Home / Money / Calculators /  John Abraham: the value investor

It is a still-pleasant early March afternoon and we are waiting for actor John Abraham in a room in the backyard of his Mumbai office which he calls an outhouse. The outhouse is over a water tank, and this is where Abraham has most of his meetings. It is quiet. The busy buzz of a Mumbai day is kept out by two glass walls and a wooden roof. The white cushions contrast nicely with a retro wooden clock on the table. Behind us is a brick wall painted white that displays two abstract art frames in black and white. An old Bullet motorcycle is parked outside.

Abraham walks in, clad in grey track pants, grey tee and black rubber flip-flops. The actor, 6 ft 2 inches tall, is just back from an endorsement shoot for a product for which he has been a brand ambassador for 10 years now. He’s a long-term guy, we think. Let’s see what he does with his money.

The 43-year-old movie star considers himself a serious investor. But he realised this only when he saw big money for the first time. “I grew up very comfortably, but when I saw a lot of money for the first time, I became cautious. Two things happen when you see a lot of money—you either splurge or become overly cautious. I became the latter," he says.

By overcautious, he means that he is careful, not tight-fisted. “For example, the first time I booked a room in a five-star hotel, though I had the money, I felt guilty. So I negotiated and got a fantastic rate, inclusive of all taxes, breakfast, dinner and four pieces of laundry. Someone will think, he is an actor, he doesn’t have to look into this space. Others may know the price of everything; I know the value of everything."

The search for value continues in investments, too. Abraham is almost a text-book version of a smart investor. He breaks his investments down into two categories—active and passive.

Abraham says that with an ‘active’ instrument, he is looking for value asset creation. These would include his production house, equity-based mutual funds, a football team, a few start-ups and a fitness company. He is set to venture into businesses that involve corporate social responsibility (CSR) activities, motorbikes and clothing.

On the passive side of his investment portfolio is real estate and any kind of rental income. He also plans to buy real estate abroad. “For example, the property that we are sitting on is mine, which is a passive investment. An example of the active side would be seed capital in a new start-up or an investment with an agent into something that has already started," he says.

In the active portfolio, the core investment is his production house—JA Entertainment—which has produced films such as Vicky Donor, Madras Cafe and Rocky Handsome. “My production house is an active investment and that is my core. Everything else will be built around that." As a businessman, Abraham says the biggest value asset he is creating with JA Entertainment is credibility. “I am trying to marry commerce with content," he says, quickly adding that he is not trying to make art films.

Of course, it’s not been easy. He gives an example of Madras Cafe. “Rajiv Gandhi’s assassination had deeply impacted me. I roamed around with the script. Everyone said this movie will not work. Every studio threw me out," Abraham recollects. Madras Cafe is a political espionage thriller set in the late 1980s and early 1990s during the time of the Indian intervention in the Sri Lankan civil war and former Prime Minister Rajiv Gandhi’s subsequent assassination. The movie, which was directed by Shoojit Sircar and was reportedly made on a budget of 10 crore, released in 2013 and collected 42 crore at the box office.

Vicky Donor, released in 2012, is another example. “Vicky Donor was such a risk; people told me ‘we will sign up with you but then you have to cut your fee in the next film and that cut in the fee is going to be the production cost of this film’. So we made it practically with nothing," says Abraham.

The film on sperm donation turned out to be a multi-bagger and crossed 35 crore at the box office, won critical acclaim and the national award for Best Popular Film Providing Wholesome Entertainment that year. Its cost of production is estimated at 5 crore.

Abraham is trying to build a library of credible content before calling the Sequoias of the world. “Not today, may be tomorrow. It takes time to build that library, to understand and go to studios in Los Angeles. I think I can do it. It is important to cross over, (but) at the same time do well domestically so that there is investor faith or viewer faith in what you are doing."

Besides the production house, seed capital is also in the active side of his investment as Abraham wants to invest in and participate actively in certain platforms. “For example, my football team. Right now there is a lot of cash outflow but I feel there is a propensity for massive value asset creation." Abraham owns 90% stake in NorthEast United Football Club, an Indian Super League football franchise based in Guwahati. Abraham believes football will grow exponentially while cricket will grow incrementally or may even stagnate. “I may be spending an X amount on the team at this point of time. I know when the popularity of the Indian Super League increases, there is going to be a certain value asset creation." He will then decide whether to hive off some stake to take care of the working capital losses he has incurred over the first 2-3 years. “But that is a decision I will take at that point of time."

He strategises brand positioning on the team jersey, brand pricing and prices of tickets in the stadium for his football team. “I met Tony Fernandes (chief executive officer of AirAsia, which is a sponsor) recently and we discussed several ideas. AirAsia is starting flights into Imphal and Aizawl. I was chatting with him about how we can do liveries (space available for branding on aircraft) across the plane and sell merchandise on the plane. He asked me whether I would discuss marketing and I said yes because I am a marketing man, I understand it. I love talking about positioning my brand and NorthEast United Football Club is my baby. Also, brand coverage that AirAsia and HTC got was the highest. One of the things I do is to make sure we have the maximum ball positions because then the camera is on us," he says, and smiles.

At the other end of the active portfolio are mutual funds. “I do a lot through my chartered accountant. There was a time when I did it alone. When I was working and earning 30,800 per month, I had gone to my bank and said I want to invest in equity-based mutual funds. I believe it is the best thing to do for long-term investments. It is great for growth and not risky."

However, he is wary of investing directly in stocks. “Pre-2008, I invested in stocks. And in 2008, when the crash happened, I was one of the luckier ones who walked off with no profit and no loss. But I felt the impact. I was too young and too new in my career to be investing crores of rupees in the stock market directly. I felt I needed to be more careful. I need to play in an area where I feel a little more safe. So, I take the equity-based mutual funds route."

Abraham is also interested in being an active investor in start-ups. He says he has been dabbling on the surface and getting educated in the process. “I speak to at least one start-up every day. That is how actively I am involved in the process."

He says he could easily take that money and put it in another film. But he wants to add value to his ecosystem, and also see if he can strike gold. “I know that sounds horrible, but if I hit on the right opportunity, I could strike gold. I want to be a part of the success story. I want to be a part of the thinking machinery of that success story."

Abraham is involved in a food app, and is keen on investing in a financial technology company in the e-wallet app space. He calls the apps segment a satta bazaar (gambling market). “Out of the 10 apps, one or two may work. Hence, I go by my gut a lot. For me, honesty and transparency are probably the most important things because some of these guys are fly-by-night operators. You really need to know how to catch the right guy...."

Being an actor comes handy in spotting the right start-up from the wrong, he says. “As an actor, you are sensitive to energies. When you look at people, you can actually read them easily. You can pick up certain qualities because they treat you as if you don’t know anything. And that is my biggest advantage."

Besides fintech and food, fitness rates high in his list of ideas. “I am also interested in fitness and a lot of it technology-driven. For example, you have FitStar, which is (former American football player) Tony Gonzalez’s app. I actually went there to speak to him to see if I could do something. But I feel I need to get an app that is far more effective and palatable for the Indian audience."

Abraham knows that he is identified with fitness, and wants to reach his target audience. “Now that could be through a technology driven app or TED Talks. The idea is how do I reach my target audience effectively."

He owns JA Fitness, a gym chain. “I know that the fitness industry is a sunrise industry, and I also know that rentals are killing the gym business. Every gym business is a losing proposition. Now how do I monetise effectively? What is the model that I should create? Do I acquire space or get a franchise? I am still working in a space where I need to monetise, and at the same time reach out to audience."

Another area that Abraham is looking to venture into is corporate social responsibility (CSR), which he believes is going to be a path breaking initiative. Under the Companies Act, 2013, CSR rules mandate that companies with a net worth of 500 crore or revenue of 1,000 crore or net profit of 5 crore should spend 2% of their average profit in the last three years on social development-related activities.

Abraham is looking to tap this opportunity. “My wife Priya’s (Priya Runchal) professor back from her college days, Sanjay Sood, who teaches marketing and media in UCLA (University of California, Los Angeles), has agreed to come down and work with us on building and monetising CSR activity."

Better use of a brand ambassador is another topic that Abraham feels holds untapped value. “Let’s face it: agents or agencies that are handling actors or models are just agencies. There is zero value-add. They take you to the client and tell the client that ‘take this actor, he is happening.’ Or, at the most he will say, ‘he is young and you have a young brand.’ That is not rocket science. The actor can think for himself. What we are trying to do is add a Z axis to this X and Y axis—to make it three- dimensional. We are working on it and will put it into action really soon."

Abraham plans to kick-start this initiative—the details of which he did not want to share—in May, when he will start actively approaching corporate entities. “Obviously there is a certain formulae that we want to work with—something that we can’t divulge at this point of time. There is a certain science behind it. They would love it."

The Dhoom star, also known for his passion for motorbikes, has plans to invest here too. “Bikes is one area that I really want to tread into. I want to pick up old vintage bikes and do a Jay Leno and have my own garage where I will probably auction the stuff. You must have heard of a Ferrari that got auctioned for $38 million. I won’t be so lucky, but if I can start from somewhere and create value from nothing...."

He points to the Bullet parked outside and says it has been designed by a friend who owns Rajputana Customs, a Jaipur-based custom bike maker. “A lot of my inputs have gone into it. I actually used to ride that bike. I like motorcycles, restoring old ones and I love to ride. That is the space I want to get into," says Abraham, who has four bikes. Someone who is really effective in that space, he says, is India’s one-day cricket captain Mahendra Singh Dhoni, who owns 33 motorcycles. “He is so passionate, and in Ranchi, he has the space to keep them also."

Abraham’s list of ventures includes taking equity in international brands. “I am looking at taking up some equity in brands rather than a fee. These would be international brands that would come into this country to grow here. Rather than just taking an actor fee or celebrity endorsement fee, I would tie up with a brand and grow with it in the country. That is an active space because I will be sitting on every marketing meeting and agency discussion."

While the actor wants to wear many hats as an investor and a businessman, he has just one regret—investing in real estate without proper due diligence. “Not going through a lawyer when I chose certain properties that I was cheated of. In my greed for acquisition, I sometimes closed the deal before reading the contract. In that I got hurt. I don’t speak about all builders, but the builder lobby can be very dangerous if you don’t tread carefully. And I have been bitten more than once."

His wife Priya, an ex-World Bank employee, is helping him structure his financial portfolio. “She actually has the knowledge and vision of how we can regulate cash flow and streamline things, which I think is a big value-add."

The businessman in Abraham has his roots in a Masters in Management Studies almost two decades back. When he started working, Abraham wanted to do media planning. “In media planning I wanted to be a strategic planner and an implementation buyer. During my first interview in those days, I am talking about 1999, I said I want to be a combination of Bloomberg and (Rupert) Murdoch." He interned at ad company Euro RSCG, where he worked with V. Ramani, his guide and mentor. After that he joined Enterprise Nexus Communications Pvt. Ltd as a media planner. “When I got into Gladrags (in 1999), I was just about ready to make my transition to a bigger agency, and then I decided to walk in my underwear—and a change of profession."

But the media planner in him still touches all spheres of his life. “I try and plan my life, films and investments in a certain way so that I reach my audience in the most effective way and also position myself in their heads in a particular way. Right now, I understand them."

Mint Rich Star is a series that introduces readers to the business side of a celebrity. The series will lead up to the annual Mint Rich issue.

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less

Recommended For You

Trending Stocks

Get alerts on WhatsApp
Set Preferences My ReadsWatchlistFeedbackRedeem a Gift CardLogout