July 07, 2017

How doing Outsized Partnerships led Karadi down the Wrong Path

Business Line has a fascinating account of the travails faced by Chennai-based children's entertainment and education brand, Karadi Tales, in its search for strategic / financial partners.
Viswanath has been fire-fighting to keep afloat Karadi Tales (now a unit of Karadi Path), the company he and his wife Shobha founded in 1996. A distribution agreement with Times Music had landed them in court. And the merger with ACK Media (publishers of Amar Chitra Katha) and subsequent acquisition by Kishore Biyani’s Future Ventures didn’t pan out as expected. 
...The partnership (with Times Music) turned sour when there was a change in leadership at Times Music...When Viswanath cited the exit clause and asked for the agreement to be nullified, his partner refused to oblige and instead took him to court, which issued a stay order. Viswanath and his team, despite founding Karadi Tales, could no longer use the brand. “It took us two years to get out of the case,” says Viswanath, who also had to face an arrest warrant. Meanwhile, the company bled and went into debt. 
...Biyani’s Big Bazaar — the supermarket chain — was present across India and appeared an ideal vehicle to sell Karadi Tales audiobooks. It was heartening that Biyani had a vision for products such as Amar Chitra Katha and Karadi Tales. In an interview to a business daily, he had talked about using stories woven around mythology and culture to impart values to the young.But did the promoter’s vision trickle down to store managers and sales executives? “For those obsessed with turnover per square feet, Karadi Tales might not be priority when there are other faster-moving and higher-valued products on the shelf,” says Parasuram. 
Realizing the futility of doing "outsized partnerships", Vishwanath is now rebuilding Karadi with the help of two Social Venture Capital firms (also called as Impact Investors): Pearson Affordable Learning Fund (part of the British publishing major Pearson) and Aavishkaar.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private company transactions, valuations and financials in India. Click Here to learn about Venture Intelligence products that help entrepreneurs Reach Out to Investors, Research Competition, Learn from Experienced Entrepreneurs and Interact with Peers. Includes the Free Deal Digest Weekly Newsletter: India's First & Most Exhaustive Transactions Newsletter.