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T E M P O R A L S E C U L A R I S M Marketing To The Faithful Forget the lure of the exotic - the kumbh has a nicely mundane side to it, one that marketers have already discovered.
The Catholic church gave business a book-keeping system; the Hindu establishment could well lay claim to giving business the largest event-market known to man. The 2000 Summer Olympics held in Sydney attracted half-a-million spectators (not counting the 3.5 million who watched it on the tube) over a period of 15 days; the 1998 Football World Cup hosted by France lasted 30 days, and ended up being watched live by 2.5 million people (and an additional 3.7 billion on television). In contrast, this year's Mahakumbhmela (the greatest festival of Elixir, in English) will see a staggering 75 million people traipsing to Allahabad over the 40 days when Jupiter enters Aries (which is considered auspicious and happens once every twelve years). Surely, a number of that magnitude can't be ignored by marketers. True, a mere 10,000 of the visitors to the mela will be from other countries. And most of this lot will be budget travellers looking for easy fixes and instant salvation. Still, that hasn't stopped companies from putting up stalls in a 'corporate pavilion'; those that have done so include Indo National (batteries and torches), HLL (soaps, detergents, and shampoos), Marico (hair oil), Duncans (Tea), Tata Tea, Bata (footwear), Colgate-Palmolive (soaps, oral-care products), Coke (which is pushing Kinley more than the cola), and Pepsi. Even the religious need to shave, and Gillette is using the mela-opp to increase awareness and trail of its Presto instant shaving system. Why, it has even invested in larger-than-life visual display screens that air films with mythological themes (interspersed with all-too-frequent Presto ads). Also leveraging the mela for economic benefit are companies like Ushafone, which is doing a brisk business selling pre-paid mobile cards, and small agencies renting out mobile phones. Even the State-owned BSNL has close to 250 PCOs that will help the faithful keep in touch with people in this world (the river should hopefully help them realise their aspirations of contacting someone in the next). Jaya Basu D E F E N C E The Vajpayee admin puts its final touches to a policy that'll allow India Inc. to tap the lucrative defence market. Everyone who has anything to do with business in India knows that sectors like defence are closed to the private sector-in spirit. For, the ordnance factories that are vested with the responsibility of keeping the country's armed forces kitted and equipped, often outsource almost 50 per cent of their requirements to the private sector. Indeed, analysts point to the clusters of SMEs (Small & Medium scale Enterprises) that have mushroomed around ordnance factories in Chennai, Nashik, Bangalore, and Hyderabad to substantiate their claim that this figure could be as high as 80 per cent in some cases. Thus, M&M supplies jeeps to the army, the Kirloskar Group, diesel engines, and L&T, communication equipment. There's sound logic behind the GOI's desire to throw open the defence sector (directly) to private Indian companies. The break-up of the Soviet Union has created problems in sourcing spares and other equipment from what was once India's largest defence-supplier. Russian suppliers are willing to step in and fill the breach, but they demand payment in dollars. And the US-orchestrated technology-denial regime has choked supplies from most of the first world. Says S.M. Nanda, former Chief of Navy staff: ''If the private sector gets involved, the country could benefit. The development of the Light Combat Aircraft or the Arjun battle tank has been going on for years. Surely, something is wrong with the system.'' M&M has already created a separate division called Mahindra Defence Systems that will, among other initiatives, manufacture armoured vehicles in association with an Israeli firm. But even the private sector is likely to balk at the magnitude of investments required for large projects. Explains Jasjit Singh, Director of the Delhi-based Institute of Defence and Strategic Analysis (IDSA): ''Let's be realistic. A project like the one developing the LCA would require around Rs 5,000 crore. Would companies be willing to pump in this money?'' Last shot: allowing the private sector in is one thing; helping them create viable business models is another. -Ranju Sarkar
F I N A N C
I A L E D G E The Hyderabad-based VST Industries' securitisation of the Charms brand could well mark the beginning of a new money-raising trend.
The man who desperately wanted to be Ziggy Stardust did it, and he was securitising future earnings from record sales. So, VST Industries' securitisation of the Charms brand to raise close to Rs 30 crore (the company was reluctant to divulge the exact number) shouldn't seem out of the ordinary. If it does, blame it on corporate India's school-boyish perspective of a brand as something that has value, which is purely intangible in nature. Indeed, as branding mavens are wont to say, ''a brand is something that allows a company to charge a premium even during a recession.'' The details of VST's deal with ICICI? A part of the proceeds from the sales of the Charms brand of cigarettes-these account for well over 50 per cent of the Rs 750 crore worth of cigarettes VST sells annually-will be funnelled into a specially created escrow account. And lender ICICI will have the first right to the money in this account against interest-and principal payments. More details? (Aren't you a quant-jock, now?) The tenure of the securitisation is for five years and VST's average cost of debt for the Rs 30 crore is 13.75 per cent. With a net loss of Rs 88.87 crore in 1998-89-the company wrote of Rs 91.67 crore on account of non-core businesses into which it had erroneously diversified in the past-and the bulk of its assets already mortgaged, brand-securitisation was perhaps the only route open to VST. Says Carlton Pereira, the Head of structured finance at Ambit Securities, the company that structured the deal: ''VST's cigarette business has always been profitable, and Charms has been its main engine of growth. So, we decided to leverage the brand.'' The Charms securitisation could pave the way for other companies with valuable intangibles (read: brands, patents, or know-how) to securities them and raise money. Lenders shouldn't have any problems with such arrangements: the escrow-mechanism reduces the risk, and the coupon rates on such deals are higher than the prime-lending rate. Everyone, to put it simply, wins. -Dilip Maitra
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