 to move on to a very interesting segment. A panel discussion on whether the stock market reward brands would sacrifice brand building for short profits, we have with us Mr. V. Kabrajan, Banerjee Director, Nostal Limited, Mr. Arnaud, Banerjee CEO of the CF Limited, and Ms. Anne Enger, Mahalakshmi, Senior Consulting Director of Money Control. And also the moderator for the session is going to be Mr. Vikram Vasapooja, V. Kamla, Group CEO, Madison Media and OOH. So with this, I'd like to request our panelists along with our moderator kindly join us. OBS, I can see that there are lots of people, please just stay tuned. I need my request to you all to please also hashtag E-M-E-R 2022. We just request our speakers to just sit down for the moment while the stage is getting ready for the panel. Thank you all for joining us. So ladies and gentlemen, this is going to be an exciting panel discussion we have with us, Mr. V. Kabrajan, we've got Arnaud Banerjee, N. Mahalakshmi, and the moderator of the session is going to be Mr. Vikram Vasapooja, who will be joining us. So as I can see the stage now being ready and the device being put on the podium, we just request with your warmest and kindest of applause, ladies and gentlemen, requesting our panelists to kindly please join us. V. Kabrajan, we've got Arnaud Banerjee, we've got N. Mahalakshmi, and the moderator of the session is Mr. Vikram Vasapooja. Over to you to take the floor. Thank you so much. I'm ready. I think I'll just say a warm-up now. Very, very warm-up and privilege to be to operating this very important panel. We have Arnaud, who is here, Kya, who is Yusuf, and Mahalakshmi, who is Mahalakshmi. We have a pretty interesting problem on our hands today. You can read behind me. The motion is very as strong as you want, a piece that satisfies brand-reeling economy profits. Who better to deliberate on this than a person who studies the markets every day and, of course, two CEOs have to battle a big battle with results and their businesses. I'm hoping to gain some insights about how, what are the compulsions and what are the kind of ways in which we can actually overcome stock market pressures and actually have marketing work without constraints. So I'm going to die right here. I'm hoping to both get a nice and tight panel so I'm hoping to cover this panel three more times. So I'm going to start by trying to establish a link between markets and what results. So yeah, let's start with you. Markets really await the what results of companies. Are there any elevations within company management on how markets are likely to react to the what results? Good afternoon. Thank you. Congratulations to my simple, eight-another impressive report. So it's a privilege to be part of this run. I've been in this game for many, many years. I'm just saying this, you know, each and our others, in fact, I'm going to say this tomorrow morning I have an each and every one of you I said. I don't think we should be or we are looking at the stock market price in determining the, in different in the stock market price, what will be the outcome in thinking about the bottlenecks and so forth. It's the outcome of what you deliver in water. So you have very little control over how the stock market will behave. So therefore what I would be or what the CEO should be interested in that it is the shareholder value creation we are supposed to do. And for that the results are very important. So shareholder value creation in short term will be different and long term should be different and the stock market is in a different one altogether. But my belief is that in the long run as long as you create the value you will get the right valuation. So there is no point in trying to do things day to day keeping in mind the stock market. If I may, can you a little bit on that are you saying what the results are whatever you have to report you really aren't worried too much about what the stock market is going to think? Not at all. And I also believe that nobody should be worried about that as well because what is the role the role is for the board for the top management is to deliver business in line with the strategy. And the stock market is behaving based on your potential to deliver or what you actually care about. So in that context it is important that you deliver good business and in that process I am saying don't worry about the stock market price of today or no, no, no. Stock market will react. But if you consistently deliver business you will get the valuation you want and most importantly forget the stock market because you know you are going to stop market as an umpire of this. Because even himself in the quarterly business he was open performance incentive of the variable thing can be impacted. We are not a country with so much of e-sauce in the float or we are our content systems not majority of the companies are not leading to stock market price in the US we will find the stock market valuation and the development market. Therefore your goal is to deliver business as expected of you. Do not worry about the stock market price at all. Then that sounds comforting we will come back to that. Another few joint SEAC in 2005 before it went public. Are the P&N pressures any different once you used to come here? No SEAC was coming here. It was then that was a big one that was a big one. No it was coming here. With what we just said I would like to add something to that it is all about a consistent story to all stakeholders including the stock market investors including your business partners and the employees within. So you cannot just swing in and swing out of a strategy in a quarter to quarter basis and as long as the story is positive and consistent I think all the stakeholders have matured enough to understand where you are going and what you are going to do. So the results are a little up and down because of factors which are short term your inputs and outputs will be a little up and down. As long as your story is positive and you have clear a view of that and you share it because of the stakeholders I think that's the way to go and the story is more important than the results. Malakshmi you have actually you bring the reality check into this entire thing. As agencies we sometimes feel that clients certainly with the acts done on budgets in the quarter even though the property is there seems to be that the property protection seems to be a concern. How do you think markets behave? Are you voting? Revenue, profit, insistency, sharp claims, what is your take? Would you agree with these tenants speakers? No. So I knew on this that I don't want to sit in that judgment about how this works really saying as to us what these gentlemen are saying. That is why I brought the numbers. There are very quick maps to see what is the act to say as ratio for the last 15 years and how do they correlate with stock market returns on a quarterly basis including some amount of lead. Because the results come in like 15 days a day and so on and as it turns out there is absolutely zero correlation between ad spend and stock market returns and some of the start numbers. You know, Imani the year where this increased the most which is 19% of sales was 2018 and that is the year where the stock market return was called 3.1.1.2.4%. I had numbers for Godrich consumer HUL, ITC and all of this and ITC is absolutely classic because they had a steady ratio for the last 20 years for the first 5-7 years it was 3% next 5-7 years it was 2% and I think you have been more erratic than your lead performance over the past few years. So there is when you articulate this discussion saying that sacrificing quarterly profits stock markets do not work and you know and sacrifice building brands and prioritize that over quarterly profits it pre-supposes that there is a positive correlation between them and that's not true at all at least that's not what the worst of the top 5-6 consumer company tells. This is brilliant. We are less than 10 minutes into the final discussion and all three of our annual panelists have absolutely dismissed the notion that we are going to bash on regardless. So again I am going to come to you Tia Is it a myth that we find that if you have an annual plan and an annual budget there are quarter by quarter it's almost like in a September-September you see budgets all with ease likewise in December, likewise in a month especially in a month then why is that is that an observation of quarter to quarter behavior so is that happening because the company management is going to go with the stock market? Yeah, that's why I firmly believe you should not be judging the stock market because they are not into this at all they, as she pointed out stock market behavior is irrespective of what you are saying I will tell you you are dead now what is the top management of this Evo's decision if at all he is going to be controlling certain expenses now whether he will be doing it in order to produce a result the answer is yes he can do it is being done I will plan about it he can be doing it now, but then you can do it only for a very short period of time let us say for example that there is a pandemic and there is chaos there is a huge uncertainty at that point of time you want to control the expenses you will go ahead and do but in the history of the company in the long term he cannot be using a certain that every quarter he is going to be doing it if he is doing so or if he is thinking and budgeting something and he is mirroring this his business is anyway going to suffer so the fundamental truth is what the Evo's goal is not to spend advertising expenses the Evo's goal is to deliver the results as per the science now we will also talk about it that Evo is so at all in this he can do anything so there is a government structure so therefore I keep in south market out of it they don't interfere in your what you spent, what you didn't spend there is a board which is following the strategy and the strategy goals and the vision for the company so it may have a market share or a revenue growth share now in that strategy you will know what should be the mix and where you will invest in terms of capital in terms of revenue expenditure in terms of investment because we are in the advertising today and if they are going to be looking at human resources what you are going to invest in so broadly the board has looked into it has approved the decision right on approving the strategies with the board definitely now I also believe the board's decision is not what is the advertising they are approving the advertising they are approving your law and strategy and the direction that you are taking and the resources that you are going to allocate the very first thing we have to ask is whether the board composition has the competent people to be advising and because they are not independent in the executive day to day role at all so that is also defined it is a mature thing supposed to be disclosing what is your board composition that are competencies that are in the board of law the next part of it is connected with the executive he can in the part do as I mentioned you are in extreme circumstances if he is going to be deviating that the board has definitely a sale you produce profit by cutting down certain expenses now inclusive we follow that even for a very little bit of general manager says the profit additional that is shown by cutting down an investment that is required will not be accounted as a profit at all we have established this practice vice president of particular division which is meant to target by cutting down an advertising expenses that is removed so he cannot be saying I produce this profit other than that as an informed decision board was told that we have cut down this they are saying for a capital expenditure I can where we are discussing advertising a capital expenditure a company can go in a different let us say a digital or anything so therefore there are checks and balances my view is that whether they are doing they may be doing for one quarter or two quarters if he is consistently going to do it if he is going to pay a price the business will suffer board has every right to question and now when next year he comes back for the budget he has to explain he has not spent the money he budgeted something and how he can be asking for otherwise right till the board is so very blind let me just move on now for this one Tiaw can tell you he said business basically said that it's a strategy no law business plan and that's what we are working through but then why do we get the feeling that the one cost which is probably the easiest to cut is marketing because that is a you can't cut raw material costs immediately at least in one's experience one has been in organizations just listed once where it has been used as a tool to show off profits if you actually do profit protection where budget cuts now if the A do you believe is hypothetical this pretty office tool is to me than it does in which case the question then becomes why is it that brand building which requires more investments longer investments and typically the value of brand building manifests itself in a good way of the value sheet as against spends which actually end up in the P and L I get the sense that the P and L is being given the focus of the long-term value sheet good way am I assertion correct or not I think it's not a zero one kind of situation if anyone states that advertising project is that untouched because of profit pressures that is untouched but will it go to 50% cut 100% cut that's also a good way so you have to navigate the whole thing by looking at the realities what are important but the fact is that it's not a discussion aspect it is a strategy experiment so if there are people who make it 0, 4, 2, 3 quarters there is half of them the rightness of the brand will go down the the action orientation towards the brand will go down and market share will go down so there is a consequence of long-term erosion of market share so yes some amount of up and down does happen and I think there is nothing wrong with that it should happen and if you do it short-term let's say if you cut it by 20-30% no power in damage happens yes, awareness will go up a little bit but the brand has a balance so if you can blind through the waters like that nicely then it is perfectly okay and there is nothing wrong and it happens so as long as you are coaching with the long-term story of how much time will you take let's say there is an existing brand which is totally caching to the operation and you also have new businesses and new brands coming up so they will not give you cash they will you can call it lost and funding or you can call it respectfully so there has to be a story behind that and you may have an appetite of funding for 2 years or 20 years as long as I have that appetite transparently share with all stakeholders and everybody understands what I am doing and in a quarter to quarter scenario yes it can go down by 20% it can go up by 30% absolutely fine so there needs to be a consistent story which the market buys into we also see that when the likes of Naikas and Zomatos without any profit lists there will be a reasonable reception there is a little probability but they did get a good reception but when it comes to legacy companies every quarter when you guys report the only thing in the headlines there is a net up so much and sales up so much I don't see a single thing about a story which says so many more people that's all if story is everything that's not what you guys do in your headlines what's your story? you are absolutely right although if I were to say seriously this is hard markets from a stock market perspective it is absolutely true that in the near term are you in the medium term markets buy into narratives and stories and only over a period of time are you tested so I don't think I will dismiss the market reception like any of the other companies because we have to understand the context of what is driving this whole thing about if you go back to the day depression period at that time markets were looking at cash as a proxy for companies value and they would value a company based on cash because lots of companies didn't have business but they had huge amount of cash in their books so the metric that was used was earnings to cash net assets and so on and then there was a period in the US when the money started picking up the highways came up and brands started getting built up and people started they said that people place their faith in companies that can create large brands which become cash machines and therefore we are willing to value the company not for its assets but based on the earnings that they were doing now we have come to a situation where in this digital space it's turning out to be a better kind of market where you get to dominate a certain space and the profit pool in that space so the competition intensity and businesses is changing and digital companies and you know and these companies are probably going to be monopolies or duopolies and that means that you are going to be able to dominate a huge profit pool and that is what the markets are right now in this company of course there is a lot of it so it is because of you know the liquidity and I work there but you don't need to get there so in the traditional companies I think one of the things that also power these companies is they are able to raise a lot of cash and there is a bit of greater pool theory that clears out there that you know that somebody is going to come and buy out and therefore the trading can go on in larger companies largely their ability to to revise it that today isn't it clear to Rajiv Bajaj that he is going to be a victim why is it that they are not putting in money out there I think the important thing to understand whether it is Nica or Oula or any other company the brand the way the markets look at it brand is supposed to deliver for the company and it is value only for the economic value or economic returns that can generate and as long as the market is able to see the brand creation in society will yield returns in a respectable period of time these days it will yield me to about 30 years also the market will receive them well so there is a narrative because you are saying for example Uber is the classic case Uber has openly said that they don't see the company making profits, why is it value today at 70 billion dollars because they have convinced the world that they are going to be either the number one or number two player in your right heading services across the world and if I remember correctly when they came out with an IPO the initial price was one tenth of what it was finally made that because I mean why they were still a private company because they said that the addressable market was no longer just US they hoped to assess the entire world but they haven't changed the calculation and the investors bought into that so today even in Nica's case if Nica's value very good if it were still only in the marketing space and we are buying into that they are able to attract a lot more value because they have been able to demonstrate they will be able to replicate that success even in the fashion space which is much bigger so there is a lot of storytelling and narrative in it at the same time these things will have to come true and they have to that's a fascinating thread that we picked up and they are welcome to that because what I really thought about this is there are CEOs and there are CEOs there seem to be some CEOs and I professed to be one of them whose condition to be thinking that I had to deliver top line and what to like and there are others like Uber and Elon Musk who will not even talk about any of this they will just talk about changing the entire of the way word should be looked at what is your because if the stock market is what they are doing this and it's really a company management that is doing it it's really coming down to the how CEOs assume what their measure of success is what's your perspective ironically you are able to have to cut the cost advertising is very easy to do the employing production the process and connected with capital expenditure it is not and in one minute half a day things can be done to cut the advertising that is why I don't think now having dealt with quantity of sales for 15 years I think is the the first problem is with the companies you are writing the quarterly research press report in the typical way talking about the numbers and you can write about other intangibles you have done and the press doesn't take no decision that's a book now in a final interview in a television channel these that are talked about and you will not be you will not be having an opportunity to talk about things as with advertising next one is there are CEOs who will be able to talk about the brand but if you take a totally different the number of CEOs who will come forward to talk about the brand branding expenses will be very limited now I am not worried so much about the press they are important the interesting community is the analyst fund managers who have spent time with you to understand your long term strategy about the new product category how you are going to be positioning yourself and therefore if you are going to be spending in advertising whether it has a correlation with your market share goals and initially you will spend more this long term story you have an opportunity to tell that quite a few companies you leave the job be a CEO and then CEO is talking he will not be coming out I have seen this that you can pick up today 50 analyst support I will share it with you then it is being talked about about the brand building or the advertising expenses it is not as they talk about the margin talk about the raw material prices talk about the capacity edition you are getting it to merger acquisition it is not talking about advertising they are not paying to the people who are dealing with them or the analysts who are discussing with you they are also not attaching the value that is the issue at the end of the day if I have to succeed I need revenue growth that will come from the market share or I need new candidates now for that I need to invest in brand building I am not saying advertising number of other things that are supposed to be done and they are supposed to be investing I am of the view the stock market will recognize that not only in the new in the conventional businesses the stock market will grant you that that you are supposed to be investing I do not pay but we are not doing a proper communication out there we are believing it is only bottom line that is important but I think you guys should share the data because you are one quarter or two quarters now they are not bringing down the line so in fact today's newspaper itself had this very interesting headline that the choice has been given to the company whether they need to separate the chairman and the managing director it is not going to be sort of pushed down on any one company do you think this is opening up an opportunity for companies to bring out two narratives the chairman will actually manage the stakeholders with stories maybe it can be just a top line bottom line kind of story what do you think the CEOs what do you think the CEOs need to be brought in there narrated from maybe a very brilliant audience I think the role of the chairman and the board is quite different from the operating team and the CEO and I have not seen the chairman coming into this kind of role of the big stakeholder especially in the US it is the CEO's role it depends on the orientation of the CEO in particular I partially agree with that but I have seen the CEOs completely different picture which is more holistically or more skewed towards the building even I need focus in some cases so it depends on the company that he represents it depends on the values or the vision that he represents and brings to the table and the journey that he is going to take in the next 5-10 years including the next 2-3 quarters so yes there are people who cover a wide amount of things including brand expense expense is just an input to it so I don't see really the board of the chairman it is the executive that will keep doing it and it has to do the job well if the executive team thinks that brand is important for his business and brand loyalty is important for market shares he will bring that to play in the story that he shares okay great I think I have time for just one more round look I think if I just summarize where we are the value is special right now it almost seems that the stock market is completely irrelevant to the functioning of the company that is what the management is all responsible for so if we are talking about markets going up and down we shouldn't find a state court in a chair market that is entirely the doings of the company however over time there has to be obviously the performance of the company is sort of is still appealing and they are communicating because stock market is not irrelevant that is not discussed that was a huge stretch I think stock market is very relevant because it is a reflection of how the market is looking forward of the company and if we are getting a value same as industry it is an input to us it is a re-rated it is an input to us so there is huge value from the stock market and there is so much scrutiny in the public space and there are certain sometimes blind spots also do come up from blind spots especially there is something that we need to focus on going forward so it is part of the ecosystem it is like any of the stakeholders are revalidant what is your take at this point in time on the world do you think are they able to see the results and actually see the strength of the company I think I would like to share the miracle ourselves if we share what we want to share and what we believe in which is going to produce the next quarter or quarter after quarter investors are definitely listening they listen and they appreciate that and then of course the performance has to live up to that expectation and do you think institutional investors lead the thinking that there is a retail investors or retail investors are blind and go into the wrong but it is moving towards largely institutional investors and the retail investors is not going to create that valuation it is in certain cases it is institutional investors who are and they have insight into what you are doing and you have got they can see through you at this exhibition in order to do this if you explain this is what you are doing for this purpose they will be able to give you the time and be patient by only coming you ask the question whether they are actually enough kind of they are I complain about investment it is a huge turnaround every quarter you need to suffer once in six months he will be in this one and that one that is the frustrating otherwise actually in the last six months we have seen a few of these new wage companies without a profit to talk about if they are taking into the market with actually success now they were investors they were private entity investors who funded these companies and they were encouraging them to do marketing work now that it is listed do you expect them to change their narrative no that is again true because as a private company there is a lot of room and as we all know in the past few years all of this has practically investments and such a space has really exploded because of easy money and so then obviously when you go into the market so you become log more unseparable than the countable of each shareholder the expectations are definitely very different and how much again it comes back to the same thing how do you build your narrative how do you keep narrative and you can always steer to a direction and say we are doing this because we are building this business here or we are building a brand here look at Amazon Amazon did not do net profits for a long long time but they were able to convince the market they were investing for the future and they have to they have to dominate this case if you heard and understand the report e-commerce is about 4,000 crores and Amazon is a big big channel that is they have actually monetize and advertise they have to 4 decades of working in bold economy companies if they can get a job in a company where you need more loss and more learning of money last word what do you think what is the kind of accountability you think that a CEO should sort of project to the market what makes you narrative the box talks about the CEO statement so he has to he is accountable for the entire performance and if there is expectation built up which is reflected in the share price today he has to live up to that expectation yeah I have always believed in long-term valuation it is not the part of the business not even when I decide on the term the foundation that is laid should be a value to the company and all this brand is very important I am sorry the brand is talking about and you will find it in my business the valuation of the company dying alone and we will talk about it and you will find it so because we are talking in the context of stock market has a brilliant code which says that markets are made like investors the voting machine and the short-term and the main machine of the long-term so in the short-term they just say who vote for the most popular and in the long-term you are obviously able to value for the most weighty companies if you look at Mahalashmi's this great picture in the workshop Warren Buffet is this great employee that is probably what he just told us thank you a big applause for this wonderful panel and for your request I hope to join the MD the production media will try to join us on stage and give a momentum to all our panelists ladies and gentlemen a huge round of applause once again and thank you so much for joining us each we are requesting to give a momentum I hope that by partners young to all our panelists and I am more greater ladies and gentlemen