IHCL's Bickson: Growth on his mind

Going international is the mantra for Indian industry these days, and it's no different for Indian Hotels Co Ltd (IHCL), the Tata company that owns the Taj brand. The provocation for outbound growth for most Indian companies across sectors is similar: New geographies, new clients, new consumers. For IHCL, cross-border expansions are being provoked by a slightly different paradigm. As Raymond Bickson, Managing Director, IHCL, explains: "A lot of large (hospitality) companies setting up operations in India today have global distribution channels as well as loyalty programmes; these are driving reservation programmes." The native of Hawaii, who has three decades in the hospitality business in Europe, the US, and China, before joining IHCL in 2003, clearly knows what he's talking about. If the Hyatts and Hiltons of the world have entered India, why can't IHCL, with the Taj brand in tow, build its own global network, and leverage loyalty programmes, thereby filling up rooms in India and overseas.

Also, as a part of the 93-company Tata conglomerate that's going global in its flagship businesses (steel, vehicles, tea, to name just three), IHCL has another unique reason for stepping overseas: It's simply following in the footsteps of its sister corporations. Example: Tata Motors has acquired Daewoo Commercial Vehicle in Korea. IHCL has signed a marketing alliance with Shilla Hotels & Resorts in Korea. "When they (Tata executives) would go there, they had nowhere to stay, so tying up with Shilla Hotels was a good thing for us," says Bickson.

Being where the Tata group is makes sense for IHCL. But if Bickson is today on a global excursion that extends from Dubai, Malaysia, and Bhutan to the Seychelles, the Maldives and Mauritius, in addition to Cape Town, Durban and Johannesburg, New York, Sydney, Thailand and China, he's obviously looking beyond just global Tata outposts and is targeting every traveller. IHCL is foraying into these regions via marketing alliances, acquisitions or JVs and management contracts (usually for 30 years), which typically involve a smallish (10 per cent) equity contribution.

IHCL currently operates 76 hotels (either owned directly or through JVs and associates), of which 60 are in India. The number of rooms globally works out to 9,247. Some 4,000 more are under construction in India, and another 2,500 overseas. Says Bickson: "We will go up to 15,000 in 36 months, and the target is to have 20,000 rooms by 2010." Pratik Dalal, Research Analyst at Emkay Share and Stock Brokers, is skeptical: "As per the ongoing expansion plan the company is adding 23 hotels which turns out to be an addition of 2,310 rooms over the next three years," he says. The Taj Group has committed Rs 1,200 crore to fund growth of its business in India and overseas in the next three to five years. Close to 25 per cent of revenues come from overseas operations. "The goal in five years would be to have a third of our revenues coming from overseas operations," states Bickson.

Marketing alliances is one way to get there. IHCL already has three such tie-ups in its kitty: Other than the one with Shilla, there's one with Raffles International in Singapore and another with Silversea Luxury Cruises in Monaco. Long-term lease arrangements as well as acquisitions are also a part of the game plan. IHCL entered into a 30-year lease deal with Pierre Hotel in New York last July, and this February it bought Blue, Woolloomooloo Bay in Sydney for Australian $36 million (Rs 118.8 crore). Management contracts have also been worked out in Palm Island, Jumeirah (a $330 million or Rs 1,551 crore project), Langkawi in Malaysia and Thimpu in Bhutan. "We are concentrating on locations in the us (on the east and west coast), Sydney, Thailand, Dubai, and China, where we are focussing on Shanghai and Beijing to start with," says Bickson. Reveals Emkay's Dalal: "The company is evaluating a property in China, which could add 200-350 rooms to its inventory. But this is at an initial stage."

Meantime, on the domestic front, Bickson feels hotel companies just can't build rooms fast enough. Currently there are close to 100,000 rooms in India, which should go up to 125,000 in four-five years. Along with IHCL, which is more than doubling its inventory, the Leela group is adding 1,400-1,500 rooms in four years. Says Vivek Nair, Vice Chairman and Managing Director, The Leela Palaces and Resorts: "Bangalore rates have plateaued a little but in Mumbai, Delhi, Hyderabad and Chennai the room rates are expected to stabilise or increase marginally." With the Commonwealth Games coming to Delhi in 2010 and Cricket World Cup in 2011, IHCL has plenty going for it back home. And then there's Cape Town, London, Palm Island, Thimpu...

-Ahona Ghosh

I Own, Therefore, I Control
The largest shareholder in Sify begins to call the shots.

When you hold 42 per cent of a company's equity, and are the largest shareholder by far, it's time to roll up your sleeves and get into the thick of the action. That's what Raju Vegesna, head of private equity firm Infinity Capital Ventures, who owns 42 per cent of Sify, might have felt. He's taken over as Chairman, CEO and Managing Director of the internet major, with former CEO R. Ramaraj suddenly calling it a day.

Vegesna says Sify will focus on growing its four key businesses: Enterprise solutions, access (broadband to homes and cyber cafés), portals, and infrastructure-managed services abroad. "The last is a sunrise area, where we have unique skills and processes," he adds. To meet the growing demand for such services, Sify recently opened its third data centre in India in Bangalore. "We will look at other avenues for growth, such as acquisitions," Vegesna says.

The company is now on the look out for a coo, whose mandate will be to focus on people, processes, and synergies between Sify's multiple businesses. Explaining Ramaraj's surprise exit from the company, Vegesna says: "I invested in the company based on its people, processes, capabilities and technological skills, and wanted to be directly involved in growing the company. Ram (Ramaraj) has done a tremendous job in developing Sify from inception to what it is today."

Is he looking for an exit in the short term? "I own 42 per cent of Sify, and my intention is to grow the value of the company over time. I believe the opportunities before Sify in India and overseas are huge, and now is the time to capitalise."

-Shivani Lath

Thinking Big (And Small)
General Motors will finally be in the segment that matters most.

GM's Reilly: Driving ahead

General Motors (GM) was the second new entrant into the Indian automobile market after policies were liberalised in the mid-1990s. It began with the Opel Astra, made at its plant in Halol, near Baroda in 1997. But it wasn't until 2004 that GM was able to make a mark, thanks to the launch of the Chevrolet brand coupled with an entry into the utility vehicles segment. Yet for the first quarter of 2006-07 GM could muster up only a 3.4 per cent market share. One reason for that is that GM doesn't have a small car in its stable (small cars make up 60.4 per cent of the entire Indian passenger vehicle market).

That looks set to change. GM, which has previously focussed its Asian presence primarily on the Chinese market (where it had an 11.2 per cent market share in 2005), will put up a massive new facility at Talegaon, outside Pune with a $300 million (Rs 1,410 crore) investment. Nic Reilly, Senior Vice-President, GM, admits the plant was a long time coming, but the 140,000 cars that GM expects to produce there, coupled with an enhanced capacity at Halol, to 85,000, "will give us a significant foothold in the country, particularly as the new plant will be manufacturing the Chevrolet Spark, our small car."

Work is expected to start by end-August, and the new plant should be complete in 18-20 months. Reilly expects the Chevrolet Spark (the next generation Daewoo Matiz) to be launched by mid-2007. Coming at a time when GM in the us is strapped for cash-it reported a $3.4 billion (Rs 15,980 crore) loss for the second quarter mainly on account of a major tax charge-the India investment is a pointer to the world's largest auto maker's strategy to chase new markets in a bid to stave off Toyota's challenge and hang on to its numero uno position.

-Kushan Mitra