HN Girisha, the London paralympics silver medallist and Padma Shri awardee, has been roped in as brand ambassador by controversial MLM company Herbalife. The company makes money not by selling products but by recruiting sales people, which recruits more sales people, which in turn recruits more sales people
Moneylife has been pointing out how multi-level marketing (MLM) companies like Amway, GoldQuest, Home Trade and Herbalife use film stars or Page3 personalities with political connections as well as tie-ups with non-governmental organisations (NGOs) to gain popularity and legitimacy. Similarly, they have been using sports personalities as well to promote their schemes.
Herbalife, which has come under the radar of the US Securities Exchange Commission, has roped in Girisha Hosanagara Nagarajegowda (HN Girisha), the London paralympics silver-medallist and Padma Shri awardee, as its brand ambassador in India. Girisha would endorse and promote the controversial “Formula1 Nutritional Shake” and “Afresh Energy Drink Mix” of the MLM company.
Herbalife, a global MLM scheme also prevalent in India, is believed to be worthless according to hedge fund manager Bill Ackman, who made a detailed presentation on why consumers should avoid buying the company’s products and stay away from the MLM. Moneylife wrote a three-part series on this. You can access Part I, Part II and Part III here.
According to Ackman, Herbalife’s Formula1 (for which Girisha has been signed as brand ambassador) is the costliest nutritional powder among six other brands. Formula1 power comes at $2.87 per 200 calorie serving, while all other powders from Abbott Labs, Unilever and GNC are available between 88 cents to $1.74 per 200 calorie serving. This is just an example. All other products from Herbalife are overpriced compared with similar products.
After winning a silver medal in London Paralympics, Girisha has been receiving awards and money from various quarters. Ace shuttler and bronze medallist from the London Olympics, Saina Nehwal had announced Rs2 lakh as token of appreciation to Girisha, while the Karnataka government also awarded Rs20 lakh to the athlete.
In addition to an award of Rs30 lakh, Ajay Maken, Union sports minister also offered the 24-year high jumper job of a coach, in officer rank, in the Sports Authority of India. The Paralympics Committee of India also announced a cash award of Rs10 lakh to Girisha.
While Herbalife did not provide any financial details of the deal, in a statement, Ajay Khanna, Country Head, said, “Our sports sponsorship program aims to strengthen the link between Herbalife nutrition and sports, which exemplify the healthy active lifestyle that we promote.”
Commenting on his association with Herbalife, Girisha said, “This is my first corporate sponsorship. I am excited to be associated with Herbalife and thankful for their support. I believe in the Herbalife philosophy of leading a healthy and active lifestyle that will translate into great professional and personal success.”
Does this mean that the success that he had achieved so far without the help from Herbalife is not genuine? Remember, Pulela Gopichand, the five-time badminton champ and India's national coach? During his heydays Gopichand refused a cola endorsement because he said he finds fruit juice much healthier. The news made rounds for a while, and was then quickly forgotten as a naive, badly-informed commercial decision. But it did not affect his performance on field or reputation. In fact, he is still regarded as finest example of refusing endorsement for things that he himself would not consume or use.
Herbalife is an MLM scheme, which ‘sells’ nutritional and weight-management products, in as many as 84 countries and has been doing this since 1980. How come it is able to sell a commoditised product that is rarely marketed at three times the price of its competitors? Why would consumers buy it when there are cheaper products out there? The answer lies in its ‘distributors’ and the way it sells a dream. It recruits ‘distributors’ in over 80 countries to buy its products and bundles it with a ‘business’ proposition, says Ackman.
It makes money not by selling product directly to you and me but by recruiting sales people, who recruit more sales people, who in turn recruit more sales people. The moment you buy its product, you become the sales person. In order to qualify for rewards or bonus, consumers (who become distributors automatically) must recruit (or ‘sell’ Herbalife’s products) so that they meet a stipulated target every month. Not many consumers or distributors get back their money’s worth. It is estimated that failed sales people, those at the bottom of the pyramid scheme, lost as much as $3.8 billion since 1980!
The total provisioning of the bank stood at Rs4,394.70 crore during the December quarter, up from Rs3,996.97 crore in the year-ago period
State Bank of India (SBI), the country’s largest lender, reported a marginal 4.08% increase in net profit at Rs3,396 crore for the third quarter ended 31 December 2012, due to higher provisioning for bad loans.
SBI had reported a net profit of Rs3,263 crore in the previous corresponding quarter.
The total provisioning of the bank stood at Rs4,394.70 crore during the December quarter, up from Rs3,996.97 crore in the year-ago period, SBI said in a statement.
The gross Non-performing Assets (NPAs), which represents portion of bad loans, stood at Rs53,457 crore at the end of December, up from Rs40,098 crore in the year-ago period.
The gross NPA as a percentage of total loan rose to 5.30% during the quarter, from 4.61% in the year ago period. The net NPA was at 2.59% of loans in the December quarter.
The Net Interest Income (NII) declined to Rs11,154 crore during the quarter, from Rs11,518 crore in the year-ago period.
Total income of the bank rose to Rs33,992 crore during the third quarter, from Rs29,787 crore in the corresponding period a year ago.
On a consolidated basis, SBI's net profit rose 7.64% to Rs4,648 crore during the October-December quarter, from Rs4,318 crore in the year-ago period.
If the Nifty cracks the recent low of 5,879, it may be headed for 5,850 in this leg of decline
The market snapped its two-day winning streak on selling in market heavyweights on lacklustre quarterly numbers. If the Nifty cracks the recent low of 5,879, it may be headed for 5,850 in this leg of decline. The National Stock Exchange (NSE) witnessed a volume of 80.46 crore shares and advance-decline ratio of 341:1168.
The market opened flat on cautiousness ahead of the release of the headline inflation numbers for January and quarterly results from State Bank of India and DLF. In the global arena, US stocks closed mostly positive overnight on signs of an economic recovery in the world’s largest economy. Markets across Asia were mostly higher in morning trade after the Bank of Japan retained its monetary policy.
The Nifty opened unchanged at 5,933 and the Sensex resumed trade at 19,627, up 19 points over its previous close. Intense choppiness kept the indices on both sides of their previous closing levels in the first hour of trade. The market slipped into the red in mid-morning trade on selling in select stocks.
However, easing of headline inflation numbers for January to 6.62% from 7.18% in the previous month saw the benchmarks venture into the green at around 11.40am. The uptick helped the market touch its intraday high with the Nifty touching 5,940 and the Sensex rising to 19,640.
The weaker-than-expected third quarter results from India’s leading PSU lender State Bank of India pushed the market into the negative in noon trade. Selling in auto, capital and technology shares and a negative opening of the European markets led the indices further down in the last leg of the trading session.
Across-the-board selling, which saw 10 of the 13sectoral indices on the BSE in the red, pushed the market to its lows towards the close of trade. The Nifty went down to 5,885 and the Sensex declined to 19,444.
The market settled near the lows of the day with the Nifty down 36 points (0.61%) to 5,897 and the Sensex closing the session at 19,497, down 111 points (0.57%).
Among the broader indices, the BSE Mid-cap index declined 1.43% and the BSE Small-cap index dropped 1.86%.
BSE Fast Moving Consumer Goods (up 0.44%); BSE IT (up 0.27%) and BSE Metal (up 0.04%) were the only sectoral gainers on the BSE while all others settled lower. The main losers were BSE Capital Goods (down 2.27%); BSE Oil & Gas (down 1.59%); BSE Auto (down 1.49%); BSE Power (down 1.25%) and BSE Realty (down 1.21%).
Fourteen of the 30 stocks on the Sensex closed in the positive. The chief gainers were Hindustan Unilever (up 2.24%); GAIL India (up 1.97%); HDFC Bank (up 1.65%); Tata Steel (up 1.17%) and TCS (up 1.15%). The major losers were Bharti Airtel (down 4.02%); Wipro (down 3.33%); Maruti Suzuki (down 3.30%); Larsen & Toubro (down 2.72%) and Reliance Industries (down 2.63%).
The top two A Group gainers on the BSE were—Suzlon Energy (up 3.71%) and Unitech (up 2.96%).
The top two A Group losers on the BSE were—Bharti Airtel (down 4.02%) and Wipro (down 3.33%).
The top two B Group gainers on the BSE were—Rishiroop Rubber International (up 20%) and Thakral Services India (up 19.93%).
The top two B Group losers on the BSE were—Prime Securities (down 18.51%) and Celestial Biolabs (down 16.33%).
Out of the 50 stocks listed on the Nifty, 19 stocks settled in the positive. The major gainers were GAIL (up 2.12%); HUL (up 1.69%); Tata Steel (up 1.49%); HDFC Bank (up 1.47%) and Asian Paints (up 1.30%). The key losers were Siemens (down 5.06%); Bharti Airtel (down 4.40%); BPCL (down 4.16%); Power Grid Corporation (down 3.55%) and Maruti Suzuki (down 3.51%).
Markets in Asia settled mostly higher as the Bank of Japan reiterated its intent to continue with its asset purchasing initiative to spur growth as the country’s GDP contracted an annualized 0.4%, following a revised 3.8% fall in the previous quarter.
The Hang Seng climbed 0.85%; the Jakarta Composite gained 0.37%; the Nikkei 225 advanced 0.42% and the Seoul Composite rose 0.18%. Among the losers, the KLSE Composite shed 0.02% and the Straits Times lost 0.32%. Markets in China and Taiwan remain shut for the Lunar New Year holidays.
At the time of writing, the key European markets were trading lower as economic growth contracted in Germany and France in the fourth quarter of 2012 disappointed. At the same time, the US stock futures were in the negative.
Back home, foreign institutional investors were net buyers of shares totalling Rs800.31 crore on Wednesday. On the other hand, domestic institutional investors were net sellers of stocks aggregating Rs289.69 crore.
Hyderabad-based Vivimed Labs today said that it has proposed to acquire city-based Finoso Pharma Pvt Ltd, a pharmaceutical development services company focused on formulations product development efforts. The proposed acquisition will be done for a total consideration of Rs15 crore comprising cash, stock and deferred payment, and will be debt free, according to a company press release. Vivimed closed 2.11% lower at Rs320 on the NSE.
Cement major India Cements is considering ramping up its capacity in Rajasthan. The expansion would attract investment of around Rs 650-Rs700 crore. The plan comes on the backdrop of growing demand in Gujarat and Madhya Pradesh. The stock fell 2.07% to settle at Rs80.60 on the NSE.
Finolex Cables plans to set up a 5 MW at its manufacturing facility at Urse near Pune at a cost of Rs40 crore. The proposed plant, expected to be commissioned within six months, will provide electricity for the internal consumption of the Urse facility, which would be pooled with additional State Electricity Board (MSEDCL) supply for night time operations. The stock tanked 9.99% to Rs50.45 on the NSE.