Are
Walt Disney India and UTV discussing a tie-up in the children's
broadcasting space? Rajat Jain, Managing Director, The Walt Disney
Company India, which has two channels, Disney and Toon Disney,
and Ronnie Screwvala, CEO, UTV, which owns Hungama TV, dismiss
this as "speculation", but industry watchers say a tie-up
will do both a world of good, and enable them to take on Turner
Entertainment Network's two children's channels-Cartoon Network
and pogo-that are the clear market leaders in this space.
According to Television Audience Measurement
(tam) Media Research, in the first half of 2006, the two Turner
channels had 30 per cent and 23 per cent viewership share, respectively,
while Hungama TV, Disney Channel and Toon Disney had 14 per cent,
11 per cent and 17 per cent shares, respectively. "Together,
the two Turner channels account for more than 50 per cent of the
total advertising, which stood at around Rs 700 crore in 2005,"
says a Delhi-based media buyer. Disney and UTV, however, dispute
these figures. "Hungama TV, in the last few days, has overtaken
Cartoon Network and registered a 42 per cent share," says
Screwvala. Cartoon Network has also consistently lost market share
(from 85 per cent in 2004 to 30 per cent now) in the past two
years, he adds. "It's not fair to compare new players (Disney
and UTV entered the market only two years ago) with those who've
been around for over a decade," says Jain.
Turner Entertainment, meanwhile, seems unfazed.
Says Ian Diamond, Senior Vice President, Turner Entertainment
Networks Asia: "When you have well-entrenched and successful
brands like Cartoon Network and pogo, it makes sense (for others)
to consolidate. Maintaining our position in a multi-player environment
is nothing new for us. We are our greatest competition and we
will continue to work towards maintaining our leadership position."
Can the challengers topple the market leaders?
Let the kids decide.
-Archna Shukla
Just
Show Me The Money
Temasek is in the back seat in two Indian
ventures.
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Lotus AMC's Bagga: Eyeing breakeven |
Temasek
holdings, the Singapore-based investment giant with a global portfolio
of a little over S$100 billion (Rs 3,00,000 crore), is known to
be an active investor. As it is in Indian companies like Tata
Teleservices and ICICI Bank, where it has a 9.9 per cent and 7.44
per cent stake, respectively. But there are times when Temasek
takes a back seat and prefers to be a passive investor, involving
only its cash and little else. These are times when the fund's
wholly-owned subsidiaries play the strategic role, just as is
happening in India in the mutual funds and the non-banking financial
company (NBFC) spaces. Temasek's 100 per cent-owned subsidiary
Fullerton, through a joint venture with Sabre Capital, is starting
a mutual fund in India, which will go by the name of Lotus India
Asset Management Company. Another fully-owned subsidiary, Asia
Financial Holding (AFH), has set up First India Credit, a 100
per cent-owned NBFC.
Ajay Bagga, CEO, Lotus India, says this is
the first time Fullerton is venturing into the AMC business. "They
have their expertise in managing institutional money and now want
to venture into retail space by managing third party funds,"
he says. Fullerton owns 55 per cent stake in the JV in which Rana
Talwar through Sabre Capital is a minority shareholder, and former
Mphasis head honcho Jerry Rao has also hopped on board with Talwar.
The promoters have infused $5 million (Rs 23.5 crore) in the AMC
and another Rs 20 crore are said to be waiting on the sidelines
for growing the business. "Our target is to break even in
three-and-a-half years," says Bagga. The AMC has roped in
a former fund manager from SBI AMC, Sandip Sabharwal, to head
the equity desk, whilst Nand Kumar Surti, formerly of JM Financial,
will head the debt funds. With an employee strength of over 100
people, the AMC has already opened 35 branches across the country
and has tied up with 3,700 distributors to sell its mf products.
By the year-end, the distributor network is expected to hit 10,000.
Meantime, First India Credit, which began
operations four months ago, is targeting the mass market, specifically
the lower middle and middle salaried class. Temasek's afh has
a strong presence in the Asian markets like Indonesia, Taiwan
and Pakistan as a bank. Restrictions by the Reserve Bank of India
on banking ventures would have persuaded AFH to take the NBFC
route into India. AFH has met with a fair degree of success in
targeting small and medium enterprises as well as mass consumers
in Indonesia through its investment in the Bank of Danamon (AFH
through a JV with Deutsche Bank has a 66 per cent stake in the
bank), and it might well be looking to replicate that model in
India via the NBFC. Led by a former Citibanker G.S. Sundararajan,
First India Credit has roped in Raj Raman of Prudential ICICI
AMC and Smita Aggarwal of ICICI Bank for the retail segment. The
current employee strength of the NBFC stands at 400 people. It
has bought an 80 per cent stake in the Chennai-based Dove Financial.
Currently present in 12 locations and 20 branches, the NBFC has
plans to open nearly 700 branches in the next one year in India.
Temasek should be impressed.
-Mahesh Nayak
The Party
Continues
The first flush of results for the
June quarter don't disappoint.
If
the stock markets are subdued-perilously close to sinking below
the 10k level at the time of writing-you can blame it on a number
of factors, ranging from a sudden disenchantment of foreign investors
with emerging markets to escalating tensions in the Middle East.
What you can't blame for the bearish mood on Dalal Street is the
corporate performance by India Inc. for the first quarter of 2006-07,
ended June 30. The first flush of report cards-of 335 new as well
as old economy companies-reveals bumper numbers. Net profits are
up sharply by 38 per cent over the previous year's corresponding
period for this sample of companies. Net sales aren't much far
behind, surging by 32 per cent. On a sequential quarter basis,
net profits surged by 6 per cent, and net sales 2 per cent over
the March ended quarter. (One caveat: It's usually the better
performers that release their results first, so by the time all
numbers are in, the sales and profits growth numbers will be lower
by a few percentage points.)
Says Rajat Rajgarhia, Head (Institutional
Research), Motilal Oswal Securities: "Most companies have
either met or exceeded expectations. Following an impressive first
quarter performance we will be upgrading our 2007 earnings estimates."
For Sensex companies, the brokerage had earlier estimated a 26
per growth in net profits for the entire year.
Operating margins, however, have been under
pressure. This has been thanks to higher expenditure on power
(up 7 per cent over the previous year's corresponding period),
marketing expenses (up 24 per cent) and freight expenses (up 36
per cent). Rising crude oil prices and commodity prices have also
played their part in lower operating profit margins, which were
down by 30 basis points to 29.57 per cent over 2005-06's April-June
period. At the net level, though, margins have improved by 57
basis points, to 13.6 per cent. Meantime, the hikes in interest
rates globally have caught up with Indian companies, which showed
a 30 per cent surge in their interest costs.
The sector that's the star of the show is
clearly it services, with bellwether Infosys posting a 19 per
cent growth in profits year-on-year (consolidated), and an impressive
15 per cent sequential jump in consolidated revenues (as against
guidance of 6-7 per cent). However, wage hikes did bring down
profit margins by 2.2 per cent, to 29.5 per cent over the March
quarter. The good news is that Infosys has revised its guidance
for the whole year, from Rs 12,254-12,446 crore to Rs 13,350-13,400
crore. Says R. Sreesankar, Head (Research), IL&FS Investsmart:
"Rupee depreciation has helped the it companies to offset
the wage hikes."
-Mahesh Nayak
Retail
Overtures
Will Wal-Mart ally with DLF and Reliance
Industries?
Wal-Mart
may be the world's largest multi-brand retailer, but if it has
to enter India it needs to sew up a few alliances. Current regulations
permit only single-brand retailers to take up to 51 per cent in
a joint venture operation with a local partner. Whether Wal-Mart
will take the JV route is not clear, but what is slightly more
certain is that Wal-Mart has begun doing the groundwork for other
alliances as various Indian companies reportedly pitch themselves
to win the retail giant's confidence. Some reports say that real
estate major DLF Universal is in talks with the US retailer to
be its franchisee in India to develop over 100 malls in 60 cities
over the next four to five years. According to reports, Wal-Mart
stores could be located either in DLF's malls or be stand-alone
structures. While DLF will own the stores, Wal-Mart would take
care of the backend and other logistics.
Meantime, industry insiders also reveal Wal-Mart
is interested in partnering Mukesh Ambani's Reliance Industries
Ltd (RIL) in the area of logistics. They point out that Wal-Mart
is eyeing RIL for sourcing items such as fresh fruits and vegetables,
as well as for transportation across the length and breadth of
the country. RIL is readying a 40-plane air cargo fleet for its
own logistical needs and this could serve Wal-Mart's purpose as
well.
Wal-Mart, meanwhile, has appointed management
consultant McKinsey & Co to help find a suitable partner or
several of them for its India operations. On being asked about
its India plans with DLF and others, Beth Keck, Director, International
Corporate Affairs, Wal-Mart International, says: "We cannot
comment on market rumours such as this." DLF refuses to comment
as it has lined up an initial public offering.
-Amit Mukherjee
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