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Reliance Power Will Pay 80 cr. to Licence Their Own Logo

In Reliance Power’s Red Herring Prospectus, page 25 of the PDF, there’s a phrase worth watching:

The [Reliance Power] trademark, name and logo do not belong to us. They have been licensed to us under a brand license agreement with ADAV. We are required to pay to ADAV up to Rs. 800 million for these rights. The timing and amount of the payment (subject to the Rs. 800 million limit) will be determined in ADAV’s sole discretion. As of the date of this Red Herring Prospectus, we have not paid any amounts as royalty for the use of the trademark and logo. This agreement can be terminated by ADAV upon the occurrence of certain events such as any breach by us of the terms of this agreement or any applicable law, regulation or industry standard or any
change in control of our company.

If the license is revoked, we may no longer be able to use the [Reliance Power] trademark, name or logo in connection with our business and, consequently, we may be unable to capitalize on our brand recognition.

So Anil Dhirubhai Ambani’s group gets 80 cr. for Reliance Power’s use of its own logo. And they can demand it anytime they like. I guess such things are commonplace like HLL paying Unilever for international brand royalty and GBN not even owning its own web site and so on, but it still seems to me as funny money. Just label it something and suddenly shareholders money goes into a private pocket.

For getting their shares for Rs. 10 each (some as late as 2007) and making the general public pay Rs. 450 for them, one would think ADAG would say “Go use the logo for free”, but I guess that’s not how it works. Such is life.

Disclosure: I own Reliance Energy shares. I won’t apply for the Reliance Power IPO, but may decide to trade it after it’s listed. More information on this IPO coming later.

  • Vishal Pipraiya says:

    >So you wouldn’t buy due to the mysterious reasons behind the logo factor or is there any other point investors like me (who are preparing to apply for the IPO), should be wary about?

  • Ankur says:

    >maybe its justified for reliance, Unilever or tatas to pay royalties… but these days even the unknown brands like Jet, CCCL etc also pay royalties to their holding companies.. even though they do not have any brand value…..

    i have been noticing this scam for quite some time… good u wrote about it

  • Deepak Shenoy says:

    >Vishal: No the logo thing is insignificant to me, just surprising. Things in the market are much worse. I had noted that GBN, in an earlier post I wrote, didn’t even own its web site! In fact they had transferred it to a different company a few days before the IPO.

    I’m not subscribing to Reliance Power because I have given up on IPOs for now. They all get oversubscribed, and I have to wait for refunds and for allocation. I would rather see the listing and then buy.

  • Rishab says:

    >I think the issue of not investing cos of a logo is really foolish.
    Reliance Power is in a unique position of having a very strong portfolio of development projects that are diversified across geographic location, fuel source, fuel type and generation technology.
    The power projects are being developed to cater to the power deficit northern and western regions of the country.
    Other key strengths include the backing of the Reliance ADA group’s experience and position in the Indian power sector
    Besides The Group track record of performance in stock market has been phenomenal, with 1 year returns by various group companies as follows:-
    1 yr stock returns
    Reliance Communications – 58%
    Reliance Energy – 260%
    Reliance Natural Resources – 654%
    Reliance Capital – 324%
    Adlabs – 271%
    Note: As of 19 December, 2007

    Isin’t that really great… Go ahead guys INVEST… I’m all ready for this Jan 15-17 is what i know about… Go for it!!

  • Anonymous says:

    >The promoters siphoning off money from public companies seems to be tolerated in India. Unfortunately, the mainstream media (MSM) has done a bad job analyzing it and reporting it. The scoops in WSJ has brought out scandals in many companies. I cannot seem to have read a worthy one in the Indian media. MSM has been extremely silent on asset transfers from Reliance Energy to Reliance Power.

    MSM, however, reports that people have filed cases, but never offers an opinion. How safe.

    I read the prospectus of Reliance Power for the intriguing mysterious parts.

    Changing offices:
    Jan 19, 2004 Moved to Reliance Energy Centre (REC), Santa Cruz (East), Mumbai 400 055
    Jul 31, 2004 Moved to 3rd Floor, REC
    Aug 02, 2007 Moved to DAKC, Navi Mumbai
    Aug 04, 2007 Moved to 3rd Floor, REC
    Sep 30, 2007 Moved to DAKC, Navi Mumbai

    The moved office to a new place for 2 days to move right back, to move back in 2 months. wow! Probably since REL takes care of execution, the folks at Reliance Power wanted something to do. 🙂

    It would be a very interesting, complex project to map out the holding companies, patterns, promoters and board of directors.

    Why would one son of ADA hold 7 shares of REL while the other 125,231? Who gets to design these intricate patterns?

    There are many more interesting nuggets. At least, this should be a good reason for one to read the prospectus.

    – AC

  • Anonymous says:

    >As someone mentioned, jet promoters did exactly the same thing, paid themselves a fat dollop of investor money for a logo. The relaince group, both brothers,seem to have masatered the art of creating capital and wealth for themselves out of nothing! But given the good times on the indian markets i suspect tons of promoters are lining their pockets, simply because it’s so easy! And so it goes on…

  • Jishnu A says:

    >Whatz ur logic in not applying for reliance power IPO?

  • Deepak Shenoy says:

    >jishnu: No point applying for ANY IPOs now. I no longer like the fact that allocation is random and you get very little (I got like 100 shares for my RPL application). For such small money I would rather wait for listing and take a call.