At Aegis, digital, OOH big bets

Ashish Bhasin

An edited version of this Q&A first appeared in DNA Money edition on Tuesday January 29, 2013.

After 21 years with Lintas Group, an opportunity came by in 2008 from Aegis Media which had a struggling unit in the country – Carat. It had 50-odd people, making losses and wasn’t doing global standards of work. That’s when Ashish Bhasin took over as CEO for South East Asia and South Asia and Chairman for India. Since then, the company has grown to 500 people as of today and from one business to 11 different lines of businesses. He spoke about the agency’s overall business and the advertising industry in general. Edited excerpts...

How far as the Dentsu-Aegis deal reached since considering it was signed in the first quarter of fiscal 2013?

Dentsu is in the process of acquiring Aegis Plc and being a global deal it will take time to conclude.  The transaction hasn’t yet completed but once it is done we will be part of the Denstu family. We do anticipate that it should happen soon, but nothing is done till it is done. The situation is that the deal requires regulatory clearance from several countries. I am not very sure but my understanding is that approvals have been received from most of the key countries except China where it is work in progress.

How will both entities function after the deal is completed?

Our global CEO has very clearly said that it will be business as usual. Aegis Media will work as a brand by itself. What and how will things unfold is something that I’m not privy to but our understanding is that it will be an independent operation that will continue to run under the Dentsu umbrella.

The year gone by has been a very exciting one for Aegis. How was the business like for the Indian unit?

With a total of 150-odd clients all across in the group, it has been a very good year for Aegis globally and an exceptional one for us. In 2012, we crossed the Rs 1,000 crore turnover mark and the year has been a record breaking spectacular year both in terms of growth in revenues/billing/profits as well as number/quality of people etc.

Which segments have seen the maximum growth?

While all businesses have done well, digital and out of home (including retail) in particular are very fast growing verticals. That’s because more clients and volumes are coming in, in these lines of businesses. However, print and television continue to be large in India and hence are major contributors to the business.

Your company straddles the entire gamut of advertising and marketing services. How has the approach helped?

Clients today want the benefit of specialisation but are fed up of silos (an advertising industry jargon indicating various departments / divisions). Each one is trying to push their agenda. For instance, the out-of- home (OOH) guy will focus only on outdoor and scrap every other media. Clients today want a complete solution and not just print or television.  At Aegis, we have this system of ‘one country one P&L’. While all the departments / divisions have their individual targets, the profit and loss (P&L) statement outside India goes through one person.

For us, what really matters is doing things that are right for the client. As a result the client benefits from all the specialisation we offer and is saved from the hassles of siloisation. This philosophy has clicked very well for us. Having said that, we might only have an advantage window of around six months or so because others are quickly catching up to this approach of doing business.

With business growing exponentially, you must have a very aggressive expansion plan.

India is not really four metros of Mumbai, Delhi, Kolkata and Chennai, which is why we already nine offices and should be adding another one in Kochi sometime soon. The ambition is to have a minimum of 16-18 offices in two years from now. Reason being, there is a lot of business in tier II and rural markets. It’s more about touch and feel these days besides what may work in Kochi may not necessarily work in Chandigarh. One needs to understand the local market / media and related outfits to ensure best results and maximum impact of the client’s communications and initiatives.

Talking about rural demand, there are very mixed opinions in the market. Could you throw some light on the ground realities?

I think there is complete confusion. I can confidently say that having pioneered rural marketing in India by setting up set up Linterland – the rural marketing unit of Lintas – which was the first attempt any agency made to have a proper rural network. I am a big believer in rural markets. There are 100 ways in which one can touch and engage a consumer and touching, feeling, reaching out to them in person is definitely very important.

Despite phenomenal growth in the number of television and newspapers, there is a very large part of our population that is unreached by any mass media. Even if they are theoretically reached the communication isn’t effective because for eight hours in a day they don’t have electricity.

On the other hand, there is this largest gathering of humanity at Kumbh Mela with almost 10 crore people attending which presents a huge opportunity for marketers and brands to reach out to them. There is no option or alternative for companies to look at rural and reach out. Companies will have to find a way and as agencies it is our duty and a great opportunity to be able to deliver that.

What is your approach the rural markets? What activities are undertaken there?

I was involved in the launch of Wheel detergent powder for Hindustan Lever (now Hindustan Unilever Ltd - HUL) back in mid 80s to early 90s. When I started working as an account executive on the brand, first thing HUL made you do was to go for 15 days and live in Etah (a village in Uttar Pradesh HUL had adapted). So you literally lived the way villagers would live there. What you learnt out of that was really insightful. That’s why I insist my rural guys to go and spend some time in villages before they actually start talking about it. That’s where all of India. It is through these initiatives that we have tracked various activities for the rural market including drawing up a calendar of village supermarkets or ‘Haat’, ‘Mela’ calendars, van operations, planning and data mining for rural markets etc.

What are your plans for 2013 looking like? Could you tell us about the key opportunities for Aegis this year?

Our plans are largely based on the clients and opportunities in India. The key opportunities we see are in the digital and mobile space.  That is why we have made disproportionate investment in this space including acquiring iProspect. Considering a lot of search is now happening on mobile handsets / devices so digital will certainly be the name of the game. The OOH media will be huge and so will be outreach (touch and feel activation or experiential).

Print and TV will continue to dominate for a long time to come but agencies will have to discover new ways of handling it. 

For instance, there is complete lack of qualitative research in India hence as a result we have made the largest investment ever on a single source data. Imagine, despite having a 20,000-25,000 crore advertising market, we don’t have any large reliable single source data in the country. We have Consumer Connection System (CCS), which is a global Aegis Media tool and world’s largest single source data. It has more than 300,000 samples globally. We have brought that and are running it in India with a very large sample size across 18 cities which is a very robust plan. This initiative is giving us immense insights into how a consumer interacts, how s/he consumes media - you can actually take it down to a category and a brand.

Could you elaborate a bit on the digital and mobile space activities?

Digital is not about putting a banner advertisement on a website anymore. It’s about engaging the consumer, developing applications for mobile phones related devices. While Ipads and Tablet devices are not that big in India, with prices coming down gradually, the entire dynamics of the game is changing and very rapidly than anyone can realise. In such an environment continuing with just a print, television or banner advertisement will not help the client engage a consumer because s/he is moving much faster. Our entire focus on digital is holistic and there is no line or separation between creative and media in digital because it’s all one.

People earlier didn’t think that a large set of consumer will transition from desktops to mobile devices and advertisements were never made keeping mobile devices in mind. This is certainly a huge problem for marketers and brand managers. Interestingly, one of our verticals, Isobar enjoys a preferred Facebook page developer status and those are the kind of areas we will have to stay ahead of the curve and your job is never done here. By the time you’ve finished it, you become obsolete.

How do you deal with the related technology requirements?

We are putting together a large tech team including programmers, net developers – nothing to do with advertising – to be able to deliver the digital communication. One can conceive and create a great idea but delivering it will be impossible if you don’t have an equally great tech team. In a sense tomorrow, our competition could very well be a large information technology (IT) major because that whole line is blurring now. Currently we have 18 people and the plan is to at least double the number in the next few months.

Do you see the tech team getting bigger eventually?

If the approach really works one can easily look at a number of 200 people just doing tech because the business vertical will then be catering to the global markets and not just India. It’s like how the IT majors including Infosys, Wipro and TCS that do tech development in their areas globally. There is nothing that prevents advertising companies like ours to start doing it as well.

Zee thumps St with 41% profit growth

This story first appeared in DNA Money edition on Thursday, January 24, 2013.

Zee Entertainment Enterprises Ltd, India's leading media company, has reported a 40.5% year-on-year (yoy) growth in net profit for the third quarter at Rs 193.3 crore, lifted by a strong surge in advertising and subscription revenues.

Advertising and subscription revenues during October-December grew 28.8% and 25.6% yoy to Rs 509.4 crore and Rs 409.8 crore, respectively.
Subhash Chandra, chairman, Zee, said the first three quarters of this fiscal have been good for the company with strong performance relative to the industry and competition.

“With one quarter to go, we are looking forward to a strong growth this year. The highlight for this quarter is the strong growth momentum in advertising revenues, despite subdued spends. The performance illustrates that our investments in content are yielding good returns,” said Chandra.
The company’s consolidated operating revenues at Rs 938.8 crore for the third quarter rose 26.3% over the year-ago period.

Operating profit, or earnings before interest, tax, depreciation and amortisation (Ebitda), for the third quarter stood at Rs 261.1 crore. Ebitda margin for the quarter was 27.8%, while net profit margin stood at 20.6%.
With digitisation bringing in a transformational change in the Indian television industry, the company is of the opinion that it will benefit all stakeholders.

Punit Goenka, managing director and chief executive officer, Zee, said, “Our subscription revenues during the third quarter are the highest ever, and with digitisation rollout they will improve in the medium term.”
While the Zee network viewership witnessed a successful mix of new and returning shows, the management is confident of the next 12 months and will continue to invest in new content and channels.

“These investments will have an impact on our operating margins in the short term, but will enhance our performance in the medium term as well,” said Goenka.
The company trumped the overall industry, too.

Atul Das, chief strategy officer, Zee, said, “While the overall industry is estimated to have grown 9-10%, our performance in the first nine months has been 27% growth over the same period last year. The growth is also an indication of strong performance on viewership and better monetisation of our properties,” said Das.
The third quarter also saw Zee launch India’s first edutainment channel called ZeeQ aimed at children in the age group of 4 to 14 years.

Response to the channel has been very good, Das said, adding the company is keen on adding more pay TV properties.
Ankit Kedia, analyst with Centrum Broking, said the company will benefit from the Phase II and III of digitisation and margins will continue to be healthy at 26-27%.

With more than Rs 1,100 crore of cash, the company would look at new investment opportunities, he said, citing the new initiatives, including ZeeQ and Ditto TV

Ikea gets FIPB go-ahead for Rs10,500 crore FDI

This story first appeared in DNA Money edition on Tuesday, January 22, 2013.

The Foreign Investment Promotion Board (FIPB) has cleared Rs 10,500 crore investment proposal of Swedish furniture major IKEA to set up shop in the country with cafeterias. The FIPB had earlier permitted it to invest Rs 4,200 crore for opening single-brand retail stores.

Commerce Minister Anand Sharma said late on Monday that IKEA's case for investment is cleared, which is a positive development. "The government is committed to playing a constructive role in enhancing FDI, especially in areas which create jobs and provide technological enhancement. Globally, IKEA has a business model which integrates in its embrace SMEs (small and medium enterprises) and domestic industry, making them the part of global value chain," he said.

IKEA Group, which manufactures and sells home and office furnishing products, proposes to invest in single-brand retail trading in India through a 100% subsidiary. With the FIPB clearing the way, the retailer would also be able to open cafeterias in their stores.

The proposal will now be placed before the Cabinet Committee on Economic Affairs (CCEA) for final approval. Any investment over Rs 1,200 crore requires approval from the CCEA which will take another 15-odd days to clear the proposal.

Calling it a sane decision, Arvind Singhal, chairman, Technopak Advisors, said there was no reason for the Indian government to take such a long time on a globally respected and ethics-driven company.

"However, I don't think we will see the first IKEA store opening anytime in the next two years if not more. While they are a very successful retailer globally, they do a careful study before entering any new market. Whatever they will do in India will be after a very careful evaluation of the ground realities viz Indian consumers' buying habits, whether they will travel long distances or not, etc," said Singhal.

IKEA typically takes over five to seven lakh square feet of retail space in most of the markets it operates in. Will it take the same approach in India given the kind of retail space in the country? "It is not necessary if they will replicate a particular approach / format in other countries of the world, feels Singhal.

"I really don't know what would be their store size in India, but whatever IKEA stands for in terms of good quality, affordable pricing, good service and good dealing with their vendors, etc. is something that will be consistent in the Indian market as well," he said.

HUL set to pay Rs150 crore extra royalty next year

This story first appeared in DNA Money edition on Wednesday, January 23, 2013.

Hindustan Unilever Ltd (HUL), the country’s largest fast moving consumer goods company, reported a 15.59% on-year jump in net profit to Rs871.36 crore for the October-December quarter on a 10% rise in sales to Rs6,433.69 crore.

The performance was not impressive, considering the company has witnessed around 5% volume growth, said Naveen Trivedi, FMCG analyst at Karvy Stockbroking.

“The price hike taken hasn’t helped in expanding margins as well. On that basis, the numbers were not substantially great. In fact, they show some concern on the company’s overall volume growth.”

The results were, however, overshadowed by the news about HUL’s increased royalty payment agreement to parent Unilever for technology, trademark licence and other services.

Till now, HUL used to pay 1% royalty on net sales of specific products manufactured with technical inputs developed from Unilever. The new arrangement, effective February 1, envisages a gradual increase in the existing royalty cost.

According to R Sridhar, CFO of HUL, royalty from February 1 to March 31 next year is estimated to be 0.5% of turnover.

At an expected turnover of Rs30,000 crore next fiscal, that would mean an additional outgo of Rs150 crore – or about Rs37.5 crore per quarter.

The company will pay about Rs22 crore extra for February and March this fiscal.

Thereafter, the increase will be in a range of 0.3% to 0.7% of turnover in each financial year, leading to a total estimated royalty cost increase of 1.75% of turnover, Sridhar said.

The impact under the previous agreement resulted in a royalty cost of around 1.4% of turnover. But with the new agreement in place, royalty is expected to be around 3.15% of the turnover by March 31, 2018.

“Since royalty will increase every quarter, Ebitda margin in the next quarter will be suppressed by 50 basis points, at least moving up to 170 bps by fiscal 2018. We will have to see how the company performs in the coming quarters going forward,” said Trivedi.

Industry observers and stock market experts gave a thumbs-down to the royalty issue, saying it harms the interests of minority investors in India.

Hind Unilever bets big on product innovation

R Sridhar

This Q&A first appeared in DNA Money edition on Wednesday, January 23, 2013.

Hindustan Unilever’s third-quarter performance presentation starts with a visual on the Dove Elixir premium hair oil brand, a category into which the company has recently extended the Dove brand. R Sridhar, chief financial officer, is quick to point out that it’s a key innovation, apart from several others by the company in the third quarter. He spoke about the overall fast moving consumer goods (FMCG) market scenario in the country, consumer behaviour, etc as also the company’s plans and strategy ahead. Edited excerpts...

On overall FMCG market scenario

During the third quarter, the FMCG market continued to grow in double digits. However, we also saw that slower growth in discretionary category continue on a sequential basis. As for soaps and detergents, growth continues to be price-led. We have also seen a slowdown in modern trade (as a channel) retail growth in the December quarter. On the other hand, Canteen Stores Department (CSD), which was a bit of a challenge, has shown recovery. The pace of store additions has slowed, in fact it is negative, indicating that the more stores were shut than new ones were opened. The input cost environment was holding firm as was the competitive intensity during the quarter.

On the HUL’s third quarter performance

In what has clearly been a challenging environment, it is a consistent broad-based growth and margin / profit improvement. While our reported growth might be 10%, but because of the exports demerger our underlying domestic consumer business growth is about 15% and volume growth is 5%. Both Home and Personal Care and Foods & Beverages registered double-digit growth. Operating margin has expanded by 40 basis points and this is the sixth consecutive quarter wherein the company has shown consistent (40 bps) growth. Advertising and promotions have been stepped up by Rs150 crore to 12.8% of the sales. For the nine months ended December, we have grown consumer business 16%, with a 7% underlying volume growth. Margin is up by 100 bps and profit after tax before exceptions is up roughly 27%.

Key product innovations

The Lifebuoy colour changing hand wash and the Dove Elixir premium range of hair oil are some of the key innovations being introduced. This apart there was a new variant in Sunsilk, Vaseline, whole new range of Brylcream hair gels and cream and Knorr soupy noodles towards the end (last week of December) of the quarter.

Immediate concerns

In the near term however, there are a couple of concerns, particularly volatility - global markets, local markets, currency, commodity - which is continuous in nature. We will have to be very conscious as the inflationary pressures may put some stress on consumer wallets.

Outlook

As we look ahead we are positioned well in a FMCG market, which has clearly got positive growth outlook over the medium to long term. The company is positioned well, whether it is our portfolio of brands or our superior capabilities.

From bulk sales, DLF goes piecemeal

This story first appeared in DNA Money edition on Tuesday, January 22, 2013.

DLF Ltd is staggering inventory from its projects to benefit from frequent price increases and protect margins from cost escalations.

India’s top realtor, which launched quite a few projects in the last year, has been offloading inventory in bulk till now.

Rajeev Talwar, executive director of DLF, said, “We are now releasing limited stock so that the increase in costs will be met through differential pricing over each subsequent release. While the idea is to release a large number of projects, taking a piecemeal approach will help us increase returns.”

In the absence of an escalation clause, cost increases had to be borne by the developer. Over the next 3-4 years, DLF expects new projects to generate Rs2,000-3,000 crore in sales annually. While launches would happen across the country, most would be in the National Capital Region and some pockets in south India.

The realtor launched a couple of residential projects last quarter including the luxury development DLF Sky Court at Gurgaon. Talwar said all projects have received a good response.

DLF Sky Court was launched at `6,000 per square foot (psf) and is currently being sold at Rs6,250 psf, according to real estate brokerage, InvestInNest.com.

On revival in real estate, Talwar said traction in the commercial space will largely depend on how soon the economy improves. The residential market, on the other hand, has kept up with people’s aspirations, he said.

“As the economy gets better and incomes get distributed, there will be greater traction in the entire residential segment – be it luxury, premium and middle-income. We are quite certain that future launches will elicit a much higher response than what was seen in the last 2-3 years,” he said.

‘Social media, consumers are today’s advertising regulators’

Josy Paul

This Q&A first appeared in DNA Money edition on  Wednesday, January 16, 2013.

Unusual is the business card of Josy Paul, chairman and chief creative officer of the Indian branch of BBDO, the global advertising major. It has neither office address nor landline telephone numbers. Even more surprising, it has his mobile number and email ID – things that VIPs usually prefer to keep private. The elegant black card even contains his Jet Privilege card number. Surprises don’t end there: the card gives away the registration number of his five-year-old Black Honda Civic. “I’m either on the road or on a flight travelling across the country. It’s practically a mobile office in my case. Hence, it made sense to have office coordinates replaced with these numbers.” In this discussion the adman speaks about Strategic design in communications, reality advertising, the digital medium, corporate campaigns. Edited excerpts...

You pioneered reality advertising in India, isn’t it?

Reality advertising as a concept was explored even before we experimented with it. It’s just that in our case the timing was very appropriate. We conceptualised an idea and designed a communication strategy around it when reality television programming was gaining momentum in the country. The Gillette ‘Women Against Lazy Stubble’ campaign for P&G not only became a huge movement in the country but also activity that created a world record in the Guinness Book and the Limca Book of Records. We have only built on what other good people have left behind.

While not taking credit for anything, it was just our response to a situation, opportunity or a problem. We feel that it has to be real and engage people in the real way that is authentic. If it happens to have some correlation with some work done before, we are more than happy. We accept that, maybe, things like this have been done before and hence would not claim to be pioneers. We have set up a philosophy for ourselves — that of creating ‘acts’ and not ‘ads’. In a way, we’ve laid down a set of principles which, maybe, the people before had not fully organised. Earlier, people were doing random ads while we’re taking a more organised approach to it.

Do you agree that advertising is closer to what the product / service stands for these days?

We’re living in a new world with a new kind of consciousness, that of a Facebook and Twitter, which is out there and driven by real people in a real world. That consciousness won’t allow the false and fakeism. Therefore, it’ll be very important that we only talk about what’s being achieved rather that what is going to be achieved. One can talk about ideas that are useful, something that is real and measurable; or you can be highly entertaining and help people be entertained for that moment. Ads could be illogical sometimes but should be highly entertaining. Having said that, nobody will be able to fake it in their communications any more because social media will kill you even before industry body takes you up. People these days are not shying away from speaking up, if they find something that’s objectionable. I’d say the consumers are the biggest industry regulators today.

Is the corporate sector getting more serious about campaigns?

I’m seeing greater consciousness among our clients for the simple reason that they also believe that’s the future. We aren’t telling them any new things. They are already in it and are trying to find a way to leverage a social context and still be sustainable at a commercial level. None of the work we do is CSR (corporate social responsibility) as companies are seeing direct benefits as well. The ecosystem is benefiting out of it and so are brands at sales and goodwill levels. It’s straddling both ways and can’t be one versus the other because then it’s not sustainable.

What kind of an impact will new media like online platforms and social networks have on television ads, in terms of reaching the target audience?

Television is still the lead medium to reach out to a larger set of people whom the corporate sector is targeting. Having said that, the way people are using television as a medium these days is changing significantly. Companies may decide to go with various available formats: that is, public relations, documentary, 30-second advertisements, etcetera. So, the corporate sector is still using the television medium, but the format is changing. Social media is playing its part by keeping the engagement alive and forcing everybody to think about interface and whether it will become a one-to-one transaction (which is a short-term thing) or a one-to-one interaction (which is a long-term thing).

How is 2013 looking for BBDO in terms of business?

We had a fantastic 2012 with interesting campaigns like the re-launch of Blackberry with ‘Action starts here’ where we made the star the hero. I think the challenge in 2013 is how to scale up these ideas and create greater impact. I think the base has been set — in the sense that this approach to appetising is here to stay for a while. Now we’ve to think about how to make it really big. The second challenge is, culturally, how do we get every one of us in the agency — we were two people earlier; now, we’re more than 100; and more will join — to understand and be with us equally and hunt for both the solution and craft and quality of solution. It’s a huge challenge and we are focusing on our reputation rather than our bottomline.

Consolidation is seeping into the Indian advertising industry. Is BBDO looking at any inorganic opportunity?

There are conversations at all times and the thing is, it’s not only about BBDO, which is part of a large organisation called Omnicom which is always looking for opportunities or possibilities to grow its objectives. I think it’s in that zone and we personally don’t get involved. We are content creators and like to remain that way.

Prozone spots new USP in luxury housing

Nikhil Chaturvedi

This Q&A first appeared in DNA Money edition on  Monday, January 14, 2013.

Having built shopping malls in Tier II cities, Prozone Capital Shopping Centres Ltd, is now looking at bringing about a shift in the way real estate is sold in these markets with its affordable luxury housing projects. Prozone, which has already invested close to Rs 1,000 crore in the realty business, is targeting Rs 300 crore in annual sales across its three ongoing developments. Nikhil Chaturvedi, managing director, Prozone, speaks about how the company is adopting novel strategies and the way ahead. Edited excerpts...

Developing retail shopping spaces being the core business, what motivated the company to make a residential development foray?

Our joint venture with Capital Shopping Centres (CSC) in this business follows a very interesting business model in the international markets they operate in. They'd generally acquire four times the land parcel required to develop a shopping mall. First they'd develop the mall thereby making the surrounding land parcel invaluable, which would then be exploited through residential, commercial and related developments. The basic idea behind this approach to create long-term, debt-free assets (malls) that are core to the business through short-term disposable assets like residential and commercial developments. We realised the business model made so much sense especially in the Indian market where cost of debt is so high, hence the foray.

So you decided to outright replicate the model in India?

A slight tweaking to the model had to be done as CSC's overseas developments were at the edge of the city while the Indian projects had to be located right in the city centre. We also decided to simultaneously develop the residential catchments when doing malls. Considering the amount of demand for housing in the market we realised it was very much doable. We also adapted a few interesting learnings from our JV partner's overseas residential developments.

And what were these learnings like?

First we went to UK to see how were they doing the residential developments and realised the approach there wasn't relevant to India. In UK they did ground plus one housing projects which was just not viable here given the scarcity and high land costs. CSC also has investments in China so we visited the sites there. We found interesting similarities to residential developments prominent one being going vertical. They'd also make a huge boundary walls, large doors and when you entered the site there was a sales and marketing office and show flats very much like what we do here in India. There was one differentiator though, a little inside the site, they had a very beautiful fully operational club house with the best of facilities and amenities. We were intrigued, the buildings were yet to be constructed so why build the club house so much in advance.

That's interesting. You mean to say the last component in a large scale residential development was the first one to be built.

Exactly. They said, every customer visits the site once in 10 weeks. If I have a thousand customers, there would be 100 customers lining up in the site every week leading to a chaotic situation. And because the competition allowed such visits they couldn't say no to the customers and every one would come back with differential levels of experience and concerns while it was still work in progress at the site. The only way to give them a powerful message was to show them an operational club house and tell the customers that site visits can be done only on a specific day of the week citing hazardous (health and safety) conditions.

What also came out of this approach is that a realistic asset was created that gave customers a realisation of the kind of environment they would be living in for the rest of their lives. The club house thus became the anchor of their development as a result sales increased 1.5 times the competition and prices started shooting north at sites they had limited inventory to offer.

It made so much sense to adapt the strategy in India. If you compare any residential development with or without visible infrastructure, the former would always register increased traction and faster price growth. And that's the approach we are taking with our residential developments in India.

But your projects are largely located in the Tier II Indian cities. Has the approach helped?

It has certainly made a paradigm shift in the way real estate is being sold in Tier II markets. There are a few challenges to this approach though. The most important being that the developer will have to be courageous enough to invest in building a state-of-the-art, fully functional club house at the start of the project, followed by the patience level for business to start kicking in. Financial soundness is very crucial for the success of this strategy.

Prozone is among the select few realty players to operate at almost negligible debt as our net debt is just Rs 10 crore. Lastly, we decided to create the visible infrastructure on the ground level as against podium level which was very time consuming. Since all this could be done with larger developments we chose to do 20 to 30 acre residential projects where 6-7 acres can easily be carved out for gardens (with 30 feet trees relocated to the site from a distance place), clubs and other leisurely facilities. A lot of care is also taken to ensure safe vehicular movements inside the development akin to what one sees with developments in Singapore. The residential developments would come up at the edge of the site which is the case with our first project in Indore Prozone Palms which is spread across 40 acres.

Selling luxury housing must be very challenging in the Tier II markets. What has been your experience?

We showcase the efforts being taken to create the luxuries through various communication initiatives including owner's manual that spell out every thing clearly thereby bring in a sense of ownership to the customers. Luxury positioning in our case is not the Italian marble and premium designer elements but the thought and attention to details being put make the product. It's about luxury tailored to the buyers lifestyle with things like sundeck and walk-in wardrobes, privacy, high railings, state-of-the-art safety and security including swipe cards for all the residents, professional facility management to name a few.

I am selling to the middle-class Indian household and make it at the rate that affordable to them. Our housing unit prices are in the Rs 2,800 to Rs 3,500 per square feet (psf) range and very much comparable to what is available in that area. The only difference in our case is that we have created economies of scale (with the number of units ranging from 1,200 to 1,500) and efficient spaces within the developments to give them a luxury feel through efficient planning and optimum utilisation of space.

Could you share some details the target audience buying into your developments. Do you also get a lot of investors wanting to make a quick buck?

Besides the middle-class households that form 70% of our customer base take the home loan approach, we have seen a lot of trader community buying into our developments. These are businessmen who prefer internal accruals and in some cases equity raised from relatives, friends and families to buy residential apartments. That is also one big reason why we stick to a 24 month delivery time as it gives these set of buyers enough time to arrange funding. There could be investors in our developments but we have devised a way to discourage them -- a two year lock-in period.

On an average how many housing units are you targeting to deliver annually?

While we have developments planned in six markets spread across 17.9 million square feet, only three i.e. Indore (40 acre), Coimbatore (26 acre) and Nagpur (41 acre) are active while developments in Aurangabad, Mysore and Jaipur is yet to start. Coimbatore and Nagpur will also have malls. All the developments will be completed in two phases at least and we are targeting at handing over 250 housing units every year. Our first mall is already operational in Aurangabad and we are currently developing commercial offices with 2 lakh square feet sold already. We have just started sales of Saral Bazaar -- kind of a flea market concept for that location -- basically shops for local people on a ownership basis as they are very averse to coming on rent but are ready to buy at premium.

Revamp to make Provogue a youth brand

This story first appeared in DNA Money edition on  Saturday, January 12, 2013.

Premium apparel maker Provogue is aggressively revamping its business. To start with, the look and feel of its 130-odd outlets will get a global appeal in the next 6-8 months.

“With times and targeted consumers changing, Provogue reached a tipping point between heritage and destiny. Thus, the ongoing revamp became inevitable,” said Timothy Eynon, business head of Provogue, a 12-year-old brand.

Focus is now on consumers in their late 20s. “We are not a teen brand nor an ‘old’ brand. Our positioning is very clear, that of a youth brand that offers innovative and stylish products for the target audience,” said Eynon.

The eagle and ‘double P’ that are part of the Provogue logo will give way to a prominently displayed ‘Provogue’ on all apparel, accessories and other product categories to be launched soon.

For instance, Provogue is set to launch new categories of apparel, men’s inner wear and premium accessories like belts and bagsfor women.

Provogue will also soft-launch an e-commerce platform next month. The company is targeting to double its store count by adding 100-odd company-owned or company-operated outlets over the next five years. With 15 franchisee outlets at present, the number is likely to swell to 300 by 2020.
For fiscal 2013, the company is targeting Rs650 crore in revenue with equal contributions expected from its domestic and export verticals.

While domestic sales have been showing higher growth, the company expects the revamp, new collections and new product categories to increase the growth rate in exports, going forward.
Eynon said 25 stores in landmark shopping malls and high streets have already been given a makeover, in terms of design, colours, lighting and amenities like trial rooms. New collections and accessories for men and women are in the pipeline.

Consequently, sales at these outlets are up 25%, driven by Provogue’s famed innovative products, technologically superior fabrics and strong colours, he said.

“The revamp will take two years (or four seasons, as they say in the fashion apparel industry) to start showing results,” he said.

Building blocks in place, Dentsu to cart in global brands

This Q&A first appeared in DNA Money edition on Wednesday, January 9, 2013.

Rohit Ohri

Rohit Ohri, executive chairman, Dentsu India Group, said 2012 was a defining period for Dentsu. He shares plans and developments at the Indian business unit, how 2012 has been for the advertising agency and so on. Edited excerpts…

How has 2012 been for Dentsu? What were the key milestones like?

The year 2012 was a clearly a defining period for Dentsu. The organisation underwent a transformation in terms of systems, technology, processes, talent, culture and so on. The company focused on building a foundation and setting a direction for the Dentsu India Group for the next three to five years. The last 12-odd months were fairly challenging as well as enormously rewarding. Many new businesses were won and many of our existing clients expressed a great deal of satisfaction with the enhanced services coupled with improved quality of work.

The year 2012 also saw Dentsu aggressively pursue inorganic approach in India and overseas. What led the decision?

The Taproot acquisition, led out of India, was certainly part of the foundation building exercise. It was a strategic acquisition wherein we wanted best-in-class creative capabilities within the group.  Taproot is regarded as one of the most creative communication agencies in India and that’s what really prompted our decision. My vision on the overall approach is that, we don’t want to be a fringe player in the Indian advertising industry. We want to be pretty much in the centre stage not necessarily defined by size. We don’t want to be the largest but the most creative integrated marketing and communications agency in India, which is what our stated objective is going forward. Unlike other players in the country, Dentsu is not an unbundled because Dentsu Media and Dentsu Digital are all part of the Dentsu India Group (DIG) with one profit and loss (P&L) statement. So to a great extent that enormously helps us in facilitating integration.

How has it worked for the agency thus far? Market believes the deal was fairly overvalued?

Not really. I don’t think the deal was overvalued. And honestly speaking, all that was quoted in the media was highly inflated. No one really knows the value as we have not talked about the deal size at all. So I am quite surprised if the market is calling it overvalued and I’d really not like to comment on such a market perception.

How challenging was the integration process? How did Dentsu deal with it?

It was not like we were setting up an agency or starting from zero because Dentsu already had an operational base in the Indian market. Integration is always challenging when there are a set of people who have already been in the organisation and one is bringing in fresh talent from the outside. To ensure that everyone (Japanese and Indian talent) worked harmoniously playing to each others’ strengths and understood how to take the new vision and culture of Dentsu forward was critical. While it certainly was a challenging task, everyone was focused around making it work and I am very happy with the end results.

Will 2013 also see some inorganic activities?

We are looking at scaling up on the digital front because that’s one of the core strengths of Dentsu Group. In the US as well as in Japan, there are state-of-the-art companies being acquired by Dentsu and we are exploring various options right now. While acquisition is one, we are keen to explore the option of bringing some of our global brands into India. The other fact is that through the Aegis acquisition we will have digital capabilities at our disposal like Isobar etc. We are evaluating all the options to identify the best way to build a compelling digital offering in India.

There were some reports about Dentsu acquiring Network18’s majority stake Webchutney.

We are exploring all our options at the moment. Yes we did meet Webchutney like we did 6-7 others in the process of exploring the possibility of acquisition. However, what the media reports have stated is baseless. Acquisition is only one of the many options and we are currently in the evaluation mode. Hopefully in the next 30-45 days we will have more clarity on what is the future course.

You earlier mentioned about bringing some of the global brands into India. Could you throw some more light on the same?

One of the things we are going to do very shortly is launching a number of Dentsu intellectual property (IP) in to India. Dentsu has an innovation centre in Japan where they work with Apple, Massachusetts Institute of Technology (MIT), Facebook etc to develop what is the next phase of consumer connect to technology. How do you create platform that consumers can use to connect with brands. Dentsu has enormous capabilities in this area and we are leveraging that strength. One of these technology platforms will be launched this month (third week of January), which will be for the first time in India. This will be the start of one of the big initiatives (with more to come) from Dentsu in the Indian advertising industry.

DTH and theatrical release of Kamal Hassan’s Vishwaroopam delayed

Actor producer Kamal Hassan's much awaited block buster film Vishwaroopam will not make it the television screens or for that matter the theatres and multiplexes on the scheduled date of its release.

A landmark development for the Indian film industry, Kamal Hassan had decided to premier his Rs 95-crore venture through DTH before its release in wide screens. The film was to be shown on the direct to home (DTH) platform on January 10, 2013 i.e. a day before its theatrical release on January 11, 2013. The DTH viewers would have had to pay Rs 1,000 for the Tamil version while it was Rs 500 for the Telugu and Hindi versions.

However, it so appears that Rajkamal films has failed to garner enough support from the multiplex / theatre fraternity that has been opposing the film’s DTH release.

Rajkamal Films’ media representative Nikhil Murugan did not respond to calls made on his cell number for an official confirmation.

The DTH players including the likes of Airtel Digitel, DishTV, Tata Sky etc. have however, already stopped taking bookings for the screening of Vishwaroopam on their respective networks.

Shashi Arora, CEO - DTH / Media, Bharti Airtel, said, “In-line with the postponement of the release date of the movie Vishwaroopam (Tamil & Telegu) / Vishwaroop (Hindi) across theaters and on the DTH platform by Rajkamal Films, we have stopped taking bookings for the movie premiere that was scheduled for January 10, 2013 at 9.30pm on Airtel DTH. The interest of our customers is paramount for us and regret the inconvenience caused to them. We are awaiting confirmation from Rajkamal Films on the revised dates.”

A Tamil-Hindi bilingual Indian spy thriller film written, directed and co-produced by Kamal Haasan that features Hassan in the lead role, Vishwaroopam also has Rahul Bose, Andrea Jeremiah and Jaideep Ahlawat in supporting roles. 

The soundtrack is composed by Shankar-Ehsaan-Loy, with lyrics by Vairamuthu and Kamal Haasan for the Tamil and Javed Akhtar for the Hindi versions respectively. The film was shot with the same cast in both languages simultaneously, and is titled in Hindi as Vishwaroop. 

It is the first Indian film, and second world film (after Red Tails) ever to be equipped with Auro 3D sound format.

According to Kamal Haasan the film is expected to earn Rs 350 crore (US$63.7 million).

For some hotels, green is the colour of bigger profit

This story first appeared in DNA Money edition on Monday, January 7, 2013.

Efficient eco-friendly practices have meant two Mumbai hotels – Meluha and Rodas, both located in Powai – save Rs1 crore and Rs29 lakh every year, respectively. Both are Ecotel-certified, a breed that’s increasing these days.

Ecotel is an environment certification administered by HVS, a hospitality-focused consulting and advisory firm. HVS claims Ecotel helps hotels enhance profits. By integrating efficient equipment and operating measures into standard business practices, Ecotel hotels enjoy reduced consumption of resources like energy and water; emissions and wastes, too, are lower.

Besides, some waste material is converted into wealth in the form of biogas. Despite initial costs, alternative energy resources like solar and windmills are encouraged. All this enhances overall performance, boosting both revenues and operations, says HVS.

Ecotel involves the entire value chain: owners, architects, operators, employees, suppliers and hotel guests. It even encompasses development of the local community. Hotels can apply for Ecotel at any stage of development, not just during construction.

Ecotel’s cost is Rs5 lakh, valid for two years. Later, hotels are re-certified (some for over ten years), provided they meet Ecotel standards and clear the property audit.

Ecotel, initially viewed as a mere marketing and branding exercise, has started gaining traction among hotel owners as the boost to profitability becomes clearer. “Fiscal benefits of operating sustainable hotels is becoming more and more known to the industry,” said Manav Thadani, chairman, HVS India.

The three upcoming Ecotel hotels will be operated under the Fern brand managed by Concept Hospitality, Asia’s largest operator of Ecotel-certified hotels.

According to Param Kannampilly, CMD of Concept, hotel asset owners are keen on Ecotel as it makes them stand out from the crowd. “Since the conversation on the environment has increased manifold, an increasing number of people want a differentiated product and want to do the right thing.”

What’s more, Ecotel norms increase the per-room cost by 10-15% at the most — something clients don’t mind paying. “A guest selects the hotel based on location and then brand. If an Ecotel hotel is in their location and if that facility and service quality are comparable, then most guests would opt to stay in an Ecotel hotel rather than a non-Ecotel hotel,” said Kannampilly. “At three years, the return on investment is much faster than non-Ecotel hotels.”

All the same, higher initial cost has kept the industry from adopting Ecotel, say experts. Vikram Vithal Kamat, executive director of Kamat Hotels, said building an Ecotel hotel is slightly expensive (10-12% higher) as there are restrictions on using certain types of building materials and refraining from using cheaper alternatives. “But while the capital outflow is on the higher side, asset owners tend to recover the cost faster because long-term maintenance cost is significantly minimised.”

Besides higher initial cost, increased construction cost, lack of knowledge on how to run an Ecotel hotel, lack of guidance on how to ace the intense scrutiny that precedes Ecotel certification are other reasons why hotel asset owners shied away from adopting Ecotel, industry observers said.

Media needs to be more than just a mirror of the society: Prasoon Joshi

An edited version of this story first appeared in DNA main edition on Monday, December 31, 2012.

Media is not only the mirror of the society, it also shapes the society. "While mirroring part is taken very seriously," feels Prasoon Joshi, president, McCann Worldgroup South Asia, "shaping is not and that's what I end up arguing with most media professionals including a few who are good friends."

Media, including the film and advertising fraternity, is often accused of commodifying women. There have been several instances of objectionable advertisements, portrayal of women in bad taste by a section of the fraternity. However, industry players feel putting everyone in the same basket is incorrect.

According to Joshi, such people exist in both the advertising and film fraternity. "You find all kinds of films, people and portrayals. Some people actually are very careful about it and would not try and objectify a women or unduly disrespect or degenerate her image. But at the same time there would be others who don't care and bother. As a result you see advertisements and films with objectionable content," said Joshi adding, it is for this reason there are various bodies to regulate such a mindset.

Media has been regarded as reflection of the society and mirror's what it sees across cultures in its communication and messages. While media has to be responsible and understand their limitations, it cannot hide facts. That said, Media also needs to follow certain rules, have a line of control, but some entities do go overboard in an attempt to play the TRP game.

"One tends to see a few instances of women being commoditised on television channels for high TRPs," said Raj Kamble, managing director, Strawberryfrog. "But the audience these days are smart enough and hence do not take them seriously. I can confidently say that a large section of media these days does a lot of sensible things and that's very commendable."

While there is no denying on media being the reflection of the society, is it really doing enough to bring in that much required a change? With atrocities happening time and again, is there a need for introspection in their approach to projecting women in a manner that instills a sense of confidence in addition to providing a safe and secure way of life for women in the country.

"Introspection is necessary anytime some atrocities happen. It should not be restricted only to the advertising and film fraternity but every other place, fraternity, discipline where there are women. They are all part of a society and media can not be singled out as the reason why this is happening or has happened," said Joshi.

Indian psyche, experts feel, is among the various reasons responsible for problems to occur. Nothing happens suddenly as it could be part of a larger consciousness of this country. "It's not as if the film makers in this era are responsible. To be fair, advertisements or films in the past have showcased women in a different light. You can go back and find things that are objectionable throughout," said a media professional.

What is it that can bring change then? The whole consciousness of the society needs to reject something which is objectionable, feels the media fraternity.

"One must understand that advertising or film is also a product. People should get conscious if there is something not acceptable and stop buying than looking upon it. No matter how much people consume pornography, people don't consume and accept it openly. If there is something that's objectionable to women, it should not be the decision of a few people of the society. A larger consciousness of the nation has to reject it," said Joshi.

He added, "When we talk about "dowry" or something like "sati", which is a thing of the past now, those are also part of our tradition and we have realised those are things we have to do away with. Larger consciousness of the society has rejected it and that is the approach really required today."

A section of the fraternity feels that advertising and films are about creating images and it would not be fair to single them out or hold responsible. "Media is a very easy target but there are many hidden layers in the society that are shaping this concept," said a media professional.

"If there is a fashion product and someone is walking the ramp, wearing a certain kind of dress and is very confident about herself, that is what needs to be looked at. Ye thodi ki, bori mein lapet ke aurat ko bitha dein... We have to respect her individuality, dreams and freedom of expression. If she wants to go out on her own she should be able to do that," he added.

Commenting on safety measures for girls/ women in various Indian cities, the fraternity is convinced that one cannot imagine a girl / women anywhere in the country saying that she wanted to watch a movie, bought the ticket and sat in the theatre all by herself. "Very rarely one would find a young girl alone in such public places. I hate people who say why did you go alone. What the hell? What are we talking about, what society are we talking about," said a top media professional with a leading advertising agency in Mumbai.

Secondly, in case of rape we have to remove one very important perception - that the women has been shamed. Why should she be shamed? It is the man who should be shamed. In fact the society should ostracise the rapist. Instead the rapist are celebrating and sitting in various powerful positions in the country. How can we let that happen? Everytime something like this happens, the victim has to go hide her face somewhere and the people who have done it are proudly roaming around in the society. Why such double standards?

"I consider today is a very positive phase because people like you and me are openly talking about it. It's a fact that people have never ever looked at rape so seriously in the past. That fact that people including media are asking questions, there is a sensitivity towards it, there is questioning attitude towards it. The fact that we are ready to introspect. I think it's a very positive sign," said Joshi.

Hyatt wants most preferred hotel tag across segments

This Q&A first appeared in DNA Money edition on Wednesday, Dec 26, 2012.

Ratnesh Verma

Ratnesh Verma, senior vice-president, real estate and development, Hyatt Hotels (Asia Pacific), is sure that the recently concluded unique management contract deal with IHHR Hospitality will be loaded with positives. He outlines what the growth engine looks like in India and much more. Edited excerpts:

What’s your growth strategy? How many hotels are you launching over the next two quarters?

Our growth strategy is not about planting in flags. We are not the largest hotel company and we don’t want to be one. Our objective is to be the most preferred hotel company across the segments we serve. Over the next six months, we are looking at opening some exciting hotels starting with Hyatt Regency hotels in Gurgaon and Ludhiana, Hyatt Place hotels in Hampi (opened last week) Pune, Bangalore, Andaz Gurgaon and Grand Hyatt Kochi.

You recently signed a deal with IHHR for introduction of Hyatt brand in India.

In fact, much before the IHHR deal, we’d already signed a Hyatt branded hotel in Raipur. This project is likely to get operational in another six months. The 110-room hotel is being developed by the Saraf’s – owners of Grand Hyatt Hotel and Residences at Vakola, Mumbai.

Is the IHHR deal uncommon in the Indian hospitality market?

It’s not entirely uncommon. In many situations, you do have owner-managed assets that are then managed by third-party specialist hotel companies. At some point in time, businesses reach a stage when they have to choose one option over the other. Promoters ask themselves if they want to be a hotel developer, owner or a hotel manager. Beyond a certain stage, from a scale point of view, the management requires a lot more investment of resources, time and commitment.

IHHR wants to continue being a hotel developer and focus on building assets.
So, the promoters have already identified their priorities. They also see a good fit with a company like Hyatt that will give their assets access to global distribution, marketing and brand equity in the country. Hopefully, we will be able to deliver a performance that would meet their expectations.

We are currently working with IHHR to go through some of the key changes that would then lead to branding of the hotels which we feel would be sometime between February and March 2013.

What changes are you likely to make to the Ista hotels’ portfolio?

I think the key changes are more from the operational point of view like plugging into the Hyatt point of sale (PoS) from a technology point of view. The collaterals will undergo changes as well. Most importantly, we are trying to incorporate changes that are customer touch related points because it is not just putting a name on the building but also delivering what the customer would expect from a Hyatt hotel. The Ista hotels will not undergo any structural change at all.

There are talks that the deal was done primarily to give Morgan Stanley (investor in IHHR) an exit?
 
I don’t think so. I have been dealing with key executives at IHHR, investors and the management team for over a year now. I can’t comment specifically on a market rumour, but what I can say is that they have been very unified and collective in driving this process.

Market sources also said Hyatt has invested $25 million for this deal.

Not at all. Hyatt is managing the hotels and we have no equity stake whatsoever in this transaction.

So, is Morgan Stanley still invested or does the London-based Bhanu Choudhrie’s C&C Alpha Group own a majority of IHHR Hospitality?
 
I am not sure if Morgan Stanley is still invested. There was some media report saying they have divested shareholding, but you’ll have to confirm it with them. The ownership structure is fairly spread with Choudhrie family as major shareholders.

Do future developments from IHHR automatically come to Hyatt with the signing of this agreement?

Our relationship with them is specific to the current portfolio of five hotels. As and when they build additional assets, we hope to be part of that development, but there is no understanding/guarantees from either side. Both Hyatt and IHHR will have to look at it on a case by case basis.

Travel companies rake it in as busy season comes good

This story first appeared in DNA Money edition on Sunday, December 23, 2012.

Nothing, it appears, can spoil the Indian traveller's holiday right now – not high airfares, nor a weak local currency. Travel and tourism companies are witnessing significant traction (both offline and online) for booking flight tickets, hotels, holiday packages and other allied services.

So much so, between October and December, the business may have grown a quarter over the corresponding period last year. "These are the peak travel months and business has been good both for domestic and outbound travel. The industry has grown by over 25% and packaged holidays have grown around 23%,\" said Arup Sen, director - special projects, Cox & Kings.

Within the overall business, the domestic holiday segment grew significantly higher than international. This, despite the airfare for domestic destinations witnessing substantial increase due to reduction in the number of flights.

Pratik Mazumder, head - marketing, Yatra.com, said travel portals have seen tremendous growth in the holiday business. "Over last year, our domestic business has seen more than 250% growth and the international outbound business more than 150% growth.”

As for international holidays, industry players said the depreciating rupee made foreign destinations more expensive for travellers this year. Movement in currency exchange rate affects the cost of holiday on the whole as hotel, accommodation, air tickets and visa charges fluctuate depending on the prevailing exchange rate.

"However," said Vishal Suri, deputy COO - tour operating, Kuoni India, "This led Indian travellers to identify alternative holiday options within their budget. A substantial number of travellers reduced the duration of their holidays and opted for shorter vacations. Budget travellers explored domestic holiday destinations. Weekend packages for destinations at drivable distances gained popularity."

Stimulating the demand for leisure travel, airlines had launched a 30-plus days Apex fares, offering 50% of their inventory at discounted rates. The strategy played well for the airlines, ensuring that over 40% of their seating capacity was booked well over 30 days in advance.

Noel Swain, executive vice president - supplier relations, Cleartrip, said, "The average pricing this year is 20-25% higher than what it was last year. The Apex fares bring the differential down to just about 10%. This gave customers a pricing advantage of 10-15% on airfares, which is a considerable benefit in terms of pricing for planning holidays in advance," said Swain.

"This year, people were smarter. They planned in advance and started booking early, since October, which is why we were sold out by early December. Besides, contrary to market perceptions that people would be cutting back on their travel spends, spends have increased considering average package costs are 10% higher than last year due to airport duties, taxes and higher hotel costs. Our standalone hotels business, where people are taking 'drivable distance' holidays, has also seen a nearly 100% growth," said Mazumder.

Industry players also indicated that average bookings (domestic air tickets) tend to decline marginally in December as most people are travelling between December 20 and January 5. However, the numbers are up marginally compared with November.

"Overall, there is a 4-5% increase in bookings compared with November and at Cleartrip, we have seen 13-15% increase over last year. On the hotel bookings front, the month-on-moth growth is about 35%. The numbers essentially mean there are a lot many people travelling in December this year compared with last year. This is a clear indication that December is going to be much better for the hotels and airline industries with very robust bookings through the Christmas week going past the new year," said Swain.

On the international front, Cleartrip has witnessed a 75% growth over last year. This is mainly because of increased capacity from low-cost carriers (Indigo, Spicejet) that launched multiple international destinations from India to the Middle East, SAARC and South East Asia, etc.

The focus is on free individual travellers, or FITs, who make up more than 65% of all international travel. "The FIT customers are the slightly evolved set of travellers who pretty much know what they want to do when in a particular destination and hence plan their own route and activities," said Suri.

DLF to sell Amanresorts in $300 m deal

This story first appeared in DNA Money edition on Thursday, December 20, 2012.

DLF, India’s largest realtor, has managed to sell its Amanresorts luxury hotel chain after scouting for a buyer for a long time. Five years after it bought the chain, DLF is selling Amanresorts back to its Indonesian founder Adrian Zecha for $300 million, or Rs 1,600 crore. The sale excludes Amanresorts’ flagship Lodhi Hotel in Delhi, which will be retained by the developer.

Under the deal, Zecha will acquire DLF’s 100% stake in Silverlink Resorts Ltd, the holding company for Amanresorts. However, it is unclear whether Zecha will partner with any investor for the transaction.

Sriram Khattar, senior executive director, DLF, said that Goldman Sachs and Citi Bank were appointed six months ago to find buyers. “Many were approached and I am happy that the portfolio is going back to the company’s founder,” he said. The deal is slated to be closed by February and a significant part of the proceeds would be used to cut debt.

DLF had acquired a 97% stake in Amanresorts, which had about 25 properties across the world, in November 2007 for $400 million or Rs 1,580 crore at the then exchange rate of Rs 39.80 for $1. The stake was raised to 100% later.
While the company was said to looking to sell the chain for over $350 million, experts said $300 million was a decent valuation.

“One needs to also consider that Lodhi Hotel is not part of the sale besides exchange rate in 2007 was much lower. The deal is to conclude next year in February so we’ll have to consider the exchange rate at that point in time,” said a top hospitality consultant.

Another industry source said, “While the present book value of Lodhi Hotel could be over $80 million, its market value is 2-3 times the book value. So if you add that to the $300 million valuation I think DLF has a very good deal.”

Analysts said the Amanresorts deal was is line with the company’s divestment guidance for the current fiscal. “The transaction is significantly positive for the stock. We value DLF’s hotel assets (including the New Delhi property) at Rs 1,970 crore, said Aashiesh Agarwaal, analyst with Edelweiss Research, in a note on the company.

The deal is also in line with the DLF’s target to bring down debt to Rs 18,500 crore this fiscal from Rs 21,200 crore. “We’d given guidance that strategic non-core asset divestments will bring Rs 5,000 crore, which will be achieved by the end of this year,” said Khattar.

With this deal, the company has sold Rs 4,750 crore of assets this fiscal.
“Further divestment in wind power business, which is in advance stages of negotiations, is expected to generate another Rs 900 crore,” said Agarwaal of Edelweiss.

‘2013 looks promising for Bollywood’

Komal Nahta

An edited version of this Q&A first appeared in DNA Money edition on Friday, December 28, 2012.

Year 2012 saw 163 Hindi films being released with the industry clocking net box office revenues of over Rs2,000 crore. Komal Nahta, noted film trade analyst discusses how the year has been for the industry, highlights and trends. Edited excerpts...

Could you briefly tell us how the calendar year 2012 has been for bollywood? What were the key highlights?

It's been a very good 12 months for the trade this time around. Although the success percentage (anything between 18% -  22%) of films that worked on the box office wasn't any different from the last few years, the differentiating factor this time around was that a lot of films did huge business. Nine films including the likes of Ek Tha Tiger, Rowdy Rathore, Agneepath, Barfi, Son of Sardar, Bol Bachchan, Housefull 2, Jab Tak Hai Jaan and the latest being Dabangg 2 registered net box office revenues of over Rs 100 crore with Ek Tha Tiger being the top grosser of the year at Rs 199 crore.

Secondly, all kinds of films worked be it comedy, horror, family drama, thriller, action etc did well at the box office. Interestingly, even women oriented films (Kahani starring Vidya Balan) that normally don't do well on the box office received huge praises, was acclaimed by the critics and the audience alike became a huge hit without a single recognisable face in the movie. Then there were some films with complete newcomers like Vicky Donor and Ishqzaade that became a big hit. So the audience appreciated every kind of a cinema in 2012 which was a good thing for bollywood.

What has really brought about this change in the audience?

In the last few years, film makers have realised that it is not just the stars who could get audience thronging to the theatres to watch a movie. While big stars could lure audience for one or two shows, the year 2012 has proved it is mainly the content of the film that is the main driver. As a result, each one has worked really hard on their scripts which is showing in terms of performance of their films at the box office.

While we have very often heard people saying scripts are the backbone of the films, a lot of producers and film makers would overlook this aspect when signing big stars because they somewhere felt huge starcast doesn't require a strong script. That mindset has changed big time. This apart, with so many channels mushrooming and the audience being exposed to world cinema sitting in their home, a taste for newer subjects has developed in a section of the audience which is big enough to make the film commercially viable.

With first few days from release deciding the fate of a movie, what kind of a change has that brought in the overall film making approach?

We have seen that trend getting stronger gradually as a result a section of the film makers have diverted their focus from the script and are focussing more on the promotion and marketing aspects. These film makers feel if they can hoodwink the public into coming into the cinemas for the first few days they have won the battle. It is easier to promote the film in the last 15-20 days than to work on the film's script for over 6-8 months. And you need to get a brainwave to get something new in the script while marketing is much easier. So 'apna kaam ho jaaega' attitude is certainly being noticed in some films.

Film marketing budgets would have shot up significantly in that case?

Absolutely. About three or four years ago, marketing budget for a big fils was in the Rs 4 - Rs 5 crore range. That number has increased to Rs 10-12 crore and even Rs 15 crore in case of really huge films.

We also saw films like Gangs of Wasseypur, Paan Singh Tomar etc. gaining huge traction. You think more such movies will get produced in the coming years?

Such movies getting acceptance in itself is really heartening because these movies would earlier get classified as 'art cinema' catering to a very small section of the audience. Today these movies are being released commercially all over the country in the smallest of the towns is a big change in the overall film consumption behaviour. In fact, 2013 will see another realistic movie titled Bhaag Milkha Bhaag featuring Farhan Akhtar and directed by Rakeysh Omprakash Mehra.

So 2013 is looking equally good or better?

It is looking good and we are hoping it will be much better than the year going by. A huge line of big films - not only actors but directors as well - are due for release. Prominent among them are Amir Khan's Dhoom 3, Shah Rukh Khan's Chennai Express, Hritik Roshan's Krrish 3, one movie each by Sohail Khan and Sajid Nadiadwala featuring Salman Khan, 4-5 releases by Akshay Kumar etc. so a host of big budget, big banner, big starcast films lined up. In fact, 2013 kick-starts with the big budget film Race 2, Kai Po Che! that are again content rich films.