Sri Kumar Bangur: Paper money is the best

Sri Kumar Bangur is on a roll. literally. west Coast Paper Mills' open offer for Rama Newsprint and Paper Limited (RNPL), a company in which it acquired a 34 per cent stake in September, from ICICI Bank (for around Rs 40 crore, and this will go down in the history books as the first instance of a bank's divestment resulting in a change in management), may have flopped-the response was a mere 0.5 per cent of the company's stock-but Bangur, the 55-year-old chairman of the former is sitting pretty. That's because the promoters of RNPL, the Ramsinghanis, who hold a 25 per cent stake in the company are in favour of Bangur taking charge, a transfer of power that could happen as early as mid-December.

The Bangurs are one of Kolkata's oldest Marwari families (much like the Goenkas and the Birlas). In 1992 when the Brothers Bangur-there were five-decided to go their separate ways, S.K., as his friends call him, ended up with West Coast Paper. Over the past 10 years, Bangur has upgraded technology at the plants, expanded capacity, ventured into new product categories, and become more investor-friendly. He also diversified into businesses such as telecom, it, and cables (apart from nurturing ones he inherited in the areas of tea, rubber, and chemicals) but as C.V. Desai, Chairman and Managing Director, CD Equisearch, a long-time friend of Bangur who owns an 8 per cent stake in West Coast puts it, "He (Bangur) wants to exit from every other business but paper where he wants to be a dominant player.''

That won't be easy. West Coast boasts a capacity of 157,000 metric tonnes a year, largely writing, printing, and specialty papers. Industry leader BILT has a capacity of 460,000 metric tonnes a year, and Tamil Nadu Newsprint (TNPL), 225,000 metric tonnes a year (increasing to 330,000 tonnes a year shortly on the strength of a Rs 750-crore expansion drive). The RNPL acquisition will give Bangur's aspirations a fillip, but what gives them credibility is the man's oft-quoted desire to pick up the 74 per cent stake in Hindustan Newsprint Limited (HNL) that the government is divesting. RNPL's capacity of 150,000 metric tonnes a year and HNL's 100,000 metric tonnes will make Bangur a force to reckon with in the paper business. However, other companies, such as TNPL and JK Paper, have their eyes on HNL too. Given, the volatility in the global prices of newsprint, Bangur will probably ensure that RNPL and HNL (should he bag it) focus on printing and writing paper: most paper companies have what is called a swinging facility, which enables them the shift between newsprint and other kinds of paper. "We will not be producing newsprint alone since the global scenario in newsprint is volatile," says Bangur.

Money may not be a problem for Bangur. West Coast is a profitable company with net profits of Rs 36 crore in 2002-03. Like most Kolkata-based Marwari companies with a background in trading, it is also cash rich and has reserves of some Rs 129 crore. What could pose a problem, however, is the effort involved in turning around a bleeding entity such as RNPL. The company returned net losses of Rs 39 crore on revenues of Rs 187 crore in 2002-03. Still, the West Coast experience indicates that Bangur may have what it takes to make a go of it: when he inherited West Coast in 1992 its revenues were Rs 130 crore and profits Rs 1.42 crore. Today, the comparable figures are Rs 522 crore and Rs 36 crore. "We spent around Rs 350 crore on modernisation, expansion, and energy saving initiatives," says Bangur. And learnt a thing or two about how manpower rationalisation and financial restructuring could turn a company's fortunes around. Given the upturn in the paper business, Bangur probably thinks it is time he puts these learnings to good use.

-Moinak Mitra

BREAKING NEWS
It Isn't Over Yet

And you thought the mushrooming of news channels was a phenomenon of the past? Well, you couldn't be more wrong. Business Today learns that CNBC-TV 18 is planning two new channels, a 24-hour Hindi business channel and an international one, and considering shifting the bulk of its editorial team to Mumbai. CEO Harish Chawla admits that the two are on the company's mind, but throws in riders about "still being in exploratory phase" and "Delhi" still continuing to "play an important role". Both Zee and Videocon, which had announced their intent to launch 24-hour Hindi business channels seem to have put their plans on hold and most media analysts believe there isn't a market for one. Chawla says the company is yet to decide whether the channel would focus exclusively on business. Although it is a niche channel (TRPs under half a per cent), CNBC is profitable: TV 18 boasted revenues of Rs 361.7 crore and a net profit of Rs 43.17 crore in 2002-03, and the bulk of its revenues come from the channel. As we've often said, there's money in business.

-Kushan Mitra

The Makeover Mantra
Increasingly, metals opt for plastic surgery.

The Maruti Zen & Fiat Palio: New avatar

Given the time of the year, we'd like to begin with a thanks-giving: we are grateful that it is still possible to play 'find the six differences' with improved and old versions of cars, something that is well nigh impossible in most fast moving consumer goods where we just have to take the manufacturer's word that a soap is new, improved, and actually has tiny elves who do the scrubbing. That said, there's not much else, apart from the six (and this includes cosmetic changes related to headlights, tail lights and interiors) to tell apart the Santro Xing and the new Zen, both cars that went in for makeovers in the past six months, from their previous versions. The soul, the engine, remains the same. Still, that doesn't seem to have bothered customers: in the six months the Xing has been on the market, it has sold, on an average, 8,500-9,000 units a month, 20 per cent higher than the earlier model's 7,000-7,500. Maruti Udyog Managing Director Jagdish Khattar is hoping the new model of the Zen can do something similar (the car currently sells 5,000 units a month). Now, there's news that Fiat will unveil an all new Palio in 2004, just as it did one in 2003. We'd love to resort to a cliché, but value old wine too much to do so.

-Kushan Mitra

FACE-TO-FACE
Fresh Trout

He's authored 10 books, the best-known being his efforts such as Positioning and Marketing Warfare with former partner Al Ries, and is one of the world's foremost marketing thinkers. Jack Trout was in Delhi recently to conduct a day long workshop as part of the Business Today Knowledge Management Forum and spoke to BT about brand India and Indian brands.

Recently, there has been a lot of debate about how building Brand India. How do you think we should go about it?

The first thing that comes to my mind when I think about India is fabrics. I'm saying this based on worldwide perception. Fabrics for India should be what Vodka is to Russia. You have a long and ancient history. In terms of tourism, you have a centuries-old civilisation. India has managed to hang on to it well. China has somehow lost the vestiges of the old civilisation. But economic and political strife is pulling the country down. India should understand that the global economy has no religion. That's why China attracts more FDI.

IT has been a success story for India. India's USP in IT has been good quality at low cost. And many companies that have thrived on that are now looking to move up the value chain. But you contend that one should cling on to the "Differentiating Factor" and not look to do something else.

There is no point in trying to become a specialist. It's easier going down the value chain than moving up.

Have any Indian brands caught your attention in the one week that you've been here?

Not really. I only see an increased influence of international brands.

STREET WISE
Local Fix
With its focus getting increasingly US-centric, is the pharma sector losing sight of opportunities at home?

The pharma industry's global prospects are bright, but let's not forget India is a land of sick, aging people too. As far as excitement goes, few industries can match the levels to which the industry has escalated. Almost every Indian drug firm worth its pain-killer is talking drug discovery, US generics, and bulk drugs supply to global formulations majors. Doubtless these are all great strategies, which could pay massive dividends. However, they're also high-risk: Last fortnight I met a director at a Mumbai-based mid-size pharma firm who learned the hard way that new drug discovery wasn't for him; his company's research efforts were going nowhere. So in a bid to recover the substantial sums he sunk into R&D, he's willing to sell the work his company's done so far to some prospective buyer. All the best to him. A grand vision encompassing R&D, US generics, contract manufacturing et al is good shareholder communication, besides keeping hacks like us busy and interested. A 20:20 long-term vision does help, but sometimes near-sightedness isn't such a bad thing after all.

What I am saying is that why aren't Indian pharma companies tom-tomming, other than their global initiatives, their efforts in their own backyard? In fact, it could just be that few Indian drug firms are looking too closely at the domestic market, seduced perhaps by the prospects of salting away an obscene stash from drugs going off patent or by even putting an altogether new molecule on the market. The domestic pharma industry is worth Rs 12,000 crore (exports bring in another Rs 10,000 crore), and is growing at just about 10 per cent-a growth rate most FMCG head honchos would comfortably settle for.

What's really exciting, though, is the heady rate at which some emerging segments are growing at. Consider the market for anti-diabetic drugs: Close to Rs 800 crore, and registering a blistering volume growth of 23 per cent. Then look at the cardiac segment: Worth a little over 1800 crore and surging annually at 17 per cent. The Rs 940 crore neuro-psychiatry segment too is showing double digit growth. You could conclude that we are a nation grappling with manic depression, clogged arteries and too much sugar in the bloodstream. There's a parallel boom happening in lifestyle drugs-the ones that tackle chronic non-life threatening conditions that are largely caused by ageing. The best example is Viagra and its numerous clones, but then drugs that claim to slow down aging, help in weight loss, curb addictions and tackle baldness also fall in this category. So let's continue with the NCEs, ANDAs, INDs, NDDs', and APIs, but at a time when "going global" is threatening to become a rather hackneyed mantra, let's not forget to give the domestic market its due.

-Brian Carvalho

ON THE ROAD DEPARTMENT
Quality-obsessed Chennai
The southern city is India's capital of quality, err, quality certifications.

Certified jewellery: And CEO Tushar Mehta sports a tie too!

No brakes: India's first Deming medal winner, Sundaram Clayton

It's hard to miss the fact that Chennai, a city of 5.5-million, which would like nothing better than to be known as India's Detroit (never mind that the American city isn't exactly Motown now) is a city obsessed with the Q word. That's Q for quality, not Queen, although the mistake wouldn't be out of context in a state governed by Revolutionary Leader (that's a real sobriquet, not this writer's description) J. Jayalalithaa. To the casual visitor, this Q factor is hammered home as he leaves the city's airport which advertises its ISO certification on an electronic display. To a denizen of the city, the fact is reinforced every morning: The Aavin brand of milk supplied to most homes in the city comes from an ISO organisation. Pathak Papad, Lalah Masala, and Arun Icecream-all popular local brands of condiments and foods-are owned by companies that boast an ISO certification. One of the city's largest cable companies, Hathaway Cable and Datacom has one too for its local operations. As do the design division of Mehta Jewellers, the first in its category in the country to sport the certification, and law firm Surana & Surana, the first in Asia to do so in 1998. Partner Vinod Surana believes the ISO played a part in helping his company treble its size over the past six years. Why, as reported first in the pages of this magazine, Chennai even boasts a numerologist Keshor Talwar with an ISO certification (See The Certified Astrologer, BT, October 12, 2003).

Then there are the larger organisations: Sankar Nethralaya was the first ophthalmic institute in Asia to obtain an ISO certification. And both Apollo Hospitals and MV Diabetes Research Centre, nationally renowned institutions, sport the certification. Sundram Fasteners was the first company in the country obtain an ISO certification and a Japanese Institute of Plant Management award. And Sundaram Clayton (also a TVS group company like Sundram Fasteners), the first company in India and the fourth outside Japan to get Quality's Oscar, the Deming Medal. For the record, two more group companies Sundaram Brake Linings and TVS Motor bagged the medal in subsequent years.

Blame it on genetic predisposition, food habits, natural proclivity for discipline, math, and playing by the rules, but Chennai's companies and non-corporate bodies seem to be more quality conscious (or, at the least, quality certification conscious) than their counterparts elsewhere in the country. The Bureau of Indian Standards concedes that between 50 per cent and 75 per cent of their business every year comes from the southern part of the country. Of its 402 (ISO) certified customers from the entire region, Tamil Nadu accounts for 151, and Chennai 67. "I would rather start any new initiatives in TPM and TQM in Chennai," says Sarita Nagpal, Principal Counsellor handling Total Productive Maintenance and Total Quality Management initiatives for Confederation of Indian Industry. "The people are more disciplined in following systems and appreciate the importance of quality."

That could explain why Chennai is rapidly becoming Deming and JIPM Award territory. This year, TTK-LIG, the world's largest condom manufacturer bagged the JIPM Award, and Rane Brake Linings and Brakes India's foundry division, the Deming. "All roads lead to the same goal, provided it is exploited to the fullest," says Suresh Krishna, Managing Director, Sundram Fasteners. In Chennai, it sure is.

-Nitya Varadarajan