Friday, August 31, 2012

“Becoming a Fortune 500 company will take time”

He joined the company in 2001 when it was poised for the typical big leap. Today, PVR Cinemas is one of the largest cinema chains in India, yet not the largest. Nitin Sood, CFO, PVR Cinemas tells B&E, what it took to reach here and what it would be like ten years later by Amir Moin

When it started in 1997 as a joint venture between the Bijli brothers’ Priya Exhibitors Private Ltd and Wachowski brothers’ Village Roadshow Limited, the intent was clearly to be one of India’s largest cinema chains. Though achievements have come a dozen, so have the hits, literally speaking. After incurring a net loss of `12.62 crores an year ago, the giant is back on track with net profits of `5.56 crores for the quarter ending June 30, 2010. Nitin Sood, the financial whiz behind PVR Cinemas, shares his future agenda in this exclusive interaction with B&E :

B&E: Your performance this quarter has been quite well as compared to the same quarter last year. What are your projections for the next quarter?
Nitin Sood (NS): I wouldn’t be able to talk specific numbers but I think from our exhibition business, we should be able to do a topline of `400 crores. As we add on more screens, the numbers would probably increase. Hopefully, we’ll stabilise between 18-20% operating margins, which again would be a very good recovery from where we ended up last year.

B&E: According to Ajay Bijli, PVR’s PAT will go up to 10-12% from the current 5-5.5%. How do you think this is going to happen?
NS: Right now, our business model is such that we incur a lot of cost on the infrastructure. Again, the real cost is also due to the screens that we are periodically adding. These costs are driving down our bottom lines. Some of the new screens that are opening take anywhere between 6, 8 or even 12 months to stabilise in operations, depending upon the location. As the cost gets fractionalised over a larger number of properties, the operating margins would start looking much better. Secondly, we are also considering the sale and lease-back of the real estate that we own because honestly, we are not in the business of owning real estate. So that will further improve the margins.

B&E: What is the concept of PVR film cities?
NS: The concept of entertainment city is that we’ll be doing an integrated retail entertainment format. We are trying to partner with mall developers and where they give a portion of the mall to us and we come up with a full fledged entertainment complex. We are planning to come up with a bowling alley, ice skating ring, food court and a large multiplex.

B&E: Don’t you think that in these ‘entertainment cities’, there already is and would further be a lot of saturation? So what are your expectations in terms of ROI?
NS: I think it’s quiet the opposite because the number of visitations will increase by more than two times as the amount of footfalls that you attract to such a place would be more than the crowd that you would attract when you are running a stand alone multiplex. If we take the example of Ambience mall in Gurgaon, we have our own food court, multiplex and bowling alley. Our learning from our Ambience mall experience is that if you give consumers a bouquet of offerings, then the number of consumers who come to that place is much more than what would normally turn up at a standalone recreational outlet. In fact, a majority of the people coming there don’t just watch a movie but also go for bowling and lunch. Right now, we are coming up with only one entertainment city in Noida in association with Logix Park. But in the future, we definitely have plans to come up with more such entertainment cities. 




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Thursday, August 30, 2012

Is this India’s growth story?

Despite the obvious rationale going against it, steel and cement players in India have had a markedly subdued first quarter. Virat Bahri of B&E analyses the dynamics behind the numbers

India’s much-touted infrastructure surge makes it a market extremely hard to miss for steel and cement players. Yet, the Q1 results for both these sectors would make one wonder if this potential is actually what it is made out to be. B&E analyses the results closely for a more objective view.

In fact, steel majors have had a spectacular run since January 2009 till the end of the last fiscal. But Q1 has been an anomaly. SAIL posted net profit of `11.76 billion, a drop of 11.56% y-o-y. Consolidated net profit of Jindal Steel & Power Ltd. (JSPL) was down by 3% y-o-y for the quarter while sales of steel products were down by 4%. Bhushan Steel saw a decline of volumes by 14.4% to 309,333 tonnes. JSW Steel managed to improve its turnover and net sales by 21% and 19% respectively due to improved sales mix, but semis were down by 66%. Tata Steel, however, was an exception as it posted profits of `18.25 billion over a loss of `22.09 billion for Q1, FY 2009-10. In Tata’s case, revival in European operations was a key contributor and domestic sales remained flat on a y-o-y basis.

SAIL Chairman C.S. Verma said: “Greater availability of steel worldwide coupled with pressure on demand made the market conditions quite testing.” The reasons, actually, emanate from neighbouring China that accounts for around 50% of global steel production and consumption. Monetary and fiscal tightening by China to prevent overheating of its real estate market has created oversupply situation and these products are finding their way into markets like India. Moody’s projects that prices of Chinese Hot Rolled Coils (HRC) are down by around 11% y-o-y, while rebars are down by 8% y-o-y since April.

Talking to B&E, Vinod Garg, ED, Commercial, Ispat Industries, said: “Since import prices are low, lot of material is being dumped. Excessive supply is affecting margins of all players.” Figures indicate that Chinese imports have risen to over 60% of the total. In the week ending March 12, HRC (CR-Grade) price dropped by 5% m-o-m to `32,700 per tonne. Steel imports increased by 116% y-o-y to 973 thousand tonnes in April 2010. The government, however, placed anti-dumping duty on certain stainless steel products from target countries including China in early 2010. Cyclical impact of monsoons also leads to slowdown in industrial activity and buyers tend to postpone purchases. Further, a Motilal Oswal report expects more margin contraction, as it states, “Realisation will fall sharply in 2Q FY11 due to sharp price cut in June, while costs of coking coal will go up further.” Iron ore prices are also up by 90% y-o-y for Q1 at $117/tonne, and are likely to continue that trajectory.

The cement sector also saw pressure on both toplines and bottomlines due to oversupply. Aditya Birla Group-owned Ultratech Cement saw net sales drop by 8.3% y-o-y for Q1 to `17.93 billion and net profits falling more steeply by 41.83% to `2.43 billion. For ACC, net sales stayed flat at `21.67 billion but net profits again showed a sharp drop by 26% y-o-y to `3.49 billion. The results for India Cements were also much below expectations, with net sales falling by 7.8% y-o-y to `8.6 billion and EBITDA down by 65% y-o-y to `1 billion.

Read more....

Source : IIPM Editorial, 2012.

An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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Wednesday, August 29, 2012

Mankind Pharma founder Ramesh C. Juneja speaks with B&E's Steven Philip Warner & Jayant Mundhra

B&E: What is the current outlook at Mankind Pharma?
RCJ: In a highly competitive industry like pharmaceuticals it is necessary that you have a highly motivated sales force. For that we ensure that our medical representatives get variable incentives that are best in the industry. What really drives us is that our sales force visits doctors on a regular basis. They are trained not just to sell the product but to establish a relationship built on trust. In today's competitive market you need to give incentives to the retailers to promote your product and to make your product available because of the competition being throat cutting and massive. My people even visits the doctor's to maintain a good relation with them as well as it works one or the other way. We already have eight plants and as part of our expansion plans we have a ninth plant coming up which is under construction. It would probably be ready by 2011. A total of Rs.100 crore has been invested in this plant. We are also coming up with an R&D center in Manesar, Gurgaon which would be functional by January 2011.

B&E: What plans do you have in the export domain?
RCJ: Our export targets have been very minute. In fact we have just forayed into the export domain. With respect to exports we are only present in Sri Lanka, Philippines and Vietnam. India is a huge country and we believe that there is a lot that is left to be done on our home soil. Once we achieve our Indian aspirations, we would target SAARC and CIS Countries.

B&E: You have projected a revenue of `3000 crore for the year 2015 and given your growth story till now, it looks easily achievable. When do you plan to become the number 1 pharmaceutical company in India?
RCJ: We are trying our level best and focusing on becoming the number 1 company in India. We basically like to move forward with the market trend. Throughout the world, global pharma companies are finding it difficult to sustain their growth as patents are expiring. To make things even worse their pipelines have almost dried up and the cost of coming up with a new molecule is exorbitantly high. In such a scenario they are looking up to India to acquire companies here. We believe that by working hard, we can definitely achieve the number 1 position.

B&E: What kind of opportunities does Mankind Pharma see in India?
RCJ: India is a huge country and the per capita consumption is only `400 per annum per person. From all the metro cities we are expecting sales of around `45000 crores this year. If we were to categorise, then 25% of the medicines are being consumed by big towns while 72% of the medicines are consumed by 1/3rd of India's population and the rest 28% by 2/3rd of the population. As per our calculations, 72% of the pharma medicines are consumed by the 67% of the population whereas the rest only consume near about 28%. Pharmaceutical industry is one of the fastest growing markets in India and this is precisely the reason why global pharma companies are willing to pay a premium to acquire Indian companies. Amidst all this, we believe that we can perform better because we have what it takes to succeed.



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Friday, August 24, 2012

Will the lion roar again?

Slowdown had a sobering effect on DLF’s meteoric rise in the early years of this decade. With a new look and renewed vigour, the company attempts to claw its way back to its glory days. by Virat Bahri

Five odd years is a terribly long wait. But it would be worth it for this 17.5 acre plot of land in Lower Parel, Mumbai, which would soon be home to 90-floor super luxury tower. Bought by DLF in 2005 from National Textile Corporation for over Rs.7 billion, the land hasn’t witnessed realty action since then; with the downturn being the obvious spanner in the works. DLF planned a mall initially, but has now decided in favour of residential accommodation with the 2000-odd flats in the tower to cost Rs.50-100 million each with targeted revenue of Rs.150 billion for the company.

2006 was a different era. At that time, an unlisted DLF was hitting all the high gears with surging fortunes in residential, commercial and retail. Then came investments into new businesses – hotels, SEZs, infrastructure, IT parks, next generation malls, asset management… there just seemed to be no end, more certainly so when news of the IPO came up, fuelling speculations that K. P. Singh would be the world’s richest man. The $2.2 billion IPO was launched in 2007, and K. P. Singh was ranked 62 on the Forbes’ list of global richest that year.

India’s realty sector was seeing rising valuations, but it wasn’t really the American bubble. The fact that realty was a lagging indicator for the booming economy had a lot to do with it. But with the slowdown, sentiments went turn turtle across – consumers, banks, corporates, retail. Realtors who had assumed huge debts in the bull run were sitting on land that would provide cash flows way ahead into the future and got further stuck when takers for their existing products dwindled. DLF’s revenues on a standalone basis in FY 2008-09 were Rs.28.28 billion, a dizzying drop of around 49% yoy and profits fell by around 40% to Rs.15.47 billion.

A company like DLF only understands too well that market speculation and sentiment are fickle by nature and are not the true parameters on which a company can judge its merits, or demerits for that matter. But then, understanding how they are playing out at any given point of time is crucial to cushion oneself against the shocks of a viciously cyclical business like real estate. As the company came face to face with a calamitous situation in 2008, it had two prerogatives – the first one was to steer the ship out of the immediate storm and the second one was to take cognizance of its priorities and redefine its business model for the future.

DLF isn’t out of the storm yet. It saw revenues drop by a further 15% to Rs.24 billion and profits falling by 50% to Rs.7.7 billion yoy for FY 2009-10. They missed the target by 16%, and achieved 12.6 million sq. ft. (msf) with an average realisation of Rs.5700 per sq. ft. But as per DLF Limited Vice Chairman Rajiv Singh the bottom is already behind them. He commented on the results, “The overall economic growth, improved liquidity coupled with buyers’ sentiments turning positive, led to a buoyant demand for our projects across segments...” Q4 has been a visible sign of hope with consolidated revenues at Rs.21.46 billion up by 59% yoy. DLF Group Executive Director Rajeev Talwar points out in an exclusive interaction with B&E (featured after this story), “Construction in the last 1 year, which had dropped down from peak levels of 65-70 msf to 40-41 msf has now picked up again to around 56 msf; an increase of around 40%.” And buoyed by the general sense of revival in the Indian economy, DLF expects to rid itself of the devils of downturn for good. B&E analyses how the market leader has evolved in the midst of slowdown and details the prospects for the company in the coming year.


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Wednesday, August 22, 2012

INDIA: WATER SCARCITY

India’s water problem will continue to grow to mammoth and daunting proportions unless an integrated approach is taken. PPP is a great model, provided profiteering is curbed successively.

Though 60% of the population in urban areas depends on the surface water sources, availability and quality are unpredictable. Moreover, population growth is leading to drastic decline in the per capita availability of fresh water. It has gone down to around 2,200m3 in 2000 from 5,150m3 of 1947, and is expected to go down by 2017 to 1600m3 .

In states like Gujarat, the water table is dropping by as high as 6 metres per year. Four decades ago, the water table was at around 30 metres; now it has increased to around 152 meters. The scenario is pretty much the same in Agra. In 1996, groundwater level was 34 metres. Ten years down the line, that dropped to 42 metres. The total cost of environmental damage in India amounts to $9.7 billion annually, as per the World Bank estimate in 1995; of which 59% results from health impacts of water pollution. Also the poor often end up paying 5-10 times more per litre than wealthy people in the same city.

Tackling the situation requires an integrated approach to multiple facets of the water problem. They include tackling the menace of water pollution, ensuring recycling of water through techniques like rainwater harvesting, engaging with the affected population to ensure that their specific needs are well understood, discouraging excesses in terms of water usage and even tackling the class divide that marginalises certain members of the community from access to this invaluable resource. Public private partnerships are the best way out. But a strong regulatory mechanism must also be instituted to ensure greater transparency and discourage profiteering.


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Tuesday, August 21, 2012

Ssssmooch!

Mallika Sherawat is back in Cannes, and this time she has brought a python with her! Hissss is her next film after all, and in order to promote the film Mallika posed and kissed the python before the shutterbugs! Love, Barack is another film she’s starring in and it promises some naughty action, at least as per its poster, which was unveiled at the Festival. Maybe she feels that if her 17 kisses in Khwahish brought her fame in India, a similar trick (with serpents or men) should work in Hollywood too?!


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Tuesday, August 14, 2012

Jennifer Green

Looks Jennifer Aniston needs to be reminded about the age-old adage ‘grass is always greener on the other side’. Rachael Green of Friends, Jen wants a career like Drew Barrymore or Demi Moore’s, as they have been experimenting with their work. She wants a quiet relaxed life away from the paparazzi, but then also wants to live a life in the limelight like Johnny Depp! A case of chronic dissatisfaction?


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Monday, August 13, 2012

“We are re-structuring our sports biz”

After fixing up the group’s GEC, Punit is now focussing on expanding the regional and sports channel portfolio

B&E: Over the last few years your involvement with Zee has increased a lot. What is the kind of change, in responsibility, that has come to you in the last 2-3 years and what change do you see coming in the near future?
PG: The change in responsibility has been basically in the sense that I was handling the entire programming about three years ago. But slowly I was also involved in the news business and was given the responsibility as the MD of Zee Entertainment. So, my role has increased a lot from being just a programming head.

B&E: Do you have any plans to explore other businesses?
PG: No, I want to stick to the media business. Our focus in the coming times is to grow the new media space where we have been only experimenting in the last 18 months. We will be a lot more active in those segments. We will also be strongly focussing on creating niche content.

B&E: We have got some information that ZEEL is restructuring its sports business under the Ten brand. Can you share the details?
PG: Yes your information is right. We have bought the additional 45% stake in Taj TV. Now we are in the process of re-structuring the entire sports business under the Ten brand. The sports bouquet of Zee will be made a separate entity and will function as a subsidiary of ZEEL. While Zee Sports will be renamed as Ten Action (proposed name), a new golf channel will be added to the sports bouquet.

B&E: But why are you rebranding Zee Sports as Ten Action?
PG: We believe that Ten Sports is a formidable brand within sports genre in the country with garnering highest viewerships in the genre on any non-cricket day. And since Ten Sports and Zee Sports functioned as separate entities, we could not club the two channels and offer it to the advertisers. Therefore, Zee Sports was not able to ride over the popularity of Ten Sports whether it was on the distribution front or from the ad sales perspective.






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