It was really long ago when I met Mr. Ramesh Chauhan, the erstwhile owner of Thums Up, Limca and Gold Spot. It was some time in the early 1990s that this deal happened.

I was asked to do a valuation of the brand – and well, I did it. The final selling price was very close to the price I valued it at. I had no clue on how to value a brand, so used the tried and tested ‘PV of future cash flows’ – that is another story.

I asked Ramesh Chauhan – ‘Why are you selling your flagship brands – at a time when you are king’.

He said – as time goes by the value will only go down! He was sure Coke and Pepsi would fight him really hard and he would bleed, so it was worth selling. Of course he was right. I think Hemendra Kothari of DSP also said something similar when the sold off to Merrill.

One very important thing that Ramesh Chauhan told me was ‘I do not own the distributors – they may walk over to a Coke or Pepsi, that will weaken me’. This was also true. To be successful in any business you need the distributors on your side.

Advertising is of no use, unless the distributor talksĀ  about your product fondly and makes sure that it is available. This means if a new soft drink was to be launched today he needs to have at least 50-60 bottlers around the country (owned or franchisee).

So when I did the valuation, all these were considered….and the value arrived at.

In case of L&T Mutual Fund, I am not sure that the distributor relationships are in place (not sure, I could be wrong) esp with the banks and the IFA community. So the team has to act very, very fast if they have to retain the assets. If the distributor is not sure about his trail commission, he will be scared.

If you see the story today in ET, Cnbc, etc…..time is running out for L&T Mutual fund. Mitra Joshi did a story on Cnbc yesterday quoting a few IFAs saying ‘clients are worried’ , today’s Economic Times has also done a story (front page) about ‘Fidelity’ and LĀ  & T mutual fund deal…on similar lines…..It would be interesting to see the sales and the redemption figures of Fidelity for the past week – after the announcement of the wedding plans!

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  1. In India, most of things are sold by distributors/shopkeepers..
    If you go to buy X brand, they will show you Y brand and make you buy Y brand only… Only a handful can escape from their marketing…

  2. which is all the more reason companies must invest in a direct selling channel, even if it is a token presence…

  3. Subra..I have discontinued my SIPS in Fidelity Equity.Not Reedem yet .Booked my profit from Fidelity Global Real Asset and Fidelity International Opprtunities ….In Dilema at the moment about Liquidating Fidelity Equity Fund in which I was a maiden Investor with Retirement as Goal .YES Distributors and which Includes Some Eminent Names are suggesting clients to come out….YMD Will Have to act Fat and Chaturvedi Ex ..Tata Fund Manager needs to swiftly act and Either Maintain or still best ,exceed Fidelity performance ….Ral LITMUS TEST For L and T Team…OVER TO YMD

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