Zee Ent beats Street, Goldman upgrades price, margin targets

This story first appeared in DNA Money editon on Wednesday April 20, 2011.

Zee Entertainment Enterprises Ltd on Tuesday said consolidated net profit for January-March rose a street-beating 49% year on year to Rs192 crore and consolidated net sales grew 23% to Rs798 crore. Consolidated operating profit, or earnings before interest, tax, depreciation and amortisation (Ebitda), for the quarter stood at Rs226.8 crore with Ebitda margins at 28.4%.

Ishan Sethi, Vaishnavi Kandalla and Pulkit Patni, analysts with Goldman Sachs, said raised Zee’s operating margin prediction by about 100 basis points to 25.8% due to this performance. They also upgraaded the target price for the stock to Rs135, in a note to clients on Tuesday.

For the last fiscal, operating revenues stood at Rs3,011.4 crore, while consolidated operating profit was Rs826.6 crore with an operating profit margin of 27.4%. Net profit was Rs623.6 crore.

Subhash Chandra, chairman, Zee, said the last fiscal was a significant year for the television media industry in several ways. “The number of television households witnessed a healthy growth. Similarly, advertising revenues bounced back after a slowdown in fiscal 2010, reflecting a buoyant recovery in the economy. The sector also saw some consolidation taking place. However, what was really encouraging is that digitisation continued to be the dominating theme,” he said.

The numbers for fiscal 2011 have been arrived at after consolidating the financials of Taj TV Ltd, a company statement said. Zee has also merged with itself the 9X business undertaking of 9X Media Pvt and ETC Networks with effect from March 31, 2010. “Post the merger of ETC Networks with Zee, the entire education business undertaking of Zee was demerged into a new listed company, Zee Learn Ltd, effective April 1, 2010. Hence, the numbers for this quarter are not strictly comparable on a like-to-like basis,” the statement said.

Punit Goenka, managing director and chief executive officer, Zee, said in a year which recorded a resurgence of advertising revenues on television, the company has outperformed the industry. “We ended fiscal 2011 on a good note, gaining viewership share across several genres, combined with improved revenue shares, better operating margin and increased cash flow. With our subscription revenues growing at a healthy pace, our overall revenues have recorded a 23% growth over the fourth quarter of last year. For fiscal 2011, our revenues grew 37%, while Ebitda grew 36%, despite increased losses in sports business,” said Goenka.

He said the (sports) losses were contained to Rs15.2 crore during the fourth quarter, in line with their earlier forecast. Goenka said that the company’s content focused approach combined with better monetisation of subscription revenues is expected to deliver steady returns in the year ahead.

‘Orchid’ won’t bloom for Bangalore hotels chain

This story first appeared in DNA Money edition on Thursday April 21, 2011.

Kamat Hotels India Ltd that owns and manages The Orchid ecotel hotels, has got an interim injunction against Bangalore-based Royal Orchid Hotels Ltd (ROHL) on the use of term ‘Orchid’ for their new hotel launches in the country.

A statement on this development from Kamat Hotels said the company had filed a trademarks case in the high court and the recent judgement bars Royal Orchid Hotels Ltd from using the word ‘Orchid’ for all their future projects.

“The court upheld the registered trademark as owned by Kamat Hotels, barring Royal Orchid from using the word Orchid. All existing names of the hotel under the banner of ROHL remain unchanged for the moment until this matter is finally decided by the court,” the statement said.

Speaking on the issue, Vithal Venkatesh Kamat, chairman and managing director, Kamat Hotels,said the management has been staving off similar incidences for a decade now.

“We have asked for a complete injunction and are entitled for the same as per trademarks rules and regulations. We will fight it out in the court and win the case inevitably. It is going to be a constant battle, but hopefully, with this judgement against Royal Orchid, it should pave the path for The Orchid to be our own private and registered trademark and not others to ride on.”

Chender K Baljee, founder, chairman and managing director, Royal Orchid Hotels in his response to the trademarks related court order said it is not a final judgement and that the matter is still sub judice.

“What happened was they (Kamat) filed a case saying we were using their Orchid brand to our advantage but there was no evidence given to prove it in court. We also provided the court with our defence saying we have always used Royal Orchid as our brand and our logo is very different too.”

“The court has only given them an interim injunction barring us to use the term ‘Orchid’ in any of future launches but our existing properties will continue with the Royal Orchid brand they are operating in. The matter is still sub judice and we will go in for an appeal against that order within a month so the case is not yet closed,” said Baljee.

On the possibilities of putting together a new brand altogether just in case the court orders a complete injunction, Baljee said it was too early for that. “We will disclose the details at an appropriate stage,” he said.

Valiant, Norwest and Intel Capital invest Rs 200 crore in Yatra.com

It's raining dollars for online travel portal companies operating in the Indian market. Just a few days ago Cleartrip.com raised $40 million (approximately Rs 180 crore) from Concur and now it's Yatra Online Pvt Ltd that has received a little over $40 million (approximately Rs 200 crore) funding from investors like Valiant Capital Management, Norwest Venture Partners (NVP) and Intel Capital.

The investment, Yatra said in an official statement, will help accelerate growth plans by enabling the company to increase sales and marketing activities, expand its hotels and holidays business and selectively pursue strategic acquisitions.

Dhruv Shringi, chief executive officer, Yatra, sais, the company has witnessed exponential growth over the last four years and is now one of the leading brands and household names in India. "This round of funding will enable us to broaden our reach and brand awareness in Tier II and Tier III towns, which are experiencing tremendous growth in e-commerce. In addition, we will use the funds to accelerate our expansion in the hotels and holidays segments," he said.

A leading consolidator of travel products, Yatra.com provides reservation facility for more than 3,800 hotels across 336 cities in India and over 90,000 hotels around the world.

“When we made a seed investment in Yatra.com in 2006, the online travel market in India was still at a nascent stage, but there was a tremendous need for innovation in this sector. We were confident that Yatra was at the forefront of the changing face of travel in India and the company was poised for tremendous growth,” said Promod Haque, managing partner at Norwest Venture Partners and Yatra chairman and board member.

$40 million gives Concur minority interest in Cleartrip

Nasdaq-listed Concur, a leading provider of integrated travel and expense management solutions, has got into a strategic alliance with privately held online travel portal Cleartrip. The arrangement between the duo consists of both a marketing partnership and a $40 million strategic investment for a minority interest in Cleartrip. This alliance, according to company management, aligns with Concur’s strategic initiatives to expand customer base while also entering new geographies, including Concur’s new operations in India.

According to Steve Singh, chairman and chief executive officer, Concur, The Indian economy is fueling a travel sector that is expected to grow to over $20 billion by 2012. "As a global technology provider, we understand that it’s critical to focus on the local needs of each market in which we operate. In partnership with Cleartrip, Concur plans to leverage the synergies of our combined technologies to help us expand our offerings, extend our reach, and make business travel easier for the millions of travelers in India,” he said. Concur is a leading provider of integrated travel and expense management solutions for companies of all sizes. Concur’s easy-to-use web-based and mobile solutions help companies and their employees control costs and save time.

Launched in July 2006, Cleartrip is one of the leading online travel companies in India. Sandeep Murthy, chairman, Cleartrip considers this partnership with Concur as a strategic opportunity that will provide enhanced benefits to the Indian business travel market. "We have built a broad and loyal base of customers who value our simple and smart approach to travel. With a strategic partner in the form of Concur, we will together drive this dynamic category, by helping Indian businesses of all sizes achieve new levels of efficiency in travel and expense management, through enhancements in technology and product offering as well as superior service."

M&A deal value up 270% in January-March

This story first appeared in DNA Money edition on Saturday, Apr 16, 2011.

With the economy gaining momentum, merger and acquisition (M&A) activity, too, has started gathering furious pace.

M&A deals involving Indian companies rose 270% in January-March 2011 to touch $18.3 billion over the numbers reported in the first quarter of last year, according to data by Mergermarket, an independent M&A intelligence service.

Thirty five out of the 57 transactions were inbound deals (over 61%), compared to 27.1% for China and 14.3% for Japan. All the top five deals in value terms were cross border - four inbound and one outbound.

“What was more significant is that the total worth of inbound Indian deals ($16.9 billion) reached unprecedented figures,” Mergermarket said.

M&A advisors say that economic cycle has reasonably or fully recovered, which is showing up in the form of increased traction.

“The economic cycle recovery started around mid 2009 and the momentum continued in the next year as well. That is the key reason behind increase in deal making. There is a change in the base effect, which is evident from the increase in the deal value, though number of deals hasn’t seen a similar growth,” said a senior official from one of the top advisory firms.

Among big-ticket deals, acquisition of Paras by Reckitt Benckiser and International Paper’s acquisition of Andhra Pradesh Paper stand out- especially the latter. Experts say it is the first time that a public company has received such high premium (240%) that too in the paper business, which is not perceived to be very attractive.

“Overall, the M&A volumes will remain and only grow from here. I am certain that we will see strong momentum on the back of economic recovery,” said Gaurav Deepak, co-founder and managing director, Avendus Capital.

Experts said an intrinsic value benchmarking has begun in the Indian market wherein strategic buyers are driving value creation and value discovery, which augur well for the Indian business environment.

While sentiments have improved in the last 12 months, the economic activity was subdued in Q1 of 2010 and the January-March 2011 numbers also included two large deals.

Besides, time taken to conclude these deals is also a key differentiator, feel experts.

“Typically, a cross-border M&A deal for any large corporate is spread over 4 to 5 quarters while it is 6 to 9 months in case of a domestic transaction. In 2009, no corporate was even thinking about doing M&A as focus was largely to swim out of the rough recessionary waters,” said Deepesh Garg, director, o3 (Ozone) Capital Advisors.

The confidence started building in 2010 as a result companies began negotiating deals all over again. So deals that are getting announced in the last few months are the transactions that were in various stages of due diligence and got concluded in the first quarter of 2011, he said.

“In the last 12 to 16 months, corporates stayed bullish, which is largely the reason behind a bunch of deals getting concluded,” he said.

On the impact of long gestation period on deal value, industry experts feel a lot of it depends on how the company has performed in that period, performance of the market, additional bidders for the company, etc. “I wouldn’t say there is a significant change in the deal value from the time negotiation starts to its actual conclusion. However, in case of auctions, the valuations do tend to sway 30% to 40% either ways, depending on the kind of response a particular asset generates from the market,” said a senior official from a leading domestic advisory firm.

On the outlook, experts feel that current traction will continue if economy doesn’t slow down in the coming months. “If everything continues the way it is I am sure the momentum will only pick pace from here with more and more deals getting announced in the coming quarters. From what we have gathered through our interactions with large corporates globally, every strategic presentation has pieces of India as part of their strategy which clearly shows there is a lot of global interest in the Indian market,” said Garg.

Trent honcho jumps ship to MobileStore

This story first appeared in DNA Money edition on Wednesday, Apr 13, 2011.

Essar Group company The MobileStore Ltd (TMS) has appointed the Tata group veteran Himanshu Chakrawarti as its chief executive officer.

Chakrawarti joins the group from Landmark, the leisure retail format of Tata group company Trent Ltd, where he was the chief operating officer.

When contacted, Chakrawarti declined to comment on his appointment.

An Essar Group spokesperson, however, confirmed the development about him joining TMS. “Chakrawarti’s rich multi-category retail experience will provide vital strategic lead to take TMS to the next level of accelerated growth, which now includes consumer durables and information technology retail also,” the spokesperson said.

Chakrawarti replaces Srikant Gokhale, who is believed to be pursuing opportunities in the teaching space. Chakrawarti is likely to take charge within a week.

A graduate from IIT Kanpur, Chakrawarti joined Trent in November 2000. On Chakrawarti’s replacement, a senior Trent official said, “Ashutosh Pandey who deputy COO has been elevated and is now Landmark’s chief operating officer.”

Blue Coast to invest Rs1,500 crore in three hotels

This news story first appeared in DNA Money edition on Wednesday, Apr 13, 2011.

New Delhi-based Blue Coast Hotels that owns the Park Hyatt Goa is setting up three hotels in North India.

Senior company officials said like their flagship project in Goa, the new hotels will be landmark properties and managed by different international hotel chains.

“We have already tied up with international hotel management companies to brand and operate the upcoming properties. The 500-room Delhi hotel will be managed by the Las Vegas-based MGM Mirage Hospitality under its two brands MGM Grand and Skylofts, while those coming up in Chandigarh and Amritsar will be managed by Starwood Hotels & Resorts under Sheraton brand. The hotels will open in another two to three years,” said a senior company official.

The new developments will entail an investment of Rs 1,300-1,500 crore, which will be funded through a mix of internal accruals and debt. In all, the new hotels will add over 850 guest rooms taking the company’s total inventory to over 1,100. The projects will be owned under two subsidiary companies — Golden Joy Hotel Pvt Ltd and Silver Resort Hotel India Pvt Ltd. The companies were incorporated by Blue Coast in fiscal 2010 to execute its hospitality expansion plans.

Blue Coast had introduced of India’s first Park Hyatt branded resort and spa in 2002-03. The 250-key five-star deluxe Park Hyatt Goa Resort & Spa is located at Arossim beach, Goa.

Warburg Pincus invests $100 mn in NDR's logistics company Continental Warehousing

An edited version of this news story first appeared in DNA Money edition on Tuesday, April 12, 2011.

Warburg Pincus is acquiring minority stake in a leading logistics service provider NDR Group's flagship company Continental Warehousing Corporation (Nhava Seva) Ltd (CWCNSL). Indian affiliate of the global private equity major, Warburg Pincus India Pvt Ltd will invest up to $100 million in Continental Warehousing through a mix of primary and secondary placements. The new investment will be Warburg's fourth in the Indian market in the last 12 months.

Officials from both Warburg Pincus India and Continental Warehousing refrained from sharing details on secondary transactions related to this placement. Industry sources however, said, “One of its existing investors, IL&FS Investment Managers Ltd (IIML) will exit completely while a few others are likely to divest partially.”

Accordingly, IL&FS Investment Managers which had invested around $7 million in Continental Warehousing three years ago will be selling its entire stake to Warburg Pincus India. Other investors like Aureos India Fund and ePlanet Venture who came on board collectively investing $16 million in 2009 are understood to be in negotiations with Warburg's Indian affiliate on their mode of exit.

As for investing in Continental Warehousing is concerned, Vishal Mahadevia, managing director, Warburg Pincus India, said, the investment firm has been actively investing in the logistics space globally. “Within India, we have two investments not directly though in a third-party logistics service provider viz. Gangavaram Port Ltd (port infrastructure company) and IMC Ltd (logistics provider of bulk liquid storage). Continental Warehousing is our first investment in a third-party logistics, infrastructure company,” he said.

Pioneers in the logistics segment, the NDR Group has an integrated national network of logistics and related infrastructure facilities across 50 centres in the country and a large client base. This investment in CWCNSL, according to company management will largely be used to fund the expansion of its businesses and strengthen its position as an end-to-end logistics solutions provider by developing rail-linked inland container depots at various locations across the country.

According to N Amrutesh Reddy, executive director, Continental Warehousing, the size of the company is approximately Rs 1,000 crore and has been registering a year-on-year growth in the range of 70% to 100% in the last three years. “The investment from Warburg will be used for organic growth where we will be putting up rail-link inland container depots (ICDs), and container terminals and domestic hubs as they are all linked by rail and are very capital intensive in nature,” said Reddy.

The Indian logistics market is currently pegged at around $75 billion and growing rapidly. Industry experts are of the opinion that Indian corporates and customers are till early in their adoption cycle of the total supply chain solutions.

“If you look at some industry estimates, only 10% of logistics functions in India are estimated to be outsourced to the organised players. The figure is anywhere between 40% to 80% in more developed economy. However, the advent of GST and other improvements is a great opportunity for leading players like NDR to benefit and help reduce their customers' costs and also re-engineer the overall supply chain,” said Mahadevia.

Outlining the opportunities and challenges faced by the fraternity, Reddy feels introduction of GST will be a great boon for the existing players in the market. “While I don't see any other significant challenge, I think acquiring land parcels for the rail link ICDs at times proves to be difficult task. There is no government participation in this area and has to be done with private players only,” he said. On their listing plans, Reddy said that Continental Warehousing would ideally look to go public in another three years from now.

IHG, Marriott partner funds to invest in India

This story first appeared in DNA Money edition on Thursday April 7, 2011.

International hotel chains that have been mostly managing hotels in India are finally betting their own money on the Indian hospitality market.

They are taking equity positions in upcoming mid-market business hotels, if the recently concluded two deals are any indication.

InterContinental Hotels Group (IHG), the world’s largest hotel group by number of rooms, has signed a joint venture agreement with Duet India, a hotel investment fund, to set up 19 Holiday Inn
Express hotels across India.

Similarly, Marriott International, America’s largest hotel chain, has formed a joint venture with a newly formed hotel fund — Samhi Hotels Pvt Ltd — to build a chain of 15 Fairfield branded hotels in the country.

Interestingly, this is for the first time that international hotel companies are investing in hotels rather than doing pure-play management contracts.

“It’s a very positive development showcasing the confidence level in the Indian hospitality market and the willingness from international hotel chains to actually invest as against management and franchising. This certainly paves the way for more such arrangements,” said a top official from a leading hospitality consulting firm requesting anonymity.

Paul Logan, vice president - development, IHG Asia Australia, said, his company will hold a 24% stake by investing $30 million in the venture formed with Duet India.

“The decision to invest was motivated by the fact that Duet very well understood the hospitality space, the team has vast experience in developing hotels in the country and most importantly, it has demonstrated capability by opening two hotels,” said Logan. Navneet Bali, chief investment officer, Duet India, said a new JV entity - Duet Smart Hotels (India) Ltd - has been instituted with a corpus of $150 million. “We have already identified a few sites in cities like Ahmedabad, Hyderabad, and Chennai for developing the first few Holiday Inn Express hotels.

The Ahmedabad property is scheduled to open mid next year. We are already looking at a host of sites across Tier I, II and a select few Tier III markets and hope to close the transactions post the final due diligence. All 19 hotels with a total of approximately 3,300 guestrooms will be operational in three to five years from now,” he said.

Bali said his fund is open to more such partnerships with other hotel chains.

Marriott will take 30% stake in its joint venture with Samhi, according to a report in the Wall Street Journal, which will decrease to 10% over time. The venture is expected to operate around 15 mid-tier hotels in India by 2015.

Samhi Hotels, the investment fund, has been set up by Steve Rushmore, founder of hotel consulting group HVS, Ashish Jakhanwala, a former development director with Accor India / InterGlobe Hotels and Manav Thadani, a former HVS honcho. Samhi will raise around $150 million in a first round of financing from GTI Capital Group, an India-focused private investment and advisory firm and expected to raise up to $250 million by 2012 or 2013, the report said, quoting Jakhanwala.

Marriott to open 6 hotels this year

This story first appeared in DNA Money edition on Wednesday April 6, 2011.

Global hospitality major Marriott International will open six hotels in India this calendar year, adding 1500 guestrooms to its inventory in the country.

With the launches, the total guestrooms of the US-based company in India would rise to 5,000 rooms and the number of operational hotels to 18.

Rajeev Menon, area vice president, India, Pakistan, Maldives and Malaysia for Marriott International Inc, said growth is the big focus for his company in India. “We have 12 hotels in the India portfolio and are gearing up to open three more in the next 60 days. These will include a JW Marriott in Chandigarh (165 rooms), a Marriott in Jaipur (365 rooms) and a Courtyard by Marriott City Centre in Pune (178 rooms),” he said.

During October to December 2011 Marriott plans to open three more hotels — JW Marriott in Bangalore (300 rooms), Courtyard by Marriott in Bhopal (150 rooms) and a JW Marriott in Chennai (380 rooms). All the hotels in India so far are under management contracts with different asset owners.

“From growth perspective as one of the fastest growing international brands, we will be in the top league with 18 operational hotels across upscale, upper upscale and luxury brands in India,” said Menon.

While Rahejas own the Bangalore JW Marriott, Viceroy Hotels is the asset owner of JW Marriott in Chennai. Incidentally, Viceroy is in the process of hiving off the two developments to reduce its debt burden.

Marriott, however, is optimistic that JW Marriot Chennai will open this year.

“Delays are quite typical for any new hotel opening in India and may take three to six months more from the original schedule. We don’t foresee any delay but in case there is, the Chennai hotel will start receiving guests early 2012. Our Renaissance Hotel in Bangalore (also owned by Viceroy) is scheduled to open sometime mid-2012 and is not part of the 2011 plans,” said Menon.

Marriott will also introduce its Fairfield Inn & Suites brand of hotels in the mid-market business hotel segment.While management contracts would remain the key driver for Fairfield’s growth in the initial stage, Marriott may to take franchise route to expand its presence at a later stage.