The Rs280 crore that the poultry group is planning to pay for Blackburn Rovers isn’t exactly chicken feed for the company. At the end of the last fiscal, Venky’s had a cash balance of only Rs10 crore. How will it cross this road?

Indian poultry firm Venky's Ltd, the flagship company of Pune-based Venkateshwara Hatcheries (VH) Group, on Tuesday announced plans to acquire the English Premier League (EPL) football team, Blackburn Rovers. The deal, which is likely to be completed next month, is pegged at £40 million (around Rs280 crore). This is a record of sorts. Venky's becomes the first Indian company to have a bought an English Premier League team.

However, the deal raises some questions. Is Rs280 crore chicken feed for Venky's? Not really. The company had a cash balance of a paltry Rs10 crore as of March 2010. For the year 2009-10, Venky's had a negative cash flow of Rs2.36 crore.

Moreover, for the past fiscal, the company also had unsecured borrowings of Rs80.56 crore and net worth of a mere Rs206.64 crore on its balance sheet. Over the past five years, total cash accruals have been a negative Rs14 lakh. Venky's has also undertaken an expansion programme at an estimated cost of Rs50 crore in its poultry products segment. On top of that, the group proposes to take on a new obligation of Rs280 crore for buying the football team.

"A series of meetings, including discussions with the Premier League, have followed an extensive due diligence process. Both parties are hopeful that the transaction will be completed in November," John Williams, chairman of the club, said on its official website. In a statement on the Rovers website, VH Group chairperson Anuradha J Desai said, "We expect to be the first Indian company to acquire a Premier League team. We are particularly delighted that the team is Blackburn Rovers, with whom we believe we have many shared values and ambitions."

It is not clear what these shared values are, except poor finances. Blackburn Rovers, based in the Blackburn town of Lancashire, is currently just outside the Premier League relegation zone on goal difference and has won just once since the opening day of the season. It finished 10th in the Premier League last season. It is in the 17th position in the 20-team top division after losing 2-1 to Liverpool two days ago.

The Rs17-billion VH Group, of which Venkateshwara Hatcheries Private Ltd is the flagship company, specialises in poultry farming and claims to be the "largest fully integrated poultry group in Asia." Its businesses interests include food processing, animal healthcare and pharmaceuticals.

The group's international ambitions began around two years ago marketing vaccines and bio-security products in South East Asia and the Middle East. The group's expansion plan includes setting up a customer-care centre in Switzerland and a floating fish plant in Vietnam. The VH group aims to become "Asia's largest poultry firm" in the near future.

While media reports suggested that the deal is being financed by the VH group to the tune of £46 million (Rs322 crore), will the acquisition of the EPL team help in promoting the company's products in countries in Europe, Asia and Africa? Rovers is badly in need of funds for its existence, but should the VH group have rushed in as the saviour?