This story first appeared in DNA Money edition on Friday, May 3, 2013.
GlaxoSmithKline Consumer Healthcare is significantly stepping up its capex as it plans to spend this fiscal the combined amount it spent in the last three years.
“Money will be spent on balancing equipment at some our factories at Nabha, Rajahmundry and Sonepat, thereby increasing throughput there. Then we have various cost engineering projects in addition to acquiring office space to house new employees,” Ramakrishnan Subramanian, director-finance, said on an earnings call.
For the first quarter of this fiscal, GSK reported a 20% year-on-year increase in net profit at Rs 156.41 crore, while sales rose 16% to 975.38 crore. GSK in the last three years spent around Rs 250 crore towards capex, including for a plant in Sonepat, Haryana.
“This year again we have a Rs 250 crore plan because of a lot of other things, including the office which is a huge expenditure for the company,” said another official.
The company would add more outlets to its distribution reach of 8 lakh outlets this year and focus on rural markets. “Our intention is to reach 50,000 villages by 2016,” said Subramanian.
With competition getting aggressive and doling out heavy discounts, GSK has adopted a different approach to tackle the situation. “We are focusing more on brand building activities coupled with introduction of premium products,” said Subramanian.
Sunday, 5 May 2013
Cabinet clears Phase-III FM radio auction
My colleague Priyanka Sahay co-authored this story appearing in DNA Money edition on Thursday, May 2, 2013.
The Cabinet on Wednesday approved the empowered group of ministers' (EGoM's) decision to e-auction 839 FM radio channels in 294 cities through private agencies. This ends the over two-year-long wait for the third phase of expansion of the private FM radio network (FM-3) in the country. The new FM radio frequencies will be opened for cities with a population of above one lakh. Currently, 86 cities are covered by FM radio services.
Wednesday's decision is part of amendments to the policy guidelines for the third phase of FM expansion, said finance minister P Chidambaram.
The migration fee, to be decided after consultations with telecom regulator Trai, will be charged from existing operators upon their migration from Phase-II to Phase-III. The specific departures from the Request for Proposals (RFP) format followed by the Department of Telecommunications (DoT) for auction of 3G and broadband wireless access spectrum proposed by the EGoM — circulated as annexure to the agenda note — for the FM radio auction were also approved with some amendments.
It has also been decided that the additional channels that may become available due to a reduction in the inter-channel spacing to 400 KHz from 800 KHz earlier could be considered subsequently, after feasibility studies are completed.
FM radio players hailed the Cabinet decision.
"We are looking forward to a fair and transparent e-auction. Our investment decisions will be driven by payback and IRR (internal rate of return) and the future projected growth of key markets," said Tarun Katial, CEO, Reliance Broadcast Network Ltd, whose '92.7 Big FM' radio reaches 45 cities and over 1,200 towns.
Apurva Purohit, CEO, Music Broadcast (RadioCity 91.1), was also gung-ho. "Being a pan-India player, we will certainly be looking to expand our footprint," she said.
Purohit, in fact, said her company has already worked out details like investment during the bidding process and capital expenditure. "We are a debt-free company with strong backing of financial institutions and private equity investors."
Similarly, 94.3 MY FM officials said they are ready for the e-auctions. Their focus will be only on Tier II and Tier III towns where the company already has a presence through its print business. "Being part of D B Corp which has an impressive cash balance, we should be able to meet the capex requirement through internal accruals," said an official.
In order to prevent monopoly, no group will be allowed to have more than 15% of all the channels, except in the North-East, Jammu and Kashmir and some Union Territories.
Uday Kumar Varma, secretary to the information and broadcasting ministry, had said earlier that the government will earn a revenue of Rs 1,500 crore from the e-auction which is expected to be completed in one year.
A CII-Ernst & Young report said earlier this year that the FM radio segment is expected to grow by Rs 2,300 crore at a compounded annual growth rate of 18% within three years after Phase-III.
The Cabinet on Wednesday approved the empowered group of ministers' (EGoM's) decision to e-auction 839 FM radio channels in 294 cities through private agencies. This ends the over two-year-long wait for the third phase of expansion of the private FM radio network (FM-3) in the country. The new FM radio frequencies will be opened for cities with a population of above one lakh. Currently, 86 cities are covered by FM radio services.
Wednesday's decision is part of amendments to the policy guidelines for the third phase of FM expansion, said finance minister P Chidambaram.
The migration fee, to be decided after consultations with telecom regulator Trai, will be charged from existing operators upon their migration from Phase-II to Phase-III. The specific departures from the Request for Proposals (RFP) format followed by the Department of Telecommunications (DoT) for auction of 3G and broadband wireless access spectrum proposed by the EGoM — circulated as annexure to the agenda note — for the FM radio auction were also approved with some amendments.
It has also been decided that the additional channels that may become available due to a reduction in the inter-channel spacing to 400 KHz from 800 KHz earlier could be considered subsequently, after feasibility studies are completed.
FM radio players hailed the Cabinet decision.
"We are looking forward to a fair and transparent e-auction. Our investment decisions will be driven by payback and IRR (internal rate of return) and the future projected growth of key markets," said Tarun Katial, CEO, Reliance Broadcast Network Ltd, whose '92.7 Big FM' radio reaches 45 cities and over 1,200 towns.
Apurva Purohit, CEO, Music Broadcast (RadioCity 91.1), was also gung-ho. "Being a pan-India player, we will certainly be looking to expand our footprint," she said.
Purohit, in fact, said her company has already worked out details like investment during the bidding process and capital expenditure. "We are a debt-free company with strong backing of financial institutions and private equity investors."
Similarly, 94.3 MY FM officials said they are ready for the e-auctions. Their focus will be only on Tier II and Tier III towns where the company already has a presence through its print business. "Being part of D B Corp which has an impressive cash balance, we should be able to meet the capex requirement through internal accruals," said an official.
In order to prevent monopoly, no group will be allowed to have more than 15% of all the channels, except in the North-East, Jammu and Kashmir and some Union Territories.
Uday Kumar Varma, secretary to the information and broadcasting ministry, had said earlier that the government will earn a revenue of Rs 1,500 crore from the e-auction which is expected to be completed in one year.
A CII-Ernst & Young report said earlier this year that the FM radio segment is expected to grow by Rs 2,300 crore at a compounded annual growth rate of 18% within three years after Phase-III.
Cyrus P Mistry gets a younger council to helm Tata Sons
This story first appeared in DNA Money edition on Wednesday, May 1, 2013.
In the first major organisational restructuring since Cyrus P Mistry took the reins, Tata Sons, the holding firm of the over-$100 billion salt-to-software Tata Group, on Tuesday announced the formation of a group executive council (GEC), which will provide strategic and operational support to the chairman.
The GEC, set up under the aegis of the Tata Sons board, will assume the roles and responsibilities earlier performed by the group corporate centre (GCC) and group executive office (GEO) and will report directly to Mistry, the company said in a release.
It would be chaired by Mistry and comprise top executives of the group, including the newly appointed group chief human resources officer N S Rajan effective May 9.
Rajan replaces Satish Pradhan, who was earlier the executive vice-president in charge of group human resources at Tata Sons.
Among the initial members of the GEC are Mukund Govind Rajan, who will oversee brand, communication, ethics and corporate social responsibility and Madhu Kannan, who will head business development and public affairs.
“Other appointees to the GEC will be announced in due course,” the release said.
The GEC members will be assigned responsibilities by the chairman to lead various strategic functions, besides serving as nominees of Tata Sons on the boards of group companies.
The agenda of the GEC, Tata Sons said in the release, will include, “return on investment with a long-term perspective; support for and shaping of the agenda for philanthropy; preserving and enhancing the reputation of the Tata name; defining and driving a Tata way of working for group companies; and playing a proactive role so that the group fulfils its responsibility as a global corporate citizen”.
The move brings down the average age of the advisory council by around 20 years, said experts.
“The new council comprises younger professionals who are very much his age. Besides being talented, the new council members are of a different mindset, will bring in fresh thoughts and are more in tune with the way the new Tata Sons chairman would like to seek advice,” said Gita Piramal, business historian and author of Business Maharajas. She described the move as “standard procedure” in large corporate houses every time there is a change at the top-most management position.
Comparing Mistry’s approach with that of Ratan Tata’s, Piramal said Tata had inherited a less cohesive group. “Over the decades that he was head of the group, the first part went in welding it together,” she said.
In comparison, Aditya Birla inherited a very cohesive group and he brought in people of his age, said Piramal. “Kumar Birla inherited at a time when the group was in the execution stage because a lot of new projects were initiated and then unfortunately Aditya Birla passed away. At that juncture, Kumar Birla brought in a few people but he kept the old people to ensure smooth flow of the already commissioned projects,” she said.
“So I’d say Cyrus Mistry is where Aditya Birla was.”
In the first major organisational restructuring since Cyrus P Mistry took the reins, Tata Sons, the holding firm of the over-$100 billion salt-to-software Tata Group, on Tuesday announced the formation of a group executive council (GEC), which will provide strategic and operational support to the chairman.
The GEC, set up under the aegis of the Tata Sons board, will assume the roles and responsibilities earlier performed by the group corporate centre (GCC) and group executive office (GEO) and will report directly to Mistry, the company said in a release.
It would be chaired by Mistry and comprise top executives of the group, including the newly appointed group chief human resources officer N S Rajan effective May 9.
Rajan replaces Satish Pradhan, who was earlier the executive vice-president in charge of group human resources at Tata Sons.
Among the initial members of the GEC are Mukund Govind Rajan, who will oversee brand, communication, ethics and corporate social responsibility and Madhu Kannan, who will head business development and public affairs.
“Other appointees to the GEC will be announced in due course,” the release said.
The GEC members will be assigned responsibilities by the chairman to lead various strategic functions, besides serving as nominees of Tata Sons on the boards of group companies.
The agenda of the GEC, Tata Sons said in the release, will include, “return on investment with a long-term perspective; support for and shaping of the agenda for philanthropy; preserving and enhancing the reputation of the Tata name; defining and driving a Tata way of working for group companies; and playing a proactive role so that the group fulfils its responsibility as a global corporate citizen”.
The move brings down the average age of the advisory council by around 20 years, said experts.
“The new council comprises younger professionals who are very much his age. Besides being talented, the new council members are of a different mindset, will bring in fresh thoughts and are more in tune with the way the new Tata Sons chairman would like to seek advice,” said Gita Piramal, business historian and author of Business Maharajas. She described the move as “standard procedure” in large corporate houses every time there is a change at the top-most management position.
Comparing Mistry’s approach with that of Ratan Tata’s, Piramal said Tata had inherited a less cohesive group. “Over the decades that he was head of the group, the first part went in welding it together,” she said.
In comparison, Aditya Birla inherited a very cohesive group and he brought in people of his age, said Piramal. “Kumar Birla inherited at a time when the group was in the execution stage because a lot of new projects were initiated and then unfortunately Aditya Birla passed away. At that juncture, Kumar Birla brought in a few people but he kept the old people to ensure smooth flow of the already commissioned projects,” she said.
“So I’d say Cyrus Mistry is where Aditya Birla was.”
How Tata Group is harnessing the innovation within
This story first appeared in DNA Money edition on April 29, 2013.
Last year, Tanishq, the jewellery arm of Titan Industries, was faced with a daunting task. It wanted to ramp up capacity for making gold coins using powder metallurgy technology. But an intermediate step in the process posed a roadblock – removing moisture from gold powder.
The process typically took 16 hours because of the type of furnaces used in the gold industry. To ramp up capacity, Tanishq would have to either set up more furnaces or look for an alternative method to really speed up the process.
It posted the challenge on Tata InnoVerse, the Tata Group’s in-house networking platform, created by the Tata Group Innovation Forum (TGIF), which was instituted in 2007 under the umbrella of Tata Quality Management Services (TQMS).
“The solution came (within the 40-day window offered for responses) from a manager at Tata Housing who, using his experience in the pharmaceutical industry, suggested using fluid bed dryers,” says Mukund Govind Rajan, brand custodian and chief ethics officer, Tata Sons.
The drying time is down to barely an hour today. “That’s an example of how the process works and the value of creating this kind of platform,” says Rajan.
Another interesting idea came from a young employee at Tata Teleservices, who questioned the need for going to an optician for eye-testing as against doing it sitting at home.
“It was a great idea, resulting in the creation of an internet-based method for eye-testing. The idea has travelled from being a concept to final implementation in the last 12 months,” says Ravi Arora, vice-president, innovation, TQMS, Tata Sons. Going by him, some 4 lakh people are using the online testing methodology already.
Harnessing such innovative ideas across Tata group companies is Tata InnoVerse. In the last three years, the platform has generated 33,500 ideas, of which 1,976 were selected and 265 eventually implemented.
Going by Rajan, a good 42% of the ideas of Tata InnoVerse came from outside the Tata company concerned, “which clearly indicates the way collaborations across the group are really finding ways.”
The second vehicle TGIF created last year is a bi-annual programme called Challenges Worth Solving (CWS), which was piloted last year and is in its first year of implementation.
According to Sunil Sinha, chief - group quality management services, Tata Sons, a focused group of top management across Tata companies is involved in identification of challenges and selecting the solutions. “This year, 28 challenges were posted on CWS by senior Tata leadership. These generated 3,764 ideas, of which, eventually, 25 were selected for implementation,” says Sinha.
To be sure, chairman Cyrus Mistry has harped on innovation – besides customer centricity – as a means to differentiation in the market place.
The group currently spends a little over $2 billion (Rs 11,000 crore), or 2% of its total revenues, on research and development (R&D). While it hopes to increase its R&D spend in the coming year, a lot of focus will also be laid on identification and optimisation of the big impact ideas for the benefit of the company.
“In the first 3-4 years, we looked at numbers because we wanted people to think creatively. The numbers have significantly increased from 100-odd in 2007 to almost 3,000 entries in 2013. Now the time has come to look at the quality of innovation/ ideas that can have a greater impact,” says Sinha
Last year, Tanishq, the jewellery arm of Titan Industries, was faced with a daunting task. It wanted to ramp up capacity for making gold coins using powder metallurgy technology. But an intermediate step in the process posed a roadblock – removing moisture from gold powder.
The process typically took 16 hours because of the type of furnaces used in the gold industry. To ramp up capacity, Tanishq would have to either set up more furnaces or look for an alternative method to really speed up the process.
It posted the challenge on Tata InnoVerse, the Tata Group’s in-house networking platform, created by the Tata Group Innovation Forum (TGIF), which was instituted in 2007 under the umbrella of Tata Quality Management Services (TQMS).
“The solution came (within the 40-day window offered for responses) from a manager at Tata Housing who, using his experience in the pharmaceutical industry, suggested using fluid bed dryers,” says Mukund Govind Rajan, brand custodian and chief ethics officer, Tata Sons.
The drying time is down to barely an hour today. “That’s an example of how the process works and the value of creating this kind of platform,” says Rajan.
Another interesting idea came from a young employee at Tata Teleservices, who questioned the need for going to an optician for eye-testing as against doing it sitting at home.
“It was a great idea, resulting in the creation of an internet-based method for eye-testing. The idea has travelled from being a concept to final implementation in the last 12 months,” says Ravi Arora, vice-president, innovation, TQMS, Tata Sons. Going by him, some 4 lakh people are using the online testing methodology already.
Harnessing such innovative ideas across Tata group companies is Tata InnoVerse. In the last three years, the platform has generated 33,500 ideas, of which 1,976 were selected and 265 eventually implemented.
Going by Rajan, a good 42% of the ideas of Tata InnoVerse came from outside the Tata company concerned, “which clearly indicates the way collaborations across the group are really finding ways.”
The second vehicle TGIF created last year is a bi-annual programme called Challenges Worth Solving (CWS), which was piloted last year and is in its first year of implementation.
According to Sunil Sinha, chief - group quality management services, Tata Sons, a focused group of top management across Tata companies is involved in identification of challenges and selecting the solutions. “This year, 28 challenges were posted on CWS by senior Tata leadership. These generated 3,764 ideas, of which, eventually, 25 were selected for implementation,” says Sinha.
To be sure, chairman Cyrus Mistry has harped on innovation – besides customer centricity – as a means to differentiation in the market place.
The group currently spends a little over $2 billion (Rs 11,000 crore), or 2% of its total revenues, on research and development (R&D). While it hopes to increase its R&D spend in the coming year, a lot of focus will also be laid on identification and optimisation of the big impact ideas for the benefit of the company.
“In the first 3-4 years, we looked at numbers because we wanted people to think creatively. The numbers have significantly increased from 100-odd in 2007 to almost 3,000 entries in 2013. Now the time has come to look at the quality of innovation/ ideas that can have a greater impact,” says Sinha
Wednesday, 1 May 2013
'Ad agencies see themselves as large businesses, not consultancies. Now, that's bad'
This Q&A first appeared in DNA Money edition on March 21, 2013.
Sam Balsara, Chairman and Managing Director of Madison World, recounts the media major's journey over the last 25 years and the road ahead. Excerpts from an interview:
A phenomenal 25 years in business for a home-grown media agency. How does it feel to have travelled so far?
Most people start on their own, because there arises a burning desire to do something independent, to be their own boss and drive their own destiny. I must confess the reason I started Madison was not quite that: because I thought a good agency is a small agency with a few large clients; and Mudra, the agency that I worked for then, wanted to become India’s largest agency -- and I felt that I was neither capable nor mentally suited to help the agency reach its goal.
Looking back, is there anything you would have liked to change in Madison World?
In retrospect, I should have focused a lot more on the creative aspect when we were full-service agency and subsequently. Because of my background, I tended to focus a little more on strategy, which I thought should be the foundation and pillar for any communication. That clearly was a mistake. In hindsight, also not focusing and, in fact, decrying scam work that wins awards was also a mistake!
And what have been the highlights?
I would say the three key pillars of Madison success have been these: Not spreading ourselves too thin in the early foundation years. We did not accept any new client for the first four years of our existence. Our early focus on media, when not too many others focused on it. Our adopting the concept of specialisation in the communication business, having seen it work in media area and applying it to other areas like PR (public relations), outdoor, BTL (below-the-line), rural, so on.
You started in 1988. What was your vision for Madison then? How much of it have you achieved?
I must confess I am a little more focused on doing a job well today based on some principles and value systems, rather than get excited by long-term vision. Long-term vision may be necessary for large organisations, but for a small hardworking, performance-oriented agency like Madison, it is the here and now that matters.
How has Madison's business fared when compared with domestic and international peers?
It has fared reasonably well. We have had our fair share of successes and knocks.
The Indian advertising industry has changed drastically in the last two decades. How has this change impacted Madison?
Yes, there have been substantial changes. The biggest change is that, from agencies viewing themselves as professional consultancies, they have begun to view themselves as large businesses in their own right. This, according to me, has led to weakening of bonds in agency-client relationships and I don’t think this change has been in the interest of either the client or the agency.
Global advertising giants have pitched their tents in India. How challenging has the market become for agencies such as Madison?
Clients are constantly under pressure and the competition that they face is increasing day by day. My experience has been that they want to deal with a partner who can best help them reach their objective.
Of late, the market has witnessed significant inorganic action, especially in the digital space. Is Madison considering acquisitions as well?
We do receive proposals from time to time from other agencies and we evaluate them. Our view on digital has been, and continues to be, that we want the digital function within Madison Media and our planners to be digital-savvy. Just acquiring a digital agency and letting it run as a separate unit neither helps our clients nor us. Nor does it enable us to improve the quality of our service. It does not offer expertise to our clients either. It may help our topline and bottomline, but Madison is not about that.
You have recently said that consumption is not increasing in spite of high marketing spends by the corporate sector. Do you see this changing in the near future?
Yes, given the intense fragmentation that is taking place in media area, especially in TV, and given the increasing competition that marketers are facing, return on the advertising rupee spent has been going down. Also, today you require far more carefully crafted strategies to ensure that return on investment is maintained. A few years earlier, it was enough to just advertise -- rightly or wrongly -- and you could get positive results. Today, it is not so.
What is Madison World's overall billing and market share like in India?
Madison World’s gross media billing including outdoor would be in the range of Rs 3,000 crore. Our market share according to a RECMA 2011 report, without counting (partner) Mediacom, is 11.2%; with Mediacom, it is 17.7%.
Does the possibility of being bought over by competition faze you?
Anything is possible in today’s world. Who would have imagined five years ago that we would have an independent joint venture with Mediacom where we own 51%?
Where do you see Madison World another 25 years from now?
'Younger and wiser'.
Have you considered putting together a succession plan for the company?
Most succession plans in the agency world go awry and create unnecessary disruption.
Do you foresee Lara Balsara taking over the reins?
Lara Balsara is a substantial shareholder of all group companies. Madison is a meritocracy and will be led by the most capable person available at the time. That person need not be a shareholder. However, if that person is also a shareholder, so be it.
Sam Balsara, Chairman and Managing Director of Madison World, recounts the media major's journey over the last 25 years and the road ahead. Excerpts from an interview:
A phenomenal 25 years in business for a home-grown media agency. How does it feel to have travelled so far?
Most people start on their own, because there arises a burning desire to do something independent, to be their own boss and drive their own destiny. I must confess the reason I started Madison was not quite that: because I thought a good agency is a small agency with a few large clients; and Mudra, the agency that I worked for then, wanted to become India’s largest agency -- and I felt that I was neither capable nor mentally suited to help the agency reach its goal.
Looking back, is there anything you would have liked to change in Madison World?
In retrospect, I should have focused a lot more on the creative aspect when we were full-service agency and subsequently. Because of my background, I tended to focus a little more on strategy, which I thought should be the foundation and pillar for any communication. That clearly was a mistake. In hindsight, also not focusing and, in fact, decrying scam work that wins awards was also a mistake!
And what have been the highlights?
I would say the three key pillars of Madison success have been these: Not spreading ourselves too thin in the early foundation years. We did not accept any new client for the first four years of our existence. Our early focus on media, when not too many others focused on it. Our adopting the concept of specialisation in the communication business, having seen it work in media area and applying it to other areas like PR (public relations), outdoor, BTL (below-the-line), rural, so on.
You started in 1988. What was your vision for Madison then? How much of it have you achieved?
I must confess I am a little more focused on doing a job well today based on some principles and value systems, rather than get excited by long-term vision. Long-term vision may be necessary for large organisations, but for a small hardworking, performance-oriented agency like Madison, it is the here and now that matters.
How has Madison's business fared when compared with domestic and international peers?
It has fared reasonably well. We have had our fair share of successes and knocks.
The Indian advertising industry has changed drastically in the last two decades. How has this change impacted Madison?
Yes, there have been substantial changes. The biggest change is that, from agencies viewing themselves as professional consultancies, they have begun to view themselves as large businesses in their own right. This, according to me, has led to weakening of bonds in agency-client relationships and I don’t think this change has been in the interest of either the client or the agency.
Global advertising giants have pitched their tents in India. How challenging has the market become for agencies such as Madison?
Clients are constantly under pressure and the competition that they face is increasing day by day. My experience has been that they want to deal with a partner who can best help them reach their objective.
Of late, the market has witnessed significant inorganic action, especially in the digital space. Is Madison considering acquisitions as well?
We do receive proposals from time to time from other agencies and we evaluate them. Our view on digital has been, and continues to be, that we want the digital function within Madison Media and our planners to be digital-savvy. Just acquiring a digital agency and letting it run as a separate unit neither helps our clients nor us. Nor does it enable us to improve the quality of our service. It does not offer expertise to our clients either. It may help our topline and bottomline, but Madison is not about that.
You have recently said that consumption is not increasing in spite of high marketing spends by the corporate sector. Do you see this changing in the near future?
Yes, given the intense fragmentation that is taking place in media area, especially in TV, and given the increasing competition that marketers are facing, return on the advertising rupee spent has been going down. Also, today you require far more carefully crafted strategies to ensure that return on investment is maintained. A few years earlier, it was enough to just advertise -- rightly or wrongly -- and you could get positive results. Today, it is not so.
What is Madison World's overall billing and market share like in India?
Madison World’s gross media billing including outdoor would be in the range of Rs 3,000 crore. Our market share according to a RECMA 2011 report, without counting (partner) Mediacom, is 11.2%; with Mediacom, it is 17.7%.
Does the possibility of being bought over by competition faze you?
Anything is possible in today’s world. Who would have imagined five years ago that we would have an independent joint venture with Mediacom where we own 51%?
Where do you see Madison World another 25 years from now?
'Younger and wiser'.
Have you considered putting together a succession plan for the company?
Most succession plans in the agency world go awry and create unnecessary disruption.
Do you foresee Lara Balsara taking over the reins?
Lara Balsara is a substantial shareholder of all group companies. Madison is a meritocracy and will be led by the most capable person available at the time. That person need not be a shareholder. However, if that person is also a shareholder, so be it.
Thursday, 25 April 2013
Digitisation to help Dish TV post a net profit this fiscal
This story first appeared in DNA Money edition on Wednesday, April 24, 2013.
Dish TV, India’s largest direct-to-home service provider, is set to turn net-profit positive this fiscal on the back of subscriber growth and improvement in average revenue per user (Arpu).
The company’s ability to generate good free cash flow will help it achieve this feat.
Suresh A Mahadevan and Varun Ahuja, analysts, UBS Securities India, said in a company note that Dish TV had already generated Rs60 crore of free cash flow (FCF) in the first nine months of fiscal 2013. “We believe the company will continue to generate FCF and expect it to generate FCF of around Rs100 crore in fiscal 2014. Further, we expect the company to turn net income positive from fiscal 2014,” the analysts said.
The said FCF generation coupled with net income breaking even is likely to drive a re-rating.
Dish TV officials couldn’t be reached for a comment.
With Phases I and II of digitisation progressing well, the ensuing phases (III and IV) are being seen by the analysts as very important for Dish TV on two accounts. One, the market size for the balance two phases is substantial with around 80-90 million households. Two, the absence of big multi-system operators (MSOs) in these phases. As a result, Dish TV’s net subscriber base is expected to reach 15.5 million by fiscal 2016, up from 10.5 million as of December 2012.
“Dish TV would emerge as one of the beneficiaries of digitisation given its leadership position in the sector. The recent move by DTH operators to increase the prices of set-top boxes (STBs) and base packages indicates the emergence of pricing power, which bodes well for Dish TV,” the analysts said.
They also expect Dish TV’s revenue to grow at a three-year compounded annual growth rate (CAGR) of 22%. The companys operating profit margins are likely to expand 3.5% by fiscal 2016 as the company benefits from the implementation of digitisation (Phases 3 and 4).
This, the UBS analysts said, is likely to aid subscriber growth and Arpu improvement.
Digitisation is also expected to boost Arpu that is pegged to grow at a CAGR of 9% over the next three years as overall tariffs move up and customers move the tariff curve (higher packages, HD etc). Earlier this month, Dish TV had announced a Rs 20 hike in its base package thus aiding Arpu improvement in fiscal 2014.
“We believe a pick-up in Arpu is the key for a stock re-rating as the improvement would result in higher profitability. The company’s Arpu has grown at a CAGR of 4% over the past three years,” the analysts said.
Follow me on twitter @ashishktiwari.
Dish TV, India’s largest direct-to-home service provider, is set to turn net-profit positive this fiscal on the back of subscriber growth and improvement in average revenue per user (Arpu).
The company’s ability to generate good free cash flow will help it achieve this feat.
Suresh A Mahadevan and Varun Ahuja, analysts, UBS Securities India, said in a company note that Dish TV had already generated Rs60 crore of free cash flow (FCF) in the first nine months of fiscal 2013. “We believe the company will continue to generate FCF and expect it to generate FCF of around Rs100 crore in fiscal 2014. Further, we expect the company to turn net income positive from fiscal 2014,” the analysts said.
The said FCF generation coupled with net income breaking even is likely to drive a re-rating.
Dish TV officials couldn’t be reached for a comment.
With Phases I and II of digitisation progressing well, the ensuing phases (III and IV) are being seen by the analysts as very important for Dish TV on two accounts. One, the market size for the balance two phases is substantial with around 80-90 million households. Two, the absence of big multi-system operators (MSOs) in these phases. As a result, Dish TV’s net subscriber base is expected to reach 15.5 million by fiscal 2016, up from 10.5 million as of December 2012.
“Dish TV would emerge as one of the beneficiaries of digitisation given its leadership position in the sector. The recent move by DTH operators to increase the prices of set-top boxes (STBs) and base packages indicates the emergence of pricing power, which bodes well for Dish TV,” the analysts said.
They also expect Dish TV’s revenue to grow at a three-year compounded annual growth rate (CAGR) of 22%. The companys operating profit margins are likely to expand 3.5% by fiscal 2016 as the company benefits from the implementation of digitisation (Phases 3 and 4).
This, the UBS analysts said, is likely to aid subscriber growth and Arpu improvement.
Digitisation is also expected to boost Arpu that is pegged to grow at a CAGR of 9% over the next three years as overall tariffs move up and customers move the tariff curve (higher packages, HD etc). Earlier this month, Dish TV had announced a Rs 20 hike in its base package thus aiding Arpu improvement in fiscal 2014.
“We believe a pick-up in Arpu is the key for a stock re-rating as the improvement would result in higher profitability. The company’s Arpu has grown at a CAGR of 4% over the past three years,” the analysts said.
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Mahindra Lifespace plans to close 4-5 land acquisitions
This story first appeared in DNA Money edition on Tuesday, April 23, 2013.
Mahindra Lifespace Developers Ltd is likely to close 4-5 new land deals as it looks to step up on new projects.
The company has signed eight memorandum of understanding (MoUs) for land procurement so far.
Anita Arjundas, managing director and chief executive, Mahindra Lifespace, said, “We have already closed two (of the eight MoUs) in the last quarter and a new one early this month. The balance are in different stages of due diligence and will close them as we go along.” She did not share financial details related to the deals closed.
The company earlier had said it planned to sign in all 10 MoUs. The realtor, which recently raised Rs 500 crore through non-convertible debentures, will utilise the money to close MoUs that are under due diligence stage.
Of the three deals concluded, two are in Mumbai and one in Bangalore.
The Mumbai parcels include three acre Nicomet site on the Andheri-Kurla road with a development potential of 3.6 lakh sq ft and a 14.5 acre site at Boisar for affordable housing with a development potential of 5.5 lakh sq ft.
The 4.5 acre Bangalore parcel is on Bannerghatta Road for 6 lakh sq ft of development.
“For Boisar, we have completed designing and submitting for approvals next month. An architect has been appointed for the Andheri site and we should be signing the first round of design development soon. We haven’t really started on the Bangalore site yet,” said Arjundas.
The company has had a joint development agreement (profit-share) on a five acre mill land near Byculla Zoo in Mumbai. The partners are currently exploring the option of selling the land parcel together and sharing the consideration. Mahindra Lifespace has issued a mandate to Cushman & Wakefield for the sale of the property. The realtor had invested Rs70 crore in this land parcel.
Announcing its financial results, the company posted a 95% increase in its consolidated net profit at Rs82 crore for the quarter ended March 31, mainly on the back of improved sales. Total income during the reporting quarter rose 32% to Rs368 crore.
The company expects to complete five million sq ft development in fiscal 2014 even as it added new land inventory with an estimated development potential of two million sq ft in fiscal 2013.
Follow me on twitter @ashishktiwari.
Mahindra Lifespace Developers Ltd is likely to close 4-5 new land deals as it looks to step up on new projects.
The company has signed eight memorandum of understanding (MoUs) for land procurement so far.
Anita Arjundas, managing director and chief executive, Mahindra Lifespace, said, “We have already closed two (of the eight MoUs) in the last quarter and a new one early this month. The balance are in different stages of due diligence and will close them as we go along.” She did not share financial details related to the deals closed.
The company earlier had said it planned to sign in all 10 MoUs. The realtor, which recently raised Rs 500 crore through non-convertible debentures, will utilise the money to close MoUs that are under due diligence stage.
Of the three deals concluded, two are in Mumbai and one in Bangalore.
The Mumbai parcels include three acre Nicomet site on the Andheri-Kurla road with a development potential of 3.6 lakh sq ft and a 14.5 acre site at Boisar for affordable housing with a development potential of 5.5 lakh sq ft.
The 4.5 acre Bangalore parcel is on Bannerghatta Road for 6 lakh sq ft of development.
“For Boisar, we have completed designing and submitting for approvals next month. An architect has been appointed for the Andheri site and we should be signing the first round of design development soon. We haven’t really started on the Bangalore site yet,” said Arjundas.
The company has had a joint development agreement (profit-share) on a five acre mill land near Byculla Zoo in Mumbai. The partners are currently exploring the option of selling the land parcel together and sharing the consideration. Mahindra Lifespace has issued a mandate to Cushman & Wakefield for the sale of the property. The realtor had invested Rs70 crore in this land parcel.
Announcing its financial results, the company posted a 95% increase in its consolidated net profit at Rs82 crore for the quarter ended March 31, mainly on the back of improved sales. Total income during the reporting quarter rose 32% to Rs368 crore.
The company expects to complete five million sq ft development in fiscal 2014 even as it added new land inventory with an estimated development potential of two million sq ft in fiscal 2013.
Follow me on twitter @ashishktiwari.
Cement firms step up capex as upcycle seen
This story first appeared in DNA Money edition on Tuesday, April 23, 2013.
Cement companies are planning new expansions and going full steam with the ongoing ones despite market concerns of an emerging glut situation on hopes of demand reversal in the future.
UltraTech Ltd, the Aditya Birla group cement firm, is expanding its unit in Rajasthan by 2.9 million tonne at a cost of Rs2,000 crore.
“In this quarter, the board has decided to enhance capacity at Aditya Cement Works in Rajasthan by 2.9 million tonne, including the setting up of two grinding units,” said K C Birla, chief financial officer, UltraTech.
This expansion will be funded through a mix of internal accrual and borrowings. The additional facility is expected to be commissioned by March, 2015.
Similarly, another leading player Shree Cement, which spent Rs800 crore towards capex last year, is increasing its capex to Rs1,000-1,200 crore this year.
Currently, the company is setting up a 4 million tonne per annum (mtpa) clinker plant in North India and corresponding grinding unit, industry sources said.
“Out of this, 2 mtpa will be commissioned in June-July 2013 and the balance in July 2014. This apart, a Rs300 crore grinding unit is coming up in Bihar, which will get operational by July 2014. The company is not holding back any capex and all the investment that has been committed will be met with,” said the source.
Cement sector analysts concur.
V Srinivasan, research analyst-cement, Angel Broking, said, “Any expansion takes a minimum of two years depending on the type of project. We have had a downturn situation for the past three years and are only expecting an upcycle from here. In such a scenario, companies will come up with new capex and I don’t see any cutback.”
On Monday, Reuters had reported that Indian cement companies are planning to slash their capital expenditure over the next 12 months.
In 2011, UltraTech had announced mega capex plans around of Rs11,000 crore, to be spent over the next three years. The plan then included Rs5,600 crore for clinker plants at Chhattisgarh (4.2 mtpa) and Karnataka (5 mtpa) and remaining along with grinding units, bulk packaging terminals and ready- mix concrete plants at various location across India.
Recently, ACC had announced capex of Rs3,300 crore (to be spent over three years) for a new manufacturing (5 mtpa) plant at Jamul in Chhattisgarh. The unit is scheduled to start production in 2015.
Follow me on twitter @ashishktiwari.
Monday, 22 April 2013
Hilton enters franchise agreement for DoubleTree with Panchshil Hotels in Chinchwad-Pune
Leading global hospitality company Hilton Worldwide has signed a franchise agreement with Panchshil Hotels Pvt Ltd for an upscale, full-service DoubleTree by Hilton hotel at Chinchwad. Scheduled to open in June 2013, the new hotel featuring 115 guestrooms will also mark Hilton’s first hotel in Pune and will be Hilton's fourth DoubleTree by Hilton branded hotel in the country.
According to Martin Rinck, president-Asia Pacific, Hilton Worldwide, the new hotel at Chinchwad (Pune) will be another significant step in our growth strategy in India as it will represent the company's entry into Pune. “Following on from two great years of growth, when we grew our portfolio to 12 hotels and resorts, we are expanding rapidly in the country and anticipate increasing our presence to 17 hotels by the end of this year,” said Rinck.
John Greenleaf, global head, DoubleTree by Hilton, added that with the launch of fourth hotel in India, Hilton will be well on its way to doubling network in the country this year. "Presently, we have two hotels in Delhi NCR, at Gurgaon and Mayur Vihar, and a resort in Goa. We will open an all-suite hotel in Bangalore and a resort in Jaipur later this year,” said Greenleaf.
Centrally located in Chinchwad, the hotel is strategically situated northwest of Pune, The Pimpri-Chinchwad belt houses more than 50 large and 630 medium-sized companies and 7,000 small manufacturing units including Premier Ltd, Mahindra Navistar, Bajaj Auto, TATA Motors, Kinetic Engineering, Force Motors, DaimlerChrysler, Thermax, Forbes-Marshall and ThyssenKrupp.
Ajay Chordia, chairman and managing director, Panchshil Hotels, said, "The conveniently located hotel will allow excellent connectivity to the Mumbai-Pune National and Express highways and the Pune city centre, airport and railway station. The hotel will also be easily accessible to the Pune-Nashik highway, the arterial road connecting the two cities."
DoubleTree by Hilton Pune-Chinchwad will feature all modern conveniences including internet access, LCD televisions, electronic safes, refrigerated private bars and tea and coffee making facilities. Other facilities at the hotel include three dining outlets, an Executive Lounge, 24-hour business and fitness centres, outdoor rooftop pool and 2,800 square feet of meetings and events space.
Hilton Worldwide currently operates 12 hotels and resorts in India - New Delhi: Hilton Garden Inn New Delhi/Saket, Eros Hotel-Managed by Hilton New Delhi/Nehru Place and Hilton New Delhi/Janakpuri; Gurgaon: Hilton Garden Inn Gurgaon Baani Square and DoubleTree by Hilton Gurgaon-New Delhi NCR; NOIDA: DoubleTree by Hilton New Delhi-Noida-Mayur Vihar and Hilton New Delhi-Noida-Mayur Vihar; Mumbai: Hilton Mumbai International Airport; Chennai: Hilton Chennai; Vadodara: Hampton by Hilton Vadodara-Alkapuri; Goa: DoubleTree by Hilton Goa-Arpora-Baga and Shillim: Hilton Shillim Estate Retreat & Spa.
According to Martin Rinck, president-Asia Pacific, Hilton Worldwide, the new hotel at Chinchwad (Pune) will be another significant step in our growth strategy in India as it will represent the company's entry into Pune. “Following on from two great years of growth, when we grew our portfolio to 12 hotels and resorts, we are expanding rapidly in the country and anticipate increasing our presence to 17 hotels by the end of this year,” said Rinck.
John Greenleaf, global head, DoubleTree by Hilton, added that with the launch of fourth hotel in India, Hilton will be well on its way to doubling network in the country this year. "Presently, we have two hotels in Delhi NCR, at Gurgaon and Mayur Vihar, and a resort in Goa. We will open an all-suite hotel in Bangalore and a resort in Jaipur later this year,” said Greenleaf.
Centrally located in Chinchwad, the hotel is strategically situated northwest of Pune, The Pimpri-Chinchwad belt houses more than 50 large and 630 medium-sized companies and 7,000 small manufacturing units including Premier Ltd, Mahindra Navistar, Bajaj Auto, TATA Motors, Kinetic Engineering, Force Motors, DaimlerChrysler, Thermax, Forbes-Marshall and ThyssenKrupp.
Ajay Chordia, chairman and managing director, Panchshil Hotels, said, "The conveniently located hotel will allow excellent connectivity to the Mumbai-Pune National and Express highways and the Pune city centre, airport and railway station. The hotel will also be easily accessible to the Pune-Nashik highway, the arterial road connecting the two cities."
DoubleTree by Hilton Pune-Chinchwad will feature all modern conveniences including internet access, LCD televisions, electronic safes, refrigerated private bars and tea and coffee making facilities. Other facilities at the hotel include three dining outlets, an Executive Lounge, 24-hour business and fitness centres, outdoor rooftop pool and 2,800 square feet of meetings and events space.
Hilton Worldwide currently operates 12 hotels and resorts in India - New Delhi: Hilton Garden Inn New Delhi/Saket, Eros Hotel-Managed by Hilton New Delhi/Nehru Place and Hilton New Delhi/Janakpuri; Gurgaon: Hilton Garden Inn Gurgaon Baani Square and DoubleTree by Hilton Gurgaon-New Delhi NCR; NOIDA: DoubleTree by Hilton New Delhi-Noida-Mayur Vihar and Hilton New Delhi-Noida-Mayur Vihar; Mumbai: Hilton Mumbai International Airport; Chennai: Hilton Chennai; Vadodara: Hampton by Hilton Vadodara-Alkapuri; Goa: DoubleTree by Hilton Goa-Arpora-Baga and Shillim: Hilton Shillim Estate Retreat & Spa.
Sunday, 21 April 2013
Entrepreneur gives loyalty programmes a social spin
Collecting reward points to redeem them for more goodies is a rage among upwardly mobile consumers. Now, a social entrepreneur has taken the concept to the lower echelons of the society, but with a difference.
Armed with the $1 million Hult Prize she won back in 2011, Akanksha Hazari will soon launch the beta version of the award winning concept m.Paani in Mumbai. Currently in the alpha stage, different iterations of its offerings are being tested in two underserved communities in Mumbai and the company is planning to do rural model sometime early 2014.
So what is m.Paani really all about? According to Akanksha Hazari, founder and CEO, m.Paani, the company designs and implements mobile-based loyalty programmes for underserved communities where they can earn more value for their spent.
"Like most people who are part of loyalty programmes they are able to earn points for certain types of spend and behaviour. They can collect and share these points with their families / communities and ultimately redeem them for a life-changing development rewards in multiple areas like education, healthcare, safe drinking water, nutrition, mobility, energy and financial inclusion," said Hazari who is also one of India's top 10 social entrepreneurs and an Echoing Green 2013 semi-finalist.
In simple terms, if someone who doesn't filter their water, and if they do something positive in that arena, m.Paani allows them to earn rewards points -- just like what a loyalty programme does. However, the rewards in this case are not materialistic or consumer rewards but are very impact focused that help people attain a better life.
The concept currently is at design lab stage, which is a 9-12 month pilot where alpha versions of the model are being tested. Different iterations of m.Paani's loyalty models are being tested to find out what works and what doesn't. "At the bottom of the pyramid - bastis and villages - people have never been offered anything like this. They have never interacted with the concept of loyalty points, they haven't even interacted with discounts etc in the same way middle- and high-income class does. That's what we want to change," said Hazari adding that a partnership with one of the biggest telco's in India will be inked son to help roll-out the offerings in India and Africa.
Based on the alpha phase the company will then design the beta service, which will be launched by the end of this summer. The beta pilot will be tested with a maximum of 1,000 users.
"We currently have two pilot communities in Mumbai - Parel and a corner of Dharavi. They are very different in nature and that's the reason why we picked them. We will run the beta service in these pilot communities and based on the beta service we will roll out first in Mumbai and the goal is by the beginning of 2014 to start a parallel rural pilot in Maharashtra," said Hazari. "The rural customer will be very different from the urban customer and so will the rewards be for these markets. Hence we will have a separate rural pilot as against extending the urban model into rural areas," she added.
The company is extensively leveraging technology and using a behavioral sciences approach to design and implement the model in the underserved communities.
"We are very much focused on helping this underserved segment in India, have a partner in their journey and attaining a better life. The reality is that this segment spends a lot of money and often pays a premium for things that not even the middle class has to pay for a premium or above," she said.
Based on her experience spending time with the underserved communities Hazari observed that people in the rural areas pay more for water, higher interest to the extent of 60% on loans (no access to banking system) and a whole lot of basic things.
"They are an extremely important customer at volume for big companies like telcos and FMCGs but they are not rewarded for it. In fact, the m.Paani model was born from this concept of why can't we connect business with impact leveraging technology and data. This customer is actually getting rewarded for being an important customer and that reward is something that's meaningful to them and can help them in their life journey with the things they are struggling with today," she said.
Hazari, a Princeton university graduate with an MBA from the Cambridge university, led the Cambridge team that won the Hult Prize. She was also honoured by former US President Bill Clinton and the Clinton Global Initiative.
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