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| Jagdish Sheth: telco savant |
He's 63, doesn't look the age, and has a full calendar.
Meet Jagdish Sheth, the Charles H. Kellstadt professor
of marketing at Goizueta Business School, Emory University, an independent
director on the board of several companies (including India's Wipro),
and a consultant to just about every major TELCO in the world. Sheth
spoke to BT's Shailesh Dobhal on
a recent visit to India. Excerpts:
What's marketing's challenge in times of
'near recession' like the present?
Its role becomes much more critical in tough
times, as industries and companies are forced to woo the customer,
as against their usual emphasis on operations and products. The
only companies seen doing more of this are in the airline industry,
more so after 9-11. They are making it much friendlier. In the Indian
context, the pharma companies are doing that, broadening the scope
of marketing beyond just over-the-counter or ethicals, to a better
understanding of consumer needs.
Does a services-led economy, like the one
India is moving towards, require a different approach to marketing?
We need branding in a services economy, since
quality variation can be enormous because it is people-to-people
business. Branding can help standardise the quality reputation.
With database availability, mass personalisation is a reality in
a services-led economy. Packaged good companies weren't able to
do it without increasing the number of stock-keeping-units.
What does it take to build a successful
telecom services brand?
I have a theory on telecom marketing. Instead
of the four marketing Ps you have the four As: acceptability, affordability,
availability, and awareness. In telephony, awareness is more than
lacking, and now companies are making an effort to make consumers
aware of all the options and capabilities. Availability, the distribution
analogy, is that you can get it directly or indirectly. Affordability
is of course pricing. Acceptability is finally happening. It says
that I can customise your phone the way you like it. India's cellular
services companies almost always do it, but the wire-line side is
just learning, and I think there is a huge potential there.
HERO HONDA
Riding High On Its Success
Will Hero Honda continue to create the same
magic this year? An analysis.
How
does hero Honda do it? The company has managed to grow its turnover
an average of 35.6 per cent over the last five years. For 2002-03,
Hero Honda has set itself a target to be a $1 billion company. Last
year, it surpassed its sales target of a million motorcycles. And
this year too, it is on course to exceed its target of 1.5 million
motorcycles.
Ask Ravi Sud, Vice President (Finance), Hero
Honda, how the finance team manages to achieve one target after
another, and you could be baffled by the simplicity of his response.
He cites three aspects of good financial management: working capital,
capital expenditure, and foreign exchange. If these three are managed
well, he says, a large part of the battle is won. ''The best time
to establish controls is when the going is good.''
The company has maintained receivables and
inventory at a low level over the last five years. Its suppliers'
credit-roughly 45 days-is among the lowest in the auto industry.
The company's interest costs are a paltry Rs 12 lakh on a turnover
of Rs 3,193 crore. And that too because sometimes, there is a mismatch
in its cash-credit account and it has to borrow from the market
to make payments.
Hero Honda became a debt-free company during
the last financial year. On the capital account side, Hero Honda
is financing its long term equity requirements from internal accruals.
And on the foreign exchange side, Hero Honda uses advanced hedging
tools and negotiates with the banks (who in turn negotiate rates
with the Foreign Exchange Dealers Association of India or FEDAI),
for getting the best rate.
Around February-March each year, like most
companies, Hero Honda makes its sales projections and undertakes
a budgeting exercise. This is closely monitored and the changes
are factored on the basis of the market's responses. For instance,
if at anytime in the course of the year it looks like demand will
exceed the target, the company revises all its targets. And cash
flows are modified in accordance with this revision.
So, there! What's different about what you
have read so far? Precious little. But don't they say something
about winners doing not different things, but things differently?
-Swati Prasad
ESSAR
Hanging On
The Ruias seek to extend their telecom dream.
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| The Ruias: a lingering telecom dream |
Tust
when we all thought Hutchison Whampoa, already in control of 51
per cent equity in Delhi's Essar Cellphone, would elbow the Ruias
out of their remaining properties (Uttar Pradesh East, Haryana,
and Rajasthan) with a little flex of its financial muscle honed
in Hong Kong, the Ruias are striking back through a two-phase consolidation.
In the first phase, the Hutchison-controlled
cellular operations-the existing ones in Delhi, Mumbai, Kolkata,
and Gujarat, as well as the fourth licences won by the Hutchison-Essar
combine for Chennai, Andhra Pradesh, and Karnataka-will be merged
into a single entity in which Essar will take a 30 per cent stake.
Essar will buy 30 per cent in the Kolkata operation
for $35-36 million (Rs 169-174 crore) and as much equity in Mumbai
for a price still being worked out. ''The valuation takes into account
the fact that a holding in the merged entity will give Essar a presence
in Gujarat and reduce its holding in Delhi from the current 49 per
cent to an effective 30 per cent,'' says Vikas Saraf, CEO, Essar
Teleholdings. The entity arising out of Phase I, valued by Andersen
at $1.9 billion (Rs 9,190.3 crore), will go in for an IPO in September
2003.
Phase II of the consolidation will start six
months after the IPO and lead to a merger of Essar's existing cellular
operations, in which Hutchison has no presence, with the entity
arising out of the first phase.
Essar will mobilise part of the funds required
for Phase I internally and the rest through a convertible issue
by Essar Teleholdings. Given Hutchison's penchant for selling out
if it gets a good price of fame, the extension of the Ruias' 15
minutes in telecom may not last. But again, given Hutchison's knack
of always netting a good price, the Ruias may not have reason to
complain.
-Suveen K. Sinha
BALAJI TELEFILMS
Kissa Quarter Ka...
The K factor Kontinues...oops continues to
work wonders for Balaji Telefilms.
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| Eakta Kapoor: the dream run continues |
Forget reality
or game shows, weepy soaps is where the action-and the moolah-is.
For proof, look no further than the third quarter report card of
Balaji Telefilms: sales are up 70 per cent, and profits by 145 per
cent. Top that with a pre-tax profit of Rs 12.75 crore on an equity
of Rs 10-odd crore in just one quarter, and that's ample evidence
that the saas and bahu theme still rules.
Indeed, Balaji's solid growth figures can be
attributed to the couple of serials launched in October-December,
primarily Kutumb on Sony and Kasautii Zindagi Kay
on Star Plus. The company also launched Kavayanjali and Kudumbbam
Aur Kovil on Vijay. The story of Balaji for the third quarter
is that of a pure volume growth due to the launch of new serials.
The company has also been trying to morph from sponsor-based serials
to commission-based ones linked to ratings. This has helped it achieve
higher margins. ''A division-wise profitability break-up of the
company shows that it gets good margins from commission-based programmes,''
says Sanjay Parekh, Media Analyst, Sunidhi Consultants.
Parekh sums up the Balaji success story succinctly:
''High volume growth, with better realisations, coupled with tight
production costs.'' The fourth quarter should be even better courtesy
better price realisations from programmes like Kyonki Saans Bhi
Kabhi Bahu Thi, Kahaani Ghar Ghar Ki and Kusum.
Kool!
-Shilpa Nayak
FORBES GOKAK
A Predator Looks Back
He lost the battle for Forbes Gokak, but did
he laugh his way to the bank?
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| Shapoorji Pallonji Mistry: nothing stands
in his way now |
His
card just says: pavankumar Sanwarmal. There's no designation, no
company (and, true to form, he refused to be photographed). The
Spartan office at 1,513 Maker Chamber V in Mumbai's financial district
offers little trace of what business he runs-or how he runs it.
Prod him, and he'll tell you that he's the promoter of a number
of textiles trading companies. And it's along with eight of these
companies-Sanwarmal estimates their cumulative net worth at over
Rs 50 crore-that this low-profile, 40-something punter launched
his audacious and ostensibly unsuccessful bid for former Tata company,
Forbes Gokak.
Last fortnight, after a see-saw battle of three
months, which saw offers and counter-offers, Sanwarmal sold the
14.8 per cent holding he had accumulated in Forbes Gokak over six
years to Shapoorji Pallonji group at Rs 93 per share.
This paves the way for Pallonji to acquire
the textiles company as his stake now sails comfortably over the
51 per cent level. Sanwarmal, who had positioned himself as a potential
controller of Forbes Gokak, accepts that he has lost the battle.
''They (the Pallonji group) had already touched
42 per cent by picking up huge chunks of shares via off-market deals
(before the open offer to the public could end); it was a good fight
till it lasted, but when we saw that there was little chance of
reaching 51 per cent, we thought that rather than making fools of
ourselves, it would be better to surrender,'' shrugs Sanwarmal.
Sanwarmal may be sporting a grim face these
days, but he will be laughing all the way to the bank, right? Not
really, he says, claiming that his average price of acquisition
of the Forbes Gokak shares works out to Rs 60. ''Even had I put
those funds in a bank, my money would have doubled in seven years.
But in this case I have made a notional loss,'' he says. That's
what he says, but given that the Forbes Gokak stock wasn't quoting
over Rs 40 a couple of years ago, you are tempted to wonder: what
if Sanwarmal's average price of acquisition was just Rs 40? A 100
per cent-plus appreciation over two years is handsome by any yardstick.
Sanwarmal insists the average price at which
he bought into Forbes Gokak isn't below Rs 60. Whether he gained
or didn't can be debated, but the minority shareholder, who saw
the stock hitting the Rs 105 level at the peak of the face-off,
surely won't be complaining.
-Brian Carvalho
VISUALSOFT
Product Of The Times
VisualSoft goes soft on products.
June
1998: a little known Hyderabad-based it company VisualSoft launches
VisualShift, a tool-box for making pc-based applications y2k-compliant.
In 18 months, the product rakes in a cool Rs 16 crore.
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| CEO D.V.S. Raju: off products now |
January 2002: VisualSoft reports a 73 per cent
fall in profits for the third quarter of 2001-2002, to Rs 5.53 crore.
Are its best days over?
They may well be, if the company continues
to rely heavily on the US for business (the country currently accounts
for close to 70 per cent of its clients). K. Krishnam Raju, 40,
Director (Finance), says q3 has been better than q2, and to that
extent a turnaround has already begun.
That turnaround will be reinforced by a focus
on the services segment. The services:product ratio has swung from
48.3:51.7 to 97:03. In addition, the company has made it clear that
''no additional money and manpower will be invested in the product
business apart from minimum investment for maintenance and support.''
rip.
-E Kumar Sharma
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