Private Treaties

By Ramesh Akkineni

from an article by Vanita Kohli-Khandekar in Businessworld

In the portfolio investments, BCCL seems to be picking high-growth SMEs headed for IPOs. They need media space to build their brand and corporate image. BCCL, says Rajshekhar, is "helping emerging companies realise the power of advertising". He heads a division called 'private treaties'. The typical deal is a cash payment for a small equity stake, say, 5-10 per cent. The deal size varies from Rs 9 crore-100 crore. So far, BCCL is dipping into its considerable cash reserves of Rs 2,379 crore to strike these deals. This money is then spent by the investee company on buying media space in BCCL brands. In effect, the money comes back to BCCL. Plus, BCCL stands to make a stash when it exits. Nice accounting move. But why not get companies to advertise straightaway? Rajshekhar reckons these companies are in their growth phase and have other working capital priorities. To convince them about the power of advertising, private treaties works best.

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