Licensing: The Story Behind 'Being Human' and Its Impact on Mandhana Retail Ventures
My friend recently bought a "Being Human" branded T-Shirt, feeling proud that the entire amount he paid would be used for charity. However, there's more to the story.
The "Being Human" brand is owned by The Salman Khan Foundation (‘the Foundation’). The Foundation had a licensing agreement with The Mandhana Retail Ventures Limited (‘the Company’) until March 31, 2020, making the Company its global license partner. We have data from FY 2016-17 to FY 2019-20, during which the Foundation licensed its "Being Human" trademark to the Company. Before diving into what this data reveals, let's first understand the relationship between the Company and the Foundation.
A portion of the revenue from apparel sales is paid to the Foundation as a license fee. On average, this fee ranged from 3% to 6% of the revenue. For instance, if the Company sells a T-shirt for Rs.100, approximately Rs.5 (or 5%) is paid to the Foundation as a license fee. This means the Foundation only receives Rs.5 out of the Rs.100 spent on a T-shirt. My friend was disappointed when he realized that the entire Rs.100 wouldn't go to the Foundation.
Are we being misled by this structure? The answer is "No."
Why not?
Let’s break down what's involved in making that T-shirt sale. The Company incurs various expenses such as manufacturing costs, employee salaries, advertising, sales promotion, electricity, freight, transportation, rent, and more. If the Foundation managed these tasks directly, the entire Rs.100 would indeed go to the Foundation. However, after deducting these expenses, only the remaining profit would be left. Since the Foundation has licensed the "Being Human" trademark to the Company, allowing it to handle the design, production, and sale, the Foundation only claims a license fee. Interestingly, the Foundation has opted for a variable fee based on a percentage of sales rather than a fixed fee.
Who is responsible for the sale of the apparel?
Both the Foundation and the Company play a role. If sales are low, the Foundation receives less in license fees because it’s based on a percentage of total sales. This might explain why Salman Khan frequently wears "Being Human" clothing—though that's just a joke. In reality, the Foundation has made significant contributions to society through hospitals, schools, and more. On the other hand, if sales are low, the Company may struggle to make a profit or even cover its costs.
Did you catch that? “Make a profit.” Yes, the Company aims to make a profit from selling the apparel, which isn’t wrong. The Company has taken on the risk of marketing the "Being Human" brand, which heavily relies on Salman Khan’s image. The Company's stock has even suffered due to controversies involving Salman Khan, but that’s a discussion for another time.
Now that you understand the basics of the deal between the Company and the Foundation, let's delve into the specifics. The licensing deal was originally between Mandhana Industries Limited and the Foundation. In 2015-16, Mandhana Industries Limited, which was involved in other garment industry businesses, demerged its existing business and transferred the license deal to Mandhana Retail Ventures Limited. FY 2015-16 and onwards, Mandhana Retail Ventures Limited focused exclusively on "Being Human." Data from FY 2015-16 to FY 2019-20 provides valuable insights into the "Being Human" brand.
The company generated average sales of Rs. 22,706 Lakhs from FY 2015-16 to FY 2018-19, amounting to a total of Rs. 2,27,06,00,000 from the sale of "Being Human" branded apparel.
The Foundation earned Rs. 4,626 Lakhs (~ Rs. 46,26,43,000) as a license fee from FY 2015-16 to FY 2019-20. Salman Khan, by simply wearing the "Being Human" brand in public and showcasing his Foundation’s work, helped generate this substantial sum.
In layman's terms, this Rs. 46.26 Crores can be considered pure profit for the Foundation, as it was earned merely by licensing the "Being Human" trademark, an intangible asset in its accounts. It’s also noteworthy that the brand has stores in the Middle East, with Being Human apparel exported from India to that region.
This also showcases the level of fanbase and belief people have on Salman Khan and on the Foundation's activities.
However, the Company began reporting losses in FY 2018-19 and FY 2019-20. While the exact cause of the loss in FY 2018-19 remains unclear, the loss in FY 2019-20 can be attributed to the non-renewal of the license by the Foundation. The Company’s license arrangement with Being Human - The Salman Khan Foundation, which was its core asset, was terminated on March 5, 2020, effective from January 31, 2020. The Foundation then appointed a new licensee to manage the Being Human brand starting February 1, 2020.
The Foundation agreed that until the Trademark License Agreement expired on March 31, 2020, the Company would operate as a limited non-exclusive licensee, holding the trademark in trust for the new licensee while transitioning intellectual property, including designs, inventories, leases, and channel partner arrangements.
As part of the transition, the new licensee agreed to purchase the store assets (at both exclusive brand outlets and shop-in-shops), inventory as of January 31, 2020, design and intellectual property costs, and pay for the Company’s transition efforts. The total consideration agreed upon was Rs. 2,713 Lakhs. Additionally, the Foundation waived the last six months of royalty as part of this closure arrangement.
In the process of transferring its business, the Company sold the net written down value of Property, Plant, and Equipment and Intangible assets, amounting to Rs. 1,896.38 Lakhs, for Rs. 525 Lakhs, recognizing a loss of Rs. 1,371.38 Lakhs.
This marked the end of the Company, which had been demerged from its parent company solely to manage the license arrangement with the Foundation. The over-reliance on this particular license agreement ultimately backfired, though the Company did experience a rollercoaster ride in the stock market.
When Rakesh Jhunjhunwala acquired a 12.74% stake, the stock reached a high of Rs.247 during FY 2016-17, only to plummet to Rs. 11.35 by March 2021. Jhunjhunwala held the stock until March 2021, and then eventually booked the loss.
The Company has since rebranded itself as Heads UP Ventures Limited, but the stock continues to trade at the same low price, as its expertise was limited to manufacturing and marketing "Being Human". There is hope that the Foundation might engage with the Company for a new deal in the future.
Salman Khan should definitely consider starting a brand-building masterclass—because if there’s one thing he’s proven, it’s that you can sell more than just movie tickets with a smile and a bicep flex. Who else could turn a casual T-shirt into a national phenomenon and have half the country wearing it.
The "Being Human" brand is owned by The Salman Khan Foundation (‘the Foundation’). The Foundation had a licensing agreement with The Mandhana Retail Ventures Limited (‘the Company’) until March 31, 2020, making the Company its global license partner. We have data from FY 2016-17 to FY 2019-20, during which the Foundation licensed its "Being Human" trademark to the Company. Before diving into what this data reveals, let's first understand the relationship between the Company and the Foundation.
A portion of the revenue from apparel sales is paid to the Foundation as a license fee. On average, this fee ranged from 3% to 6% of the revenue. For instance, if the Company sells a T-shirt for Rs.100, approximately Rs.5 (or 5%) is paid to the Foundation as a license fee. This means the Foundation only receives Rs.5 out of the Rs.100 spent on a T-shirt. My friend was disappointed when he realized that the entire Rs.100 wouldn't go to the Foundation.
Are we being misled by this structure? The answer is "No."
Why not?
Let’s break down what's involved in making that T-shirt sale. The Company incurs various expenses such as manufacturing costs, employee salaries, advertising, sales promotion, electricity, freight, transportation, rent, and more. If the Foundation managed these tasks directly, the entire Rs.100 would indeed go to the Foundation. However, after deducting these expenses, only the remaining profit would be left. Since the Foundation has licensed the "Being Human" trademark to the Company, allowing it to handle the design, production, and sale, the Foundation only claims a license fee. Interestingly, the Foundation has opted for a variable fee based on a percentage of sales rather than a fixed fee.
Who is responsible for the sale of the apparel?
Both the Foundation and the Company play a role. If sales are low, the Foundation receives less in license fees because it’s based on a percentage of total sales. This might explain why Salman Khan frequently wears "Being Human" clothing—though that's just a joke. In reality, the Foundation has made significant contributions to society through hospitals, schools, and more. On the other hand, if sales are low, the Company may struggle to make a profit or even cover its costs.
Did you catch that? “Make a profit.” Yes, the Company aims to make a profit from selling the apparel, which isn’t wrong. The Company has taken on the risk of marketing the "Being Human" brand, which heavily relies on Salman Khan’s image. The Company's stock has even suffered due to controversies involving Salman Khan, but that’s a discussion for another time.
Now that you understand the basics of the deal between the Company and the Foundation, let's delve into the specifics. The licensing deal was originally between Mandhana Industries Limited and the Foundation. In 2015-16, Mandhana Industries Limited, which was involved in other garment industry businesses, demerged its existing business and transferred the license deal to Mandhana Retail Ventures Limited. FY 2015-16 and onwards, Mandhana Retail Ventures Limited focused exclusively on "Being Human." Data from FY 2015-16 to FY 2019-20 provides valuable insights into the "Being Human" brand.
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The company generated average sales of Rs. 22,706 Lakhs from FY 2015-16 to FY 2018-19, amounting to a total of Rs. 2,27,06,00,000 from the sale of "Being Human" branded apparel.
With an average T-shirt price of Rs. 2000, this translates to approximately 11,35,318 T-shirts sold during the 4 year period
The Foundation earned Rs. 4,626 Lakhs (~ Rs. 46,26,43,000) as a license fee from FY 2015-16 to FY 2019-20. Salman Khan, by simply wearing the "Being Human" brand in public and showcasing his Foundation’s work, helped generate this substantial sum.
In layman's terms, this Rs. 46.26 Crores can be considered pure profit for the Foundation, as it was earned merely by licensing the "Being Human" trademark, an intangible asset in its accounts. It’s also noteworthy that the brand has stores in the Middle East, with Being Human apparel exported from India to that region.
This also showcases the level of fanbase and belief people have on Salman Khan and on the Foundation's activities.
However, the Company began reporting losses in FY 2018-19 and FY 2019-20. While the exact cause of the loss in FY 2018-19 remains unclear, the loss in FY 2019-20 can be attributed to the non-renewal of the license by the Foundation. The Company’s license arrangement with Being Human - The Salman Khan Foundation, which was its core asset, was terminated on March 5, 2020, effective from January 31, 2020. The Foundation then appointed a new licensee to manage the Being Human brand starting February 1, 2020.
The Foundation agreed that until the Trademark License Agreement expired on March 31, 2020, the Company would operate as a limited non-exclusive licensee, holding the trademark in trust for the new licensee while transitioning intellectual property, including designs, inventories, leases, and channel partner arrangements.
As part of the transition, the new licensee agreed to purchase the store assets (at both exclusive brand outlets and shop-in-shops), inventory as of January 31, 2020, design and intellectual property costs, and pay for the Company’s transition efforts. The total consideration agreed upon was Rs. 2,713 Lakhs. Additionally, the Foundation waived the last six months of royalty as part of this closure arrangement.
In the process of transferring its business, the Company sold the net written down value of Property, Plant, and Equipment and Intangible assets, amounting to Rs. 1,896.38 Lakhs, for Rs. 525 Lakhs, recognizing a loss of Rs. 1,371.38 Lakhs.
This marked the end of the Company, which had been demerged from its parent company solely to manage the license arrangement with the Foundation. The over-reliance on this particular license agreement ultimately backfired, though the Company did experience a rollercoaster ride in the stock market.
When Rakesh Jhunjhunwala acquired a 12.74% stake, the stock reached a high of Rs.247 during FY 2016-17, only to plummet to Rs. 11.35 by March 2021. Jhunjhunwala held the stock until March 2021, and then eventually booked the loss.
The Company has since rebranded itself as Heads UP Ventures Limited, but the stock continues to trade at the same low price, as its expertise was limited to manufacturing and marketing "Being Human". There is hope that the Foundation might engage with the Company for a new deal in the future.
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