Success, glow and siphons

This newsletter is not profitable, but that doesn't mean we are not doing well

Being successful and making money are two different things

It is no fun if everyone is trying to invest in, or trying to get out of, a particular industry at the same time. It is also tautological - for someone to invest into an industry, someone else needs to disinvest, and vice versa. As a business practice, it is always good to want to buy when everyone else wants to sell and vice versa. For this reason, statements of the sort of “why is (s)he buying when everyone else is selling?” make no sense. Someone needs to buy for someone else to sell.

Indian billionaire Sanjiv Goenka, whose claim to fame so far has been knocking an “s” off his Indian Premier League team’s name after one season, is buying rights to distribute Fortune in India. This is his second investment in the media business, after the magazine Open. He has also announced that he wants to buy a lifestyle publication, and possibly an electronic media company as well (ungated version of the story).

The Business Standard asked Goenka if Open is profitable. This is what he had to say:

In profit before tax terms, no. But close enough. I don’t know which media is making money right now, but that doesn’t mean it is not successful.

This applies to The Paper as well. We are “media” and we are not making money right now, but that doesn’t mean we are not successful.

Interestingly, Fortune India, which is currently owned by the ABP group, hasn’t been doing well.

Fortune India sent its 20-people strong editorial team on a three month leave without pay on 28 April. The decision was communicated in an internal email. The email came with a consent form that the employees are expected sign

While Goenka already has a history of investing in media (with Open), and he had expressed a desire back in 2016 to buy a media company, he is not the first industrialist to dip his feet in media. More famously, Amazon founder Jeff Bezos owns the Washington Post, Salesforce founder Marc Benioff bought Time Magazine, and Liverpool Football Club and Boston Red Sox owner John W Henry owns The Boston Globe, to name a few.

This article in the BBC gives a good account of why billionaires like to invest in media.

Glow is alright, but is it Handsome?

We had written last week that after knocking off “fair” from “Fair & Lovely”, Hindustan Unilever (Unilever’s Indian arm, known as HUL) was likely to call it “Glow & Lovely”. That became official yesterday.

The move comes a week after the maker of Lipton Tea and Dove soap announced that it would drop words such as “fair,” “fairness,” “white,”, “whitening” from its marketing in a push to move away from a single ideal of beauty.

Its skin cream for men will be called ‘Glow & Handsome’, Hindustan Unilever said, and the products with the new brand name will appear on shelves over the next few months.

We don’t think anyone will object to Glow & Lovely. However, Emami, which currently manufactures and sells men’s fairness cream Fair and Handsome, has already objected. The men’s fairness market in India is worth ₹4.5-5 billion, and Emami has a 65% share.

Emami is evaluating legal action.

Emami Ltd on Thursday said it is evaluating legal action against Hindustan Unilever Ltd (HUL) for renaming its men cream "Glow & Handsome" which sounds similar to the Kolkata-based company's brand "Emami Glow & Handsome" which it has launched digitally a week back. 

Emami and HUL have a bit of history between them. After Emami had launched its Fair and Handsome in 2005, HUL had responded with “Fair & Lovely Men’s Active” (we wonder what’s wrong with Glow & Lovely Men’s Active).

In 2017, HUL had objected to claims in one of Emami’s advertisements. That objection was overruled by the Advertising Standards Council of India. In 2018, HUL made an ad that took a potshot at Fair and Handsome. They were so sure that they would offend Emami that they filed a caveat petition in the Bombay High Court anticipating a suit.

Emami had sought an injunction order anyway.

In a 2018 injunction order against HUL, Emami sought to restrain HUL from publishing a TVC for the Fair & Lovely Men's brand over claims that it intends to “demean, disparage or denigrate Emami’s product, Fair and Handsome Fairness Cream for Men, thus, interfering into the direct goodwill and business loss for the company".

And in 2019, it was HUL’s turn to complain about Emami’s TV advertisements.

“All is fair in fairness creams”, can we say? Oops, we forget they’re not “fairness” cream anymore. All is glow in glow creams, maybe.

Siphons in an airport

The Central Bureau of Investigation (CBI) has filed a case against GVK, operator of the Mumbai airport, alleging misappropriation of funds.

The Central Bureau of Investigation (CBI) has registered a case of criminal conspiracy and fraud resulting in losses to the state exchequer, by the promoters of Hyderabad-based leading infrastructure conglomerate, the GVK group. The alleged irregularities are to the tune of Rs.705 crores. 

According to the CBI FIR , the promoters of GVK group in connivance with unknown officials from Airport Authority of India (AAI) adopted various means to divert funds meant for the modernisation, upgradation, operation and maintenance of Mumbai airport through their joint venture company (JVC) Mumbai International Airport Limited.  

(₹705 Crore is ₹7 billion, which is equivalent to about $100 million)

Mumbai International Airport Limited has also been named in the complaint, and has said it will cooperate. Moneycontrol provides a bit of history.

MIAL is a joint venture between Hyderabad-based GVK Group’s GVK Airports Holdings Limited, Airports Authority of India (AAI) and some foreign companies. GVK Group has a 50.05 percent stake while that of AAI is 26 percent.

AAI had in 2006 signed an agreement with MIAL for modernisation, operation and maintenance of the Mumbai airport. MIAL was to share 38.7 percent of its revenue with the AAI as an annual fee, the agreement said. 

So GVK operates the Mumbai airport, but has to share a percentage of the revenues with AAI. One of the complaints is that GVK understated revenues. As simple as that. The other complaints have to do with money AAI gave GVK to invest in the airport, with the allegation that the funds were misappropriated.

There is also a political angle to the case. Gautam Adani, who runs India’s largest port, and also has interests in electricity generation and coal mining, is trying to buy a minority stake in the Mumbai airport. GVK doesn’t want him as a shareholder there.

Allowing Adani in simply isn’t an option for Reddy as airports business is the holy grail of GVK empire spanning six subsidiaries and 18 step-down subsidiaries. It single-handedly contributed 90% of the holding entity GVK Power & Infrastructure’s consolidated income of Rs 4,098 crore in FY19. With GVK offloading complete stake in Bangalore International Airport last year and Navi Mumbai airport still under development, MIAL is now its sole cash cow.

Interestingly, Adani had won concession to operate six airports in India in 2019. Last month, citing force majeure on account of covid-19, the group indicated it wanted to back out from the deal.

Gautam Adani is supposed to be close to Prime Minister Narendra Modi.

The Platform for PE firms grows bigger

Remember Jio Platforms? After Facebook had announced an investment, the holding company of India’s largest mobile operator had announced ten more investments from nine companies. Now, there is yet another. Intel Capital is putting in ₹19 billion for a 0.39% stake in the company.

This is what the scorecard looks like now.


Source: The Economic Times

Meanwhile, Jio has launched a videoconferencing app called “Jio Meet”. It might be called “meet” but it bears an uncanny resemblance to something else.

Facebook is known for quickly copying Snap, and introducing its features into Instagram. Now it looks like it didn’t take too long for Jio to get into that habit as well.