Questionable Promoters' action

Deepak Shenoy from CapitalMind has an excellent blog and website. His post today titled Jubilant Backtracks From Paying Promoters For Brand They Don’t Really Use deals with some questionable actions by the Bhartias. Below are edited quotes from that article.

Jubilant Foodworks and Jubilant Life Sciences in a board meeting, they proposed a 0.25% royalty on consolidated sales for using the “Jubilant” name , to each of the companies.

To give you a perspective Jubilant Foodworks is franchisee operator for Dominos and Dunkin Donuts both well known US brands. Jubilant Life Sciences is a pharma company in generics and contract manufacturing.

The article further details various business groups doing this activity in some form or other. The two prominent ones that are missed in that discussion are the Aditya Birla Group and Kingfisher. Here are some from the article:

• Royalty from listed companies - 

  • Colgate from Colgate India (4.8% of turnover) 

  • Unilever from HUL (3.15%), 

  • Dominoes from Jubilant Foodworks (~3%), 

  • JSW Steel to Wife of Promoter (INR 1.25 billion)

  • Tata from Tata companies using Tata name (0.25%) 

  • Tata from Tata companies not using Tata names (0.15%)

  • Muthoot group

  • Shriram group

  • Wadias (intending) from Britannia Industries

• Loans to promoters later written off

  • Network 18

  • DHFL (Alleged)

• Merging promoter companies with listed ones at unclear valuations

  • Satyam

  • JPAssociates

  • LEEL

  • Eon electric (attempted)

  • Vedanta

• Financing Promoter lifestyle

  • Raymond - maintaining Raymond House

I do not like these kinds of "promoter earnings". You are either a promoter or an employee - don't be both. These should come within the purview of related party transactions irrespective of their materiality.

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