Making Partnerships in India Successful

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I'm Kisam Patel and you're listening to M and A Science where we talk with deal professionals and learn valuable lessons from their experience. This podcast focuses on stories, strategies and what actually happened during M and A deals.

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Welcome to M and A Science Live, where leading M and A practitioners share lessons learned from their experience. When you use proven techniques in M and A, more value is created. If you're interested in keeping up with the latest from M and a science, visit mascience.com and subscribe to our newsletter. Again, that's mascience.com I'm your host Kisan Patel, CEO and founder of M and A Science and Deal Room. Joining me today is is Darshan Mehta, President and CEO of Reliance Brands Ltd. Reliance Retail has been ranked the fastest growing retailer in the world. It's ranked 56 in the list of top global retailers and is the only Indian retailer to be featured in the top 100. It is the largest, most profitable retailer in India with the widest reach. Today we're going to talk about how to manage multiple deal structures and form successful partnerships in India based. Maybe we can kick things off by telling us a little bit about your background.

It's pretty straightforward. I'm an accountant by background. The usual stuff. Pricewaterhouse some of the early lazy years and then serendipity landed me in advertising. I was like a lost soul. But my best years homegrown agency called Trikaya which later on morphed into Pre advertising which is now part of WPP Group. That's a massive M and A story, but I'm sure that's a whole different conversation. What Martin Sorel did with WPP and global ad agencies so spend close to a decade and a half there and thereafter again another stroke of serendipity and I landed up in fashion with little too what's the difference between a merchandiser and a designer? What's a crew neck T shirt? But again loads of fun. And since then I've been stuck into fashion and then fashion retailing and now more broad based retail. So that's kind of a quick Sum up of my 30 year career.

Well, really interesting and it's interesting with the various brands which we'll talk about. I think that one of the things that really intrigued me was your business model that you operate as India's largest luxury retailer. You don't stick with just one type of deal structure. You have quite a few. And maybe you can walk me through some of those different types of deal structures that you currently apply or utilize.

Once we have passed the goalpost in terms of the partners interest in India, Indian market interest in US and vice versa. And when we start getting down on the drawing board of how the contours of the partnership would be, we start off by saying honestly we're quite agnostic to structure A versus B versus C. But during my journey of the last two decades in this business, what I've come across is there are largely two or three kinds of players. One is people who see India as a very significant market, but a complicated market which it is like most markets of this size. So they don't want to let go of the control or the reins of the India business as it shapes up to a third party. So they opt for a more joint venture. So they would want to be in the deal room, if I may use borrow your face in terms of joint management, operations, all of that etc. But realizing that you need a heavy hitter in this market because it's a complex market and hence they'll choose a partner like Reliance for instance. The other model is, and many American companies tend to fall into the second model which basically says India is big but it's not currently as significant compared to us as a market. And hence we would opt for a more master franchise kind of a deal where we have high level control but we don't invest in the business, we sell you the product, we will help you with whole host of things but thereafter it's your skin in the game and you get the upsides and the downsides. So master franchise and joint venture are typically two classic models. There's a third model which is basically, in fact that's what I started my career with. A small brand called arrow American Brand, 1951 Old Heritage and was owned by a company called Cluett. Now it's owned by BBH. But Kluitt Peabody companies basically had 30 people in their office. 15 of them were deal makers and 15 of them were lawyers. Suppose they made the deals and they policed the deals and basically their model was that they'll give you the license to the mark Arrow. They'll give you some trend guidelines and stuff like that, etc. But by and large lets you run with the brand the way you want. So Arrow in France was positioned very high. Arrow in India was positioned very high. Arrow in Thailand was positioned mid market. So the problem with licensing as a model, because it's a kind of loose governance model where you pay the royalties for trademark usage but you're pretty much on your own. And there's nothing right or wrong with any particular model. But many of the people also tend to fancy that. It's what we call the most light touch of the model where like landlords, you collect the rent, you collect royalties, and say by and large, so long as you're not cheating on the licensee, you're okay to go. These are the three classic, so to say, models. And then of course, as markets have progressed, newer models have come into play in this business. As we have more conversation on this, happy to give you insights.

Yeah. Because it sounds like these are the more common ones is the joint venture, master franchise and licensing. And I'm curious because looking at your portfolio brands, you have a lot of these European luxury brands. And then you mentioned some of the US brands and it seems like they have different appetite for these partnerships. Would you say that the European brands lean more towards a joint venture versus the US brands have leaned more towards a master franchise? Or is there a certain structure that you've noticed by demographic?

Yeah, I mean, just by empirical evidence, we have More than now 60 brands in our portfolio partnerships spanning from Japanese brands all the way to American brands, North European, South European brands. But the US brands tend to follow the midpath, which is they want a massive franchise, so they follow what's called a wholesale model. They want to sell you the product they want to keep control on, where do you sell it in terms of channels of sale, where do you open stores, all of that, et cetera, but don't want to co invest with you. So classic example, for instance, we are the only player in the world which has a partnership with both Tapestry and Capri. Capri's number one brand is Michael Kors and Tapestry's number one brand is Coach and Coach and Michael Kaush go head to head. No part of the world except India and except Reliance, would they have a common part. In fact, we now have also Kate Spade, which is part of Capestry. We also do Jimmy Choo and Versace, which is part of Kipri. And lo and behold, the last partnership that we entered into was Tory Merch. So we even Do Tory Merch in India. So only player in the world is Tory Burch, Gates, Michael Cross, Kate Spade, all of them. But all of them are massive franchise partnerships and not joint ventures. In fact, the only joint venture that we have out of us, which is I think technically no longer American company, is Tiffany because it got bought over by lvmh. So we did a joint venture with Tiffany just I think seven, eight months before LVMH bought that company. And most recently, as hot as three days ago, we inked a joint venture with a American IP company called caa. I don't know if you're familiar with caa. CAA stands for Creative Artist Academy. One of It's a good 4 billion, 5 billion, very large IP owning company. So they basically from makeup artists, musicians, Hollywood, full host of people, they manage their intellectual property and they manage licenses. So it's that's another more refined and unique model. So we've tied up a joint venture with CAA for India. So these are only two joint ventures out of us. Rest are all typically very long term master franchise partnership. Like the other master franchise we have is with Brilliant Sarma for both Western and Portugal, two of the best brands. Then I talk about my Italian partnership where we have 10 partnerships, seven of them are joint ventures. So I mean now was it just, you know, coincidence or was it by design all the years? I get a sense that European companies tend to maybe also they physically, they see themselves as time zone wise, 4 hours away, 6, 7 hours flight away, easy to manage a joint venture. US sees India as very far away.

Which one's easier to structure in the.

Short term the master franchise is easier. So we sign very unique joint ventures. So all our joint ventures are what we call timeless. So we never sign a joint venture with either a time bound put or a call option which is very unique to only us. Which means unless what you would call there is a material breach by either of the partners, the partners are tied to the partnership. So typically, as we say of your Indian origin and background, Indian marriages used to be timeless. The society did not permit at least 20, 30 years ago concept. So I used to explain to them, if you want to get a joint venture for us, it's like a marriage and a traditional Indian marriage, which means we are there for keeps. Okay, if it is time bound, then it's not a marriage because then closer to the time when you have a call option or I have a put option, posturing will start. So our general trend is if you want a time bound partnership, you're better off with the master franchise if you want something more ongoing. Unless as I said, we are in breach or you are in breach, in which case there's always an option for the non breaching party to get out of the marriage or the partnership. So those are more difficult to construct at the front end because then you talk about deadlock mechanisms, deadlock resolution, fair market value, all kind of concepts come master franchise. It's saying here are the rules of the game. This is the price at which you buy the product, this is how you do marketing, open source, all of that etc. Fairly cookie cutter. Although we still negotiate many of the terms. But yeah, long answer to your question, easier master franchise. But in the long term the joint venture. Because moment you say this is not just a franchisee partner, this is my. I have a joint venture so I have skin in the game. Then the partner involvement comes to a very different level. So we go through what we call the initial slog overs just for dating versus marriage. So I'm not going to sit here and preach the joys of marriage, but it's just the dating games a bit easier.

Yeah, it's interesting. Like the pros and cons shift from the short term nature versus the long term nature. So that's really interesting. It would be good to touch on maybe some of the other structures that you had in mind. I do want to get into the strategy, but it would be nice to sort of get a broader scope in terms of what are some of the other types of arrangements that you may structure.

So there's a gentleman called Neil Cole, younger brother of Mr. Kenneth Cole. Both the Cole brothers had their parents. The father ran a shoe business called candies. 20, 30 years ago, candies was a heavy hitting name. And as the story goes, the eldest son decided to branch out and start his own label or which became a powerful brand. Kenneth Cole, the younger son joined the father's business. And the father was having lots of challenges as always on leftover inventory and seasonal trends and so on so forth and working capital, all of that. Anecdotally, he was talking to the buyer at Kohl's one of the days and complaining about that. And that guy said, Mr. Kohl, why don't you shut all your business, give the brand Candies to us on a long term royalty kind of a model. Leave it to us. Believe me, you will make net more money just out of earning royalty from us and you can take all your life because you have nothing else to do except collect the royalty checks from us. And apparently this conversation happened or a drink or something in a bar. A few days later, Mr. Pozel called up the buyer from Kohl's and said, were you serious? And can we talk to him and say, yeah, I'm serious. So long story short, the concept called a dtr, a direct to retailer model was born. So the DTR concept is that you own the brand and you do some clever marketing around it, but you don't get into the operational aspect. So you are not doing sampling and designing and making the bulk merchandise. So they kept the candies, they did some clever marketing around candies, gave it to Kohl's, signed a 10 year DTR and then Coles started producing the product, started moving the price points, all of that, etc, etc and the clever man that Mr. Cole was, he saw coming to him. So typically the deal is structured where you pay a percentage of sales but subject to minimum guaranteed royalties so that your DTR partner does not squat on the brand. So he has to perform a minimum threshold. And he went to a bank and securitized Visa receivables. And Coles is a triple A predator. So he managed to get front end money on securitization and he used his money to say, hang on, now I can go out and buy more brands. So he went and bought from Sharper Images to Sara. Lee had also brands like Canon and Bedding brands. He bought Lee Cooper, he bought Umbro as a brand, Popeye. So he created a beautiful portfolio of 23 brands and he started a company called Iconics and he flew floated the company. So Iconics are public company. A few years ago, I think seven, eight years ago, Iconics had a run in with SEC on some accounting, the way they were accounting the deal structure. So there's some challenges there. So Coal had to step down. But anyway, that's a separate story. But Iconics invented the concept of a DTR model in fashion. Later on, of course, the guy who perfected that art to a different level is Mr. Jimmy Salter who runs ABG. So today from Barney's to Brooks Brothers, you name the brands. But okay, finally out of Chapter 11 or wherever the brand is in trouble, okay, ABG buys it out and typically takes out the intellectual property. So he started doing it with typically Elvis Presley, Marilyn Monroe, Mahmoud Ali, all of that. So ABG owns the IP of that, but they don't have a warehouse full of inventory or designers, all of that. So they'll go to operators, whether they are retailers or large scale operators, online operators, and does long term deals so when Iconic started, that whole model has got perfected in a much different way with abg. And now of course what's happening in the US in terms of the real estate, the brick and mortar real estate you have more often than not, let's say when Rook Brothers went into the chapter 11 process, the number one creditor were the landlords because they had long 15, 20 year contracts on the stores and hence they tied up with ABG. Rather than taking 10 cents to a dollar or something, they created a partnership with ABG and created a yet newer model. So it's a very sophisticated model between the plain manila license, master franchise and joint venture. Okay. That people like Iconics and now abg and there are a whole lot of companies like marquee brands. There are at least a dozen companies who are working in different facets of this model. We tied up with Iconics incidentally in India. So we have a joint venture with iconics where the 23 brand portfolio that they have, the India territory we bought 50% because we have 50 JV. So we paid half the value for that. And we are now we pioneered that model in India. So under our Iconic joint venture, we own brands for the India territory that again we do DTR or long term licensing, very often to my own competitors. So brands like Ed Hardy, again, Candies in India, Lee Cooper, Umbro Canon, they're all licensed on our royalty basis. So another interesting one.

Yeah, it's interesting because it seems like a type of licensing, but maybe you can elaborate a little bit about the difference between this and the original licensing model you first described.

So typically in a licensing model, so Disney is a master of the licensing, so they are the holy grail. They earn whatever 40, $50 billion of end revenues, but they only license out there. Typically in licensing, what you do is you slice and dice categories. Very fine and saying, okay, you have the license to tailor clothing, someone has license to denim, someone has license to backpack, someone will have license to shoes, etc. Etc. Typically these licenses tend to be with intermediate companies and for shorter periods, one year, three years. I've never seen good licensees beyond five years. What the DTR model does, what Iconics and ABG popularize are 10 year, 15 year and they are more holistic partnerships. So they tend to be. So Candies used to be with Kohl's. I think the 10 years run out. They have a brand called Starter. They bought Starter from Nike. So Starter was a brand owned by Nike. And as very often these large companies like listen story of list, they're born that it was one brand and they became very acquisitive in nature and then they started accumulating debt and then to unwind that debt they had to let go a lot of these brands which went into trouble. So they will acquire these good brands but which are in distress and then they go and give that entire brand portfolio to by and large one powerful retailer for a longer period of time. So it's a bit of a nuanced difference between what just let's say a Disney model is and what an ABG Stroke Iconics model is.

Yeah, very interesting. Are there other models that you do? Are you doing direct acquisitions?

Yeah. So of course it's not a model, but yeah, we acquired for instance we were the master franchise for the brand called Hamleys. It's a very iconic British toy retailer with more than 260 years heritage. So last 10 years we are running the Hamleys business in India as a master franchisee. And then when the opportunity arose to buy the parent brand, they changed a few ownerships, we made a bid and we acquired Hamley's in 2019. So we globally own Hamley's now across all categories which we have registered in more than 110 countries in fact. All going well. By quarter four this year, pre Christmas, we will launch families in US through a joint venture. Fingers crossed, of course, with all the uncertainty that's going on. And then we have been, we've also done brand acquisitions only for the India territory. So there's a Italian denim brand called Gas Jeans. They were in need of money so they said let's have a joint venture for India. We will fund the entire money required for building the business and we will give you 50% equity just by your bringing in the IP of DAAS jeans into the joint venture for the India tip. So that's another model. And the third variation of that model is there's a Indian designer, very well known India. Every gentleman will have something called a bandgala band gala. Other parts of the world it's a waiter suit. But in India it's very worn in ceremonial, you know, it's a, it's one with a standing collar. And the Raghavinder Rathod is ultimate bhandala suit, very expensive. It's priced at level as any other price. So we went and acquired a 40% stake in the Raghuindrajo business. So it's not an acquisition of sorts, it's a minority, but a significant minority. We get equal board seats, equal governance rights. But when The Rajwad, the man runs the business. He's both the creative and the business engine of the brand. And we give him a lot of support. So that's another variation of the model.

You have a lot of structures to slice and dice here. We covered everything from joint ventures, licensing, master franchise equity investments, direct acquisitions. Is there anything that we missed? No.

We are currently in the middle of a deal. All going well. We should do a deal closure another two weeks. We are in the last legs if that goes through. I'm currently on a confidentiality agreement. Can't talk more about it. But that would be yet another very unique structure. But ultimately our approach is that we are not a fund. So we don't have a time horizon of investment unlike most funds have. Okay, so this is our own money. We see ourselves as creating value in the fashion and lifestyle. What we call the discretionary spend in India. In fact, my next is also going to be on beauty. We are looking at the beauty stack in a big way and we don't have a preconceived notion as to how we'll create the value. We can get fairly creative about that. And we are not compulsive operator, sitting and playing a powerful board role and letting the partner run the business. We do that. Let's say with Burberry. Burberry in India, we have 4950 on Chevy. They have a Burberry appointed CEO who runs a business. But we play a very active board role. So there are multiple models or what we call multiple ways of skinning the cat. But the ultimate is if we see value getting created. And we are strategic investors because we understand the space very well. And other than money, which is always fungible, anyone else can bring in the same money. But the other things that we bring, the heft that we bring to the market, whether it's in terms of real estate, human capital is a talent. Our tech platforms, our data analytics sciences, all of that, those are in a sense the real icing on the cake. Which is why more often than not people will choose Reliance as compared to anyone else. Because they of course get money, but they get many other things.

How does the strategy itself shape the structure of these deals? How do you decide what structure to use on a particular brand?

So we put some guardrails. First and foremost is what is a partner, so to say looking. That's how we got so creative. Because we don't have a one size fits all model. In fact, one of the first things that I'm very mindful of because of who we are. We are a $200 billion market cap company. We don't want the Reliance arrogance or very often the name can be very overwhelming for many of these businesses. So we want to ensure that we underwhelm our partners and not overwhelm. As a corollary to that, we don't say, okay, this is how Reliance does business. This is, we'll take it on. Will understand. What's your interest horizon, both in terms of typically, if you're a partner, there are two interest horizons. One is, do you want to be in operation? Very often we call him Raghu as a friendly name. And Raghu said, look at these 10 years. I see fruitful creative life for me. Fantastic. We would support you on that. Do you see what are the operational parts of the business that you would rather not dirty your hands on? So the whole idea is we try and find out what, what are good meeting grounds. One clear thing is most any form of partnership starts coming to grief when there are conflicts of interest. So we put very strong guardrails on governance structure anywhere. For instance, if any of our partners want to use do business with one of the Reliance platforms online or offline, I'm on both sides. On one hand I'm a joint venture partner. On the other hand, I'm owner of, let's say, a retail chain. So at the board, I will always say my vote will be the way you vote because I can't be on the left side and the right side of the deal. That's a conflict of interest. And the reason we've not had a single partnership either unwind, dissolve, litigate or come to any form of grief is because we have put very strong guardrails on avoiding corporate services. So strong governance mechanisms, all of that. Our approach is not of a multinational. Very often Walmart, Coca Cola, a lot of these McDonald's, a lot of these large multinationals will say, we have an army of people who are in the Coca Cola are culturally immersed into that. We don't do that. So very often if a partner says that, look, we need a CEO for the business, we'll go and hire the best person in the market. Rather than saying, okay, we have a bunch of young people who could be potentially who have been working with alliance for the last 10, 20, 30 years, who could be an X CEO. So if you look back on partnerships under what are shape and form which come to grief. And very often grief happens when business is good, not when business is bad. When business is not so good, there's no food on the table. When there's a lot of food on the table, that's the time these issues come up. And we put, as I said, very strong guardrails in our contracts and our structures to ensure that there's no conflict of interest and there is a meeting of minds and that we are both pulling in the same direction with all these. Okay, we are, as I used the word earlier, we're quite agnostic to A versus B. So for instance, we say if there is a brand that we believe in, we will have the risk appetite and the investment appetite to back it up. So we are okay to do a master franchise business. Which means it's I get all the upsides, I get all the downsides, it's only my skin. And. But on the other hand, we will create enough room. So we also have a model where our license or franchise agreement provides for a partner to convert into a joint venture through windows to say at the end of five years, do you want a window? And say, hey, hang on now, India is becoming exciting for us and we want a seat on the table. And finally, it's your brand. Okay, so we'll create pre agreed fair market value, the FMB mechanisms because I build a brand up to a mezzanine level or I build a foundation, if you're coming in that level, how would we value the business? And then you come in at that point of time. Very often we even put down in a master franchise agreement fairly detailed deal structure of what a potential joint venture would be. In fact, in two cases, in anticipation, we have also housed the business in a separate way so that I don't have to carve out the business from my main parent company so that the partner can come in and simply say, that's the vehicle in which this business is run. This is how we determine the fair market value. I'll come in at the end of five years. I have a call option on buying 50% on equity on this and come along with it. So we have a fairly open mindset and that leads us to a lot of creativity because ultimately these are all means to a single end which is creating long term value in this market.

You've put an emphasis on the partner's perspective and you spend time understanding what their objectives and goals are. I've noticed that you've referenced that a few times.

We have a common phrase which says, you can't hurry love. So I'll give you an example. We have a joint venture, Muji, you might be familiar. It's a fabulous Japanese brand, very Close to my heart. It took six years. We quoted each other for six years. But when we finally got married, it was like a house on fire. You can't hurry up. I have a master franchise that steam added. American brand. One of the earliest ones I signed from the time I first met. Now there's a gentleman called Ed who's the CEO. That time Ed wasn't there. We were talking to the cfo. Then it was four weeks from the first time we said hello to inking a master franchise agreement. So sometimes it's four weeks and sometimes it's six years. Again, we say we'll be as fast or as slow as our partner in a sense wants to be.

I think that was a good contrast of American culture versus Japanese culture. You have a lot of big brands, Boss Armani. What's your strategy in winning brands to partner with you?

Good question. Internally, the jargon is we are hunters and farmers. So we have a separate team which is the farming team and then we have a hunting team. So how do we hunt? We are constantly tracking within fashion, lifestyle. Lifestyle is home improvement, jewelry. Now as I mentioned, beauty. We are in conversation with three beauty companies parallel at the moment. We are constantly following the customer's wallet in India. And we are big believers in research. Maybe my earlier years in advertising, wherever it came from. But we constantly do very high quality quantity and quality researches. And we're constantly tracking what names come up. And most of these researches happen through early adapters. So these are the guys. The early adapters are guys who are more cosmopolitan mindset. You know, Indians are big travelers all over the world. So as they travel all over the world, what are the brands that they are picking up and what are the names that keep on coming up. So that's one of the kind of ways in which we build our radar. In fact, immediately after this, literally back of this conversation, I'm having a conversation with a yoga brand out of us. Very, very interesting brand. I do think it could be the next Lululemon. I'm talking to the CEO now. That's a good example of a brand that hasn't come up in Inappa research. But the story is incredible. It's like a fund or a private equity or a venture fund spotting the next opportunity. So everyone talks about Lululemon and Lululemon is there an incredible story. What's the next Lululemon? Okay. And we are also sensing that whole active lifestyle is not a trend. It's a whole new direction in customers journey that is here to stay. So all the Wellness and mindfulness and active lifestyle, all of that etc. So that is leading us to say, so this particular brand that I'm talking to is more proactive and said let's scan the Horizon in the U.S. canada, U.S. is a markets where these trends emerge in a much bigger way and Europe falling. So Europe is much more tailored, clothing us a different kind of mindset. Europe is more luxury, is more democratic in that sense. And this yoga brand I'm very excited about started by two guys, it's $200 million currently. But we think it will really go places. It's a privately held company.

Yeah, I was just curious like when you sort of identified these brands, what's the next step? How do you engage with them and get a conversation going?

As I said, proactive, reactive. Very often ranks call on us because if you're looking at India sooner rather than later because you go to the malls and see who's running that brand, who's running that brand, and the number will come back to Reliance brand. So we get lots of proactive calls, but we also reactively reach out like this brand that I'm talking to after the initial hellos and very often we find that because of India as a market and because of who we are, even if we are quote unquote cold calling. Although we rarely cold call, I pick up the phone, speak to someone in Goldman Sachs or any of the big four or investment bankers or people like JLLC VRE who are big real estate companies, so easy to find an entre into saying hello. Very often the conversation will be at the highest levels and after exchanging hellos, we'll do a presentation, a pitch deck as we call it in terms of who we are, what are we doing, Give them from a 40,000ft to about 4,000ft view of our business. They will start sharing all of that and through these conversations because more often not it's about human chemistry. And as we start warming up to each other, generally the step is, I think this is interesting, why don't we sign NDAs and come up with what does a five year plan look like? This is even before we decided whether it's a joint venture or Master Franchise, etc. So that we get a bit of an alignment of vision. Because sometimes they're saying, okay, it's going to be a $20 million business in three years, maybe it's not worth our while. And some others get scared and say no, we want to keep our brand very small and close. Long story short, depending on the positioning we Come up with a detailed five year plan, give a template and we'll break it down into brick and mortar distribution, online distribution, customer each who is a customer segment. We are talking to all of them. Once we have an alignment on that, which is three, four, five conversations, we said this makes sense. You guys look very interesting. We find the same and that's when we start talking about structures and then either they have in house counsel. So we are pointing and we start discussing the package. As I said, different companies have different, so to say, internal hierarchies, processes, all of that. From our end, what we pride in is we are extremely flat, extremely nimble footed. Very often Our own chairman, Mr. Ambani reads about a partnership, very often the newspaper and say, oh, okay, we tied up with them and so on and so forth. Which is to show that we work with, we work literally like a startup mode. And a lot of our partners love that about us and say your reliance. And yet you are, you're like a startup in terms of your speed of reflects and all of that.

What are the common challenges when convincing these large brands to partner up with you?

Five years ago, India per se on the Indian market and saying the size and saying, yeah, we know they've heard all kinds of stories about the complex. Some of them are true, some of them are fictional in nature. Doesn't matter very often it's also expectation management because you all started 1.3 billion people. The reality is most of the brands we are talking to is the addressable audience. Even in the next five years is 100 billion. It's not 1.3. So that expectation management, it takes some time because they're all trying to assist it. In fact, one of them, I told one of my partners, I said, you are trying to, you're sitting in New York and trying to figure out how Texas market looks like. Okay, but you have to go down to Texas to how the Texas market looks like you haven't been to India. So very often we invite them to make a visit to India, spend some time so they get a sense because they. The challenge with India is a year and now is still underwhelming in terms of disproportionately small to the quantum of effort and energy you have to put in. But we believe that the potential, the famous inflection curve, it's a hockey stick curve or whatever, you know, inflection point, we believe could be pretty large. And that's why we are in this business humanized reliance. So expectation management is a challenge making them understand Indian complexities, etc. Etc. But there are easier parts also, because one of the most easy part is because they all have a reference of talking to China is a language. We talk English and we have Google and we have Uber and we don't have Baidu and we don't have strange things, if you know what I mean. So they don't have to learn Mandarin at a dinner table. They're not some weird conversation going on that they can't figure out. English in India, it's a common language, all of that. So I think language, which makes marketing easy, because when you open up a, let's say website or you're doing marketing communication, because for a lot of these brands, the big part of the secret sauce is very clever communication. Tory Burch, good example, launched two months ago, and if it were not for Covid, Tory would have been here. And in fact, a brother who runs international business. I said, you speak in Hindi. I said, if you speak in Hindi, I may understand a bit of it. I said, no one speaks in India. You know, you want to apply for a liquor permit, you want to apply for a driver's license, you want to apply for passports, all in English. So really, I said, yeah, that's the national language. Language makes it easy. Some of the cultural nuances make it easier. So there are some easy wins and there are some, in a sense, tough wins.

What do you think are the challenges of the international brains to enter the India market?

If you get the mindset, Generally we find that if there is at a senior level, if there's one champion, one believer in the Indian market, it becomes easy if there is at the highest end, if there isn't a believer, I'll give you example. I can talk about it now that eight or 10 years ago, we are on the verge of doing a joint venture with Gap in India. And that time gap was currently they have some challenges in the US but they were doing incredibly well. And then just at the cusp of when we are closing, about to close it, there was a bit of a currency crisis. So the Indian rupee dramatically got re rated. So we were at 45, 47 rupees to a dollar. I remember. And we quickly moved to the 57, 58, so there's a 20% appreciation. And immediately the first thing we heard is the CFO of Gap. Then they say, look, I always told you, I don't know why we are dirtying our hands in India. And look for what? I said, so the perception. So at that point we realized that the CFO was always a disbeliever in the India story as much as Mr. Steve Jobs to Samsung's benefits and advantage. So if you have a disbeliever, it will always be an uphill climb. But if you have a believer and there's no right or wrong, it's just, it's just a perspective. So if you believe in the potential of this market, then all the hurdles that come on your way, you'll take it in your stride, it will not be irritated. So generally that's one element we find after that it's relatively easy compared to most of them, compared to Japan earlier and later on China and both of those are large market but very difficult markets because of language and cultural nuances which are very different for the Western world.

The main thing is you need a champion to get a deal going at senior levels. What's your advice to brands looking to form partnerships with Indian companies?

Howsoever, sexy it looks, don't do it. You truly are looking. And it's the last of the big markets left in the world. Honestly, what's there after this? Africa maybe. It will take another 20 years for it to develop. China is already a very, very advanced market. So China should never be compared with India. But that's the other mistake a lot of people used to make. My common answer was why are you talking about China? Do I talk about Mexico when I talk about us? You guys have a common border, we have a common border. Mexico and us are different markets. And that drove home the point to say don't compare it with China because China is very different. It's a very advanced and super sexy market. And I always say India will not be the next China, India will be the next India. So India will have its own evolution curve because economically, socially, politically we are very different than how China is. Given that the fact that this is the last of the big markets, a second entry is super expensive. You need to get it right the first time around. And for that, don't go alone. Pick up a partner who has vision, alignment with you, has heft. In this market, you really need patience, which means you need deep pockets, not just investment appetite. A lot of people have investment appetite, but they don't have a risk appetite. And the two are very different because investment appetite without patient is not risk appetite. Okay. And markets can test your patient. Let's look at Covid who forecasted this and has tested many people's patients in different parts of. So choose your model of partnership. Ensure there are no conflicts of interest, as always. But It's a market that very often people get carried away. Currently in the toy business, I'm on a conversation with a player who has been in India for the last 20 years and going nowhere. And I am suggesting to them that they come into a joint venture with us. And they kept on saying, but why would we give this business to you? I said, what do you have? Would you be 100% owner of something very small or you'd rather be 50% owner of something that could be sizable? Because don't get carried away by percentage. You don't take home a percentage. There's an absolute value. So if you are a 50% owner of something that could be very substantial, it's far better than having this. Because a lot of people have this control obsession. Even as Reliance, I'll give an example, we have 49% partnerships, 40% partnerships, no problem. Okay. We don't have control obsession. We'll have governance obsession, which is very different than control obsession. That's what I tell. But one way or the other, it's a very difficult market. As much as like I am looking when I'm launching Hamleys in US I don't want to give that market to a franchise. We operate in 20 countries. Otherwise in Japan, Middle east, we have franchises and we have lots of franchise interest. But US is a very large, especially after the what's happened with Toys R Us. It's a very large potential, four, five billion dollars. But I would not even think with all the Reliance arrogance of going in that market alone. It's a very complex market. In fact, in US you're doing business in 50 countries and not one country. State by state laws, deferred sales tax, all of that. So I'll pick up a joint venture part for the same reasons that I would recommend the same for people to do that in India and Front End. You might have to go through what I call these log overs of going through lots of these contracts needs. But when the dust is settled and if you have a well thought through contract, you're then set on the Runway to take this.

So really spend the time, understand the market and make sure you choose the right partner.

Don't do it at all.

As CEO, are you hands on all these partnership deals? Like what exactly is your role?

As I said, on the farming side of the business, I have nearly 11, 11 business side, fairly autonomous PNL responsibilities. And we have really institutionalized. We have about 900 people in a corporate office and we run all our stores. He'd love our stores. We run about 700 stores just in the international partnership. Overall we run 12,000 stores in the country across all those mats. We don't have a concept called franchise store. We are or a sub franchise store. So we run all our stores ourselves. The front end staff that you go to a Steve island store or Tripoli store, or a Coach or a Tollywood store, or all employees of Reliance or the joint venture as the case may be. All of them are headed typically by what we call a business head who is a CEO. As a piano responsibility very often presents to the board. The business side is the joint approval more often than not. But what they love about the fact is that I'm always there as not just face of Reliance, but as Reliance as a quasi owner and always on WhatsApp. We are virtually on 24 hour calls. The newer partnerships take time like the first two years. Steve Mandel, good example, he signed a partnership in 2010. So it's been more than a decade of a lovely partnership. And I used to come for the buys. I used to all of that little by little as the next round of leadership grew and this build comfort level. So Ed and I will still talk once in a while, but we have a stable team on the hunting side of the business. We have a small team. We have got two very clever analysts and two senior people. So very often on hunting. I'm frontending the conversations as I mentioned after this I'm having hopefully an interesting conversation. Yeah, that's about.

Yeah, it's really interesting. You essentially run it like any other corporation with overhead of operations and those components that you need and also the entities of the joint ventures within that. And then you have the team to manage, to continue to growth.

To interrupt you, Xenia and Canali as an example, two very strong tailored clothing, Italian brands. They are like PNG and Unilever. They are like that. We are the only partner in the world that they have a joint venture with the same company, Senia and Canali and also Georgia and also Hugo Boss. And it's basically Saying now the two joint ventures have two separate CEOs, separate teams, separate governance, data protection in terms of customer data, all of that, but all feeding off a common tech platform, you know, common so to say real estate, muscle in the market, all of that, etc. So since you mentioned very professional team, etc, all of these kind of levers are in place.

One other topic I wanted to pick up that I think a lot of other people would generally be interested in is the culture of Reliance. Even when you hear of India. And you think of corporations, it's one of the top brands that you think of. And I think people are in awe in terms of the success the organization's had. I'm curious to hear, and I think you alluded to a little bit of this earlier, but how are you able to make so much success with these different verticals? And I'm curious in the culture of the organization you run with the broader organization, is there a sort of blind man? Love to hear more about that.

Yeah, it's a very interesting question. So you know, Reliance has been a public company for more than four decades. By Indian standards, it's one of the youngest companies as compared to let's say the Tata group which is more than 150 years. Both are around 200 billion market cap groups. As individual companies, Reliance is ahead. The first 30 years we were only in B2B business, which is we are an energy company, hydrocarbons business, petrochemicals, refining, oil and gas, all of that. And that still throws up a lot of cash in our business. The cultural mindset, the people skills on those businesses are very different. So if you were to walk into one of our hydrocarbons business, the culture would be very different, very asset focused, all of that. 2006, Reliance started a retail business. In fact, adding to a whole lot of other introduction you give. We are the fastest company in the world to go from zero to $10 billion less than nine years. We are currently at $22 billion retail business, but retail, we grow from zero. We did not grow through acquisitions. We were greenfield. So the skill sets that came into retail were very different skill sets. And then in 2016, which is just five years ago, we launched Jio, which is our digital business, which is a business in which both Facebook and Google invested. Last year, only company in the world again that both Facebook and Google have invested as a common. We have a big fundraise and both are JIO and retail businesses. Suddenly the age became like in the company I run, I have about just slightly under 5,000 employees. My average age is about 27.2 years. If I go to the hydrocarbons business, I suspect it'll be 40 years something, etc. In the Jio business it will be maybe late 20s, early 30s, etc. It's amazing how Mr. Ambani, our chairman, has transformed in less than 10 years from a very B2B energy company, which is what Reliance was known for, into a digital and retail powerhouse. And until 2005, this group did not have a single joint Venture Today we have more than 250 joint ventures. So also attitude towards. Because in the past the father was the founder chairman, the belief was that we'll buy technologies, we will never share equity. So we are a public company of course. But the belief in value creation was very different. And from 2005, 6 when we started building the consumer facing system. So Mukesh Ambani, our chairman Mukesh Bhai started believing that this wave of value creation where we move from 50 billion to 200 billion market cap, we will have to not only partner to even get the kind of talent that we bring. So even other businesses that we acquire. For instance, we acquired a business called Sawan is a, you might have heard of it, it's a music platform of old Hindi music. Music. And that's a big part of this thing. The entire team, when we acquired the business is a bunch of us born to Indian parents, a bit like yourself, young people who set up that plan, all based in two years after acquisition, they're still based in now and that's where the company is run all the way on. So very often we have done acquisitions because we get great talent up. So the focus on creating startup cultures, you know, younger people, even something which is very, may sound very simple but was a big step forward. So Reliance is a very large campus on the outskirts of Mumbai city where we have more than 30,000 people working there. Philosophically, the group, the family, the promoter is very strongly rooted in vegetarians. So in the entire Reliance, multiple offices and campuses, we could never have meat or fish or seafood served until few years ago when we started our digital business, we had a few thousand expatriates, Koreans and all kinds of people working. And now there are cafeterias that serve non vegetarian food. You have a lot of Jewish people, which I know in the fashion industry and New York, they come all the way from New York to India. Okay. They carry their own food because they believe okay. In their religious beliefs and all of that etc, so I'm just giving a parallel. So long story short, I'm amazed. Sometimes I treat myself a bit of an outsider on the inside watching this as close quarters because by lunch standards I'm still 14 years old here. There are people who have been here for 25, 30, 35 years. But I've seen how it's morphed and changed and constantly deep events. So you use the word agile. It's a very agile culture because in five years you've moved from something else to a very different platform. I think five years later it will be a very, very different place.

Do you think that also holds your leaders accountable for their goals?

I've never seen the level of empowerment. Okay. And as I said to say that I could sign a joint venture and where our chairman would read about it in the papers or on online media, just about the same time you may read about it, that speaks of the levels of empowerment because it's not always the money for any successful group or a company, let's say whether it's a Google or Apple or Reliance, the currency is a brand name. It's not about whether you invested a million dollars. You invested $100 million in that partnership, you invested that Lance. And to see that investment in the land's name is, you know, that degree of empowerment going down. That empowerment creates huge accounting. I am constantly very mindful of the accountability or the trusteeship that I hold by virtue of the empowerment. If there were a committee about me which had lots of checks and balances and I had to present to this committee and all the time we have a board, of course and we have some great people on the board. We have board governance processes because businesses like retail, like digital, they are very hands on businesses. You need to get a pulse of the mark. So the yoga brand that I'm going to talk to, if that goes to maybe it's a few million dollars of investment and it is my gut which will say that this will succeed. It's not always right. But I've had a very good strike that can't a board or a committee, it would be difficult for them. That brings in the accountability both in spirit and of course in actual terms.

Also empowered leaders drive success or reliance. Well put, Darshan. What's the craziest thing you've seen in M and A?

I've had a deal that I worked on for a long period of time. Both sides spent a few million bucks on some expensive loans, lawyers and investment bankers. And I went to sign the deal some part of China to be told an hour before by an owner who was on some bullet train or God knows on some train somewhere to say my young daughter who studies in the US called me and said, papa, I want to do this myself. I have to run three changes. Oh, it was a big deal.

Okay, the 12th hour.

Some of the craziest things I've seen in China. So yeah, there's never a dull moment in this business. You know this better than.

Yeah, nothing's predictable.

And incidentally, I was, I was told this through an interpreter and I'm saying, am I hearing this right? Is there a lot of background noise? Are you saying no? What? Our chairman is saying that his young daughter said, papa, don't sell it. I want to run it. So I said, okay, what can I say at the last minute, an hour.

Before wow, that's incredible.

I always tell people money in the bank is equally important. I still have money in the bank because no deal comes for free.

Yeah, that's always good. Trisha, thank you so much for your time today. I enjoyed this conversation and learned a lot about partnerships.

Thank you so much. Thank you for having this chat with me and all the best.

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