Endorsement deals get restructured based on equity

Last year Amitabh Bachchan got richer by ₹3.77 crore after investing ₹6.27 lakh and picking up a 0.1 per cent stake in Just Dial.

He also happens to be the brand ambassador for the local search engine and is holding on to his stake. And Bachchan is not the only one getting returns through his endorsement-cum-equity deal.

In 2012, Salman Khan invested in a minority stake in travel portal Yatra.com. Other Bollywood actors such as Hritik Roshan are also planning similar investment moves.

Small start-up companies in the digital and technology categories are the ones who are keen on forging such equity-based endorsement deals.

“Equity-based private deals happen for digital and technology based companies which probably cannot afford high profile celebrities. In such companies the share price is expected to grow faster after an IPO unlike the established companies where the valuations may not be that high and is unlikely to prove an attractive investment for the celebrity,’’ said Manish Porwal, Managing Director, Alchemist, a marketing & talent solutions company which has done celebrity based endorsement deals for L’Oreal, SC Johnson and Cavinkare.

That explains why a celebrity like Amitabh Bachchan prefers picking up a stake in a technology led search engine such as Just Dial instead of investing in companies and brands such as Cadbury or Pepsi, which he has been endorsing.

UAE-based travel portal Musafir.com also had Sachin Tendulkar picking up a minority stake when it decided to launch operations in India late last year.

With both online and offline models, travel company Musafir, like Yatra, hopes to gain quick visibility with the help of celebrities who might be treating such deals as part of a “hedging’ strategy”.

“Celebrities also tend to pick up stakes to hedge their risks when their career is getting over or have passed their prime as it gives them secured returns,’’ adds Porwal.

But more than cricketers, it is Bollywood stars who are keen on restructuring their endorsement deals based on equity than plain revenue share models.

“Today there are not too many sport stars in the equity space. We are negotiating on behalf of film stars, where some would be looking at a buy back option of their shares with such deals. When there is transfer of shares involved we have to inform the Corporate Affairs Ministry and usually a special purpose vehicle (SPV) is floated or even the holding company may have a celebrity pick up stake in it,’’ says Afsar Zaidi, Founder & Managing Director, Exceed, an entertainment marketing company.

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