acquisiton of IndiaWorld. While every newspaper has splashed the takeover of IndiaWorld, it turns out that the portal has not been sold at all. DSP Merrill Lynch, the investment banker to the deal points to the carefully worded press release which says that Satyam is only acquiring the specific domains within the IndiaWorld portal namely khoj.com, khel.com, samachar.com, bawarchi.com etc and not IndiaWorld.

It also seems as though Satyam Infoway may not have done itshomework and its due diligence as well as it should have. Not only do they continue to confuse newspapers, which repeatedly refer the sale of indiaworld.com, but there have even been messages sent from Satyam officials to Rajesh Jain at the address rajesh@indiaworld.com.

This means that Satyam has committed to pay $ 115 million for just the domains within the IndiaWorld portal which also have almost no original content. The absurdity of this valuation is apparent when you consider that a great domain like business.com changed hands at just $ 7.4 million internationally.

The reason for not acquiring IndiaWorld is simple. Rajesh Jain and his company Ravi Database do not own the IndiaWorld trademark or even its dotcom address. The US Patent and Trademark Office database reveals that IndiaWorld is owned by ASAP Solutions Inc, a San Diego-based privately held company whose Chief Executive is Ghassan Y Yacoub, an engineer who is among the six original founders who conceptualised IndiaWorld.

The company islisted as a specialist in organising electronic communities. In fact, the IndiaWorld story itself is very interesting. Far from being the brainchild of the young Rajesh Jain, it was in fact part of a highly ambitious global project which was put together by a team of US-based specialists.

The US founders had a big plan to create a massive international portal and internet firm called Starworld Online Inc in the US. This company would establish several operating interactive global communities such as IndiaWorld, ChinaWorld, MexicoWorld, KoreaWorld, JapanWorld etc mainly in emerging markets. The project kicked off in 1994 with a US-Indian team which had invested over US $ 1 million in their global plan. IndiaWorld was the first to be enabled because over 10 million Indians abroad had access to the net and were a potential target. Ravi Database was the Indian partner. The next was MexicoWorld which was constructed in partnership with CIASA. It is this global vision that had attracted the attention of BillGates' relatively low profile partner Paul Allen.

The original team comprised Ghassan, Tarun Soni, Jarret Malone, Jason Penn, Shuvam Mishra, Subash Darr and Sanjay among others. All of them have been high flying techies working in Fortune 500 companies. The first four were in the US and the last four operated from India. The business vision was that each of the country partners will hold 70 per cent of the locally registered company and ASAP Solutions would hold 30 per cent.

The technology for the site was put together by the US team, it trained Rajesh Jain and those who worked with him. It also put in place one of the earliest automatic online credit card authentication and billing facility which was responsible for the gift shop of IndiaWorld that allowed people in the US to send flowers and chocolates to their friends and relatives in India.

By 1996, Rajesh Jain fell out with his partners in India as well as those in the US. These included Sanjay, his co-investor in Ravi Database and the othertechies like Shuvam Mishra who has now gone on to set up SpaceNet. Clearly the differences were nasty and the site was down for a long time. Rajesh Jain, had by then built up enough of a content supply to do without the foreign partners, but the problem was that IndiaWorld had been hosted on US servers and the trademark remained with ASAP Solutions. So Jain got himself a registration in India through NCST which granted him an IndiaWorld .co.in and Indianworld.org address and ignored the letters and requests of the US-based partners to disable IndiaWorld.

The matter rested there because internet sites those days were simple cost centres and litigation in India is a slow and expensive business. Today things are different. There is big money chasing internet content providers and the US listing of Satyam Infoway gives the foreign trademark holders a legal remedy in US courts. Naturally, the deal could not include the IndiaWorld brand name.

Rajesh Jain had IndiaWorld.co.in up and running in a short time whileindiaworld.com remained dead for a long time because it had lost its content builders. At this time, the US team seems to have blundered and allowed a techie called Victor George to takeover the site and launch a rather silly campaign to irritate Jain and his content providers by creating a mirror site. It copied IndiaWorld's material and changed bylines of writers, daring Jain to try and stop them legally, since they held the trademark. Rajesh Jain was frustrated, but there was little he could do.

In fact, the mirror site had the advantage of warning off several venture capitalists who had considered buying a stake in the business. Then Satyam Infoway came along and seems to have looked at things differently.

It is not at all clear why Satyam considered the sub domains so valuable that it ignored the main portal and decided to pay Jain a hefty cash payment Rs 122.2 crore for a 24.5 per cent stake and a non-refundable deposit of Rs 51.3 crore. The speculation today is whether the remaining Rs 325.2 crorepart will actually go through. The buzz overseas is that the hype created by Satyam's hyped up deal and big price may simply be the worm to net a big fish like Yahoo or America Online. Indians, more cynical ascribe other motives. Either way Satyam's acquisition will continue to be keenly watched until the millennium deadline makes the rest of the money due.