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Jubilant Life and Food promoters attempt to charge the companies 0.25% of revenues as royalty. Andby the evening, withdraw this proposal. Well done there, because the Food stock tanked over 10% intraday - loss of market cap much higher.
For jubilant life, the Bhartias get around 30 cr. in salaries. They don't take salaries from Food - but that's becaues they don't run it. THe 0.25% would have been an additional 25 cr. from Life and about 8 cr. from Food.
a 10% fall in the stock means the promoters (who own about 45%) lose about 800 cr. - higher than the 54x P/E on the drop in earnings by 7.5 cr. It makes complete sense to reverse it.
For life it was tiny - probalby around 2% of profits. This is not that much to be honest; we have seen companies like JSW steel charge as much as 30% of profit (in 2014) and get away with it! capitalmind.in/2014/07/jsw-st…
Even companies like RPower have paid promoter loyalties. Tata charges a royalty for the tata name to companies that don't even use the tata name (Indian hotels). Wadias charge 0.35%. Godrej prop pays 0.5%, etc. Not unheard of. Colgate is an obscene 5%?
In stark contrast, @anandmahindra doesn't charge and neither does Bajaj. They stand out, and kudos to them.
As much as I'd like to say charging brand name royalty isn't a good thing - the practice is so well entrenched in a multi-business setup that it's going to be somethign we all have to expect our companies to pay in the future. For now, though, Jubilant promoters have backed off.
