Tuesday, December 30, 2014

Bhairavi, Kalyani, Quaker Oats and Kingfisher

What have Bhairavi, Kalyani and Quaker oats to do with Kingfisher, one may ask. Was Quaker Oats being served as breakfast on a Kingfisher Airline flight (when it was indeed flying) with Bhairavi and Kalyani ragas played on the in-flight music system?  Most unlikely.  But they are indeed connected......

"Kingfisher brand" was mortgaged as collateral to the group of bankers that funded the airline, as security for huge loans aggregating to Rupees 6,300 crores, which have now swelled to over Rupees 7,000 crores with application of interest.  It is said that Bhairavi and Kalyani ragas were mortgaged by legendary musician "Bhairavi Venkatasubbaiah" as security for 1000 gold coins he borrowed, in the 18th century.   Thus, mortgage of intangibles is not at all new and Kingfisher was not the first to start this novel trend. This is in vogue since many centuries in India.  Not only Bhairavi and Kalyani , even Todi and Shankarabharanam have also been mortgaged from time to time.  Lenders believed the borrowers and confidently gave loans on the security of the ragas.  There are also stories of poets mortgaging some letters (say Ka or Pa) to raise loans.  Once these letters (alphabets) are mortgaged, the poet could not use them in his literary works till the loans were paid and the letters were redeemed! There are many similarities between these transactions of mortgage of ragas, letters and Kingfisher brand.  However, there is one major difference between mortgage of ragas and Kingfisher brand.

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Bhairavi Venkatasubbaiah, known as Venkanna in his younger days, was very fond of learning music and did everything possible in his command to pursue his passion.  He lost his first Guru (Teacher) due to a misunderstanding and even followed a drunkard with all his eccentricities, for learning finer points of music from him.  He left his old mother and led the life of a nomad to master the art.  As a budding artiste he fell in love with a dancer-girl by name Chandra and lived with her. Since he needed money for being permitted to live with her by her mother, and taking care of other expenses, he borrowed 1000 gold coins from a money lender. Money lender wanted security for the loan and Venkanna had no security to offer. Venkanna suggested pledge of his two favorite ragas, Bhairavi and Kalyani, as security and assured the lender that he would not sing those two ragas till the loan was repaid in full.  A mortgage deed was drawn accordingly and loan of 1000 gold coins was disbursed.

Venkanna's uncle (mother's brother) comes to know of this transaction.  He visits Venkanna's house and enquires from Chandra about Venkanna's music practice. She confirms that Venkanna did practice singing regularly.  When specifically asked about singing of Bhairavi and Kalyani ragas, she realizes that Venkanna was not singing these two ragas during his practice sessions.  His uncle then gives her the mortgage document, obtained by him by repaying the loan to the money lender. When the girl starts the evening practice session with Bhairavi, Venkanna falls silent. She shows him the redeemed document and extracts a promise from him to pursue his musical path without a break.

With hard work and dedication he becomes a famous artiste and occupies the place of "Asthana Vidwan" in the royal court of King Madakari Nayaka, ruler of Chitradurga.  He masters Bhairavi and in due course of time becomes known as Bhairavi Venkatasubbaiah. He becomes arrogant and moves away from others in the music world. He learns from his mistakes and towards the end of his life, he stops singing for others.  When he was forced to sing before Hider Ali, who conquered Chitradurga after several attempts, he is said to have cut off his tongue. A musical Kannada film by name "Hamsa Geete" made in 1975 based on this theme was an award winner and brought many laurels for the actor Anant Nag, elder brother of Shankar Nag of "Malgudi Days" fame.
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There are similar anecdotes of pledging ragas as collateral for loans.  One Todi Sitaramayya, an Asthana Vidwan of King Sarfojee (1798-1832) of Thanjavur was known for his singing of Todi raga. Once he sang Todi raga for 8 days in a row to bring about all its different aspects.  He needed money and unable to find any tangible security, he pledged Todi raga with another Vidwan.  When the King asked Sitaramayya to sing Todi, he declined.  Having come to know of the mortgage, the King got the loan repaid and then Sitaramayya could sing Todi again.

Around the same time, another Vidwan Narasayya pledged Raga Shankarabharanam with one Ramabhadra Moopanar for 80 sovereigns of gold. One Appuraya, a senior official of East India Company called Narasayya to sing on the occasion of the marriage of his daughter.  When requested, Narasayya could not sing Shankarabharanam as the mortgage was still subsisting.  Appuraya sent for Ramabhadra Moopanar who came running with the document, waived the loan in full and requested Narasayya to resume singing of Shankarabharanam!

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John Stuart, Chairman of the Quaker Company was of the view that brands and trademark were far more valuable than land or brick and mortar assets. He is reported to have said once, "If this business were split, I would give you the land, brick and mortar, and I would take the brands and trade marks, and I would fare better than you".  He truly believed in unlocking value from intangibles in a business proposition. John Stuart indeed  knew the value of brands as he started his working life by sweeping floors in his father's mills in Cedar Rapids, Iowa. When his father Robert Stuart and his partner Henry Parsons Crowell got control of "American Cereal Company", they changed the name of the company as "Quaker Oats Company", to take advantage of Quaker brand built by Crowell. It was the first marketer to register a trademark for a cereal.  Though the brand has changed many hands over the years, Quaker is a popular brand even today.

Brand is a special intangible asset that could be the most valuable asset in some businesses.  Brand value of Coca Cola, Apple and IBM are today valued at about 80 billion US dollars each.  Brand evaluation is a complex concept that includes Brand vision, Organizational culture, Brand objectives, Brand essence, internal implementation and brand resourcing.  Among the collaterals offered by the Kingfisher Airlines to its lenders are tangible assets like a building in Mumbai, a villa in Goa and two helicopters.  To increase comfort level of bankers, Kingfisher brand was offered as a collateral. Audit firm Grant Thomton India was drafted to value the brand.  Valuation was arrived at 4,100 crore rupees in 2010, but now has come down to 2,500 crores.

Kingfisher brand was offered and accepted as collateral.  Now that the loans have turned bad, bankers want to encash the security.  United Breweries Limited now says that the "Kingfisher" brand is its registered trade mark under trademark classes pertaining to alcoholic beverages and that it is not hypothecated or mortgaged to any lender whatsoever.  Now a subtle distinction is being made between "Kingfisher Airline" brand and "Kingfisher" brand of UBL. Bankers feel that the Airline part of the brand is quite valueless, but the beer brand holds value.

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We have seen the similarities in these cases; it is one of mortgaging intangibles. What is the difference between them?  In the case of ragas or letters, it was not the property of the person offering the security.  There was no dispute as to who owned the security or which part of it.  The only understanding was that the borrower would not be able to use the raga or letter till the loan was repaid; there was no restriction on others as he could not bind them.  It was not even a kind of security that could be encashed when necessity arose.  The true security was the word of the borrower; its value was infinite. There were others who were ready to repay the loan on behalf of the borrower and redeem the security!  Lenders got the money back and their objective was fulfilled. They were not constrained to fight for the very title of the security, as is happening with the Kingfisher case.

8 comments:

  1. Excellent post, Appa. The Kingfisher story is interesting and shocking.

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  2. Thanks for the interesting stories surrounding the mortgage of ragas in olden times. The connection between that and the Kingfisher story or the difference between the two have been thought out cleverly, and presented, as usual in a very engaging way. Enjoyed it thoroughly.

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  3. Very informative article. Degradation of value of word has been narrated so beautifully as usual by you.

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  4. Lenders take advantage of the sentimental factors attached to such intangibles. Financing against intangibles like 'Brands' is in practice among the Banks. Good example to teach our students.Very interesting and beatifully brought out.
    Umesh(BMSB)

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  5. In the case of mortgage of ragas, it was the honour of the person that was at stake in case he was unable to repay. Also, his sacrifice was immense as he withheld singing these ragas.
    These values are rarely upheld these days.

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  6. Enlightened Devare, hearing first time abour " Ragas " mortgage - Vasan

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  7. It's new to know about mortgage of ragas in old times that was totally based upon the trustworthiness of borrower.

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