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JUNE 3, 2007
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Trillion-Dollar Club
India has joined the elite club of 12 countries with GDPs in excess of a trillion dollars. The country's GDP crossed the trillion-dollar mark for the first time when the rupee appreciated to below Rs 41 against the greenback. According to a report by Swiss investment bank Credit Suisse, India's stock market capitalisation has risen to $944 billion (Rs 39,64,800 crore), which is also closing in on the trillion-dollar mark. An analysis of the Indian economy.

Minding The Monsoon
The India Meteorological Department's prediction that the total rainfall in the coming monsoon season is likely to be 95 per cent of the long-period average, with an error margin of 5 per cent, is good news for agriculture. But experts say there's a need to revamp monsoon prediction so that the region-wise and timing of rainfall patterns can be forecast much earlier. A look at the credibility of monsoon models and their impact on agriculture.
More Net Specials

Business Today,  May 20, 2007

The Great Outdoor Hunt
It's a Rs 1,000-crore industry and is expected to grow exponentially. Little wonder that PE players, and large media houses such as Rupert Murdoch's News Outdoor and a host of others want a piece of the out-of-home media pie.

It's now being called the "Zapak effect" for the instant recall that the outdoor campaign has managed for gaming portal this year-punching home the message that outdoor is the place to be for brands wanting remote- and surf-proof connect with consumers. There's a growing ripple of awareness-private equity (PE) players have swooped in, MNCs are scouting around for partners and large and mid-sized regional players are basking in the attention they're receiving from the big boys of the game.

Flagging off the action late last year in the category that is called ooh (out-of-home), UTI Ventures announced an investment of $10 million (Rs 45 crore then) for an undisclosed minority stake in Laqshya Media, an ooh company headquartered in Mumbai. This was followed by the allocation of a larger sum of Rs 100 crore, of which Rs 20 crore was placed as the first tranche in vJive Networks, part of Digital Music India, by Matrix Partners India. And large players like Anil Ambani's R-ADAG and us media giant Viacom are waiting for the right cue to take the plunge.

Nearly $100 million (Rs 410 crore) has already flowed into the ooh sector from PE companies. And expectations are that this amount will double over the next three years. There are unconfirmed reports of talks between Sequoia Capital India and outdoor player DSN. Bangalore-headquartered Serve and Volley, another ooh company, is also said to be on the radars of PE funds.

So, why is everyone sitting up and taking notice of a segment that, at Rs 1,000-crore in annual revenues, makes up only about 6 per cent of Rs 16,300 crore ad pie (2006 figures) and growing at only 10 per cent compared to radio (58 per cent growth) and the internet (52 per cent)?

"Online and outdoor advertising are the next big things for the media industry and will witness explosive growth"
A.P. Parigi

The obvious attraction is its massive future earnings potential. How? Over the next five years, the government and the private sector are expected to spend about $350 billion (Rs 14.35 lakh crore) on various infrastructure projects across the country. A portion of this money will be raised from the sale of advertising space on the project sites. "We think outdoor advertising can help fund the development of infrastructure in cities," says Sanjay Jaju, Special Commissioner, Greater Hyderabad Municipal Corporation, which has floated a scheme called "Fund Your City" for this purpose; and projects worth Rs 55 crore have already been assigned. "We have just invited another round of bidding under the scheme," he says. The funds raised are being used to build public toilets, footpath barricades, bus shelters and the like. New Delhi, Mumbai, Kolkata, Bangalore and Chennai have also benefited similarly.

This, then, will be the template for things to come. "Governments, municipalities, airports and railway stations are slowly waking up to the fact that they need to award contracts for longer tenures; only then will outdoor companies invest substantially in infrastructure," says Sam Balsara, CMD, Madison Communications which also offers ooh solutions under moms and Platinum. The natural corollary: Indian cities will benefit. "Our internationally-designed bus shelters, being installed in Bangalore, cost Rs 7 lakh each as opposed to the traditional ones that cost Rs 70,000. We are participating in other such projects in other cities," says Sumantra Dutta, MD, News Outdoor, a wholly-owned subsidiary of Rupert Murdoch's News Corporation, which has ooh operations in nine countries.

Times Innovative Media (TIMPL), which manages Times ooh Media, a wholly-owned subsidiary of Entertainment Network India (ENIL), is believed to be the largest national player in this space; it has bagged the contracts for outdoor advertising at the Mumbai and Delhi airports, which are said to be worth Rs 250 crore and Rs 150 crore, respectively. The next big opportunity that has outdoor advertising companies drooling is the one offered by Bangalore Airport and, subsequently, other airport privatisation projects in the country.

"We're hungry for growth and will look to partner anyone who has an appetite for growth"
Sumantra Dutta
MD/News Outdoor

Fund houses, naturally, are keen on riding this approaching crest. "I must have looked at least at 20 companies before deciding to invest in vJive," says Avnish Bajaj, MD of Matrix, adding that its latest broadband technology that seeks to convert consumers at the point-of-purchase was a clear differentiator in an industry that has traditionally seen ooh as being restricted to hoardings. vJive offers led screen at different points in stores and is able to relay precisely the message that is relevant to a certain shelf/consumer at a store. It's called "moment-of-truth-advertising" or MOTA, and kicks in when actual buy-decisions are being taken. Then, "Laqshya is among a handful of companies that has put in place a proper management team to lead its foray into this sector. It has also set up a subsidiary in Dubai that has bagged the contract for setting up air-conditioned bus shelters there," says S.N. Rajesh, Director, PE, UTI Venture Funds.

It's still a highly unorganised industry, but companies operating in this space typically record internal rates of return (IRRs) of 15-30 per cent. Given the multi-billion dollar top line potential of this sector, it's not surprising why investors are pouring in.

The competition is clearly hotting up. Clear Channel, a leading global brand, has already bagged a lucrative contract from the Delhi Metro Rail for advertisement rights inside stations. "The race to 'own' properties and consolidate gains will lead to lots of M&As," says Sanjay Shah, CEO, StarSight, the ooh division of Starcom.

Currently, the market is highly fragmented, with more than 5,000 site owners-a situation tailor-made for consolidation-but there are agnostics who believe that this state of affairs will continue for some more time. "The entry of star and Clear Channel was expected to lead to a consolidation, but nothing significant has happened," says Balsara.


These big boys are on the prowl.

» JC Decaux Advertising India
» vJive
» Laqshya
» News Outdoor
» Times Innovative Media
» Serve and Volley
» Jagran
» Clear Channel
» Selvel

...These are waiting to enter the fray

» Viacom
» Aegis
» Omnicom
» Big Reach-ADAG

... And these regional players may be in play

» Tamil Nadu: Diamond Publicity
» Gujarat: Chitra Publicity Company, Sambhaav
» Andhra Pradesh: Prakash Arts, Uni Ads
» Indore: Ad World
» Uttar Pradesh: National Advertiser
» Mumbai: Bombay Advertising
» Delhi: Graphis Ads, Pioneer

His view has influential takers. "We are hungry for growth and will look to partner anyone who has an appetite for growth and is progressive. But this industry is dominated by family-owned businesses that are more emotional than rational in their approach. We are talking to some of them… maybe we will be able to make an announcement shortly," says Dutta.

It's a sellers' market and the smaller players are in no hurry to cash out. Says Srinivas Maganti, MD, Uni Ads, a Rs 30-crore company that has a pan-Andhra Pradesh presence: "We have been approached by many players, including News Outdoor, but I need to understand their vision (before deciding on an alliance)."

But not every large player is keen on gobbling up its regional counterparts. "We are not looking at takeovers," says Pramod Bhandula, MD, JC Decaux Advertising India, "we are interested in long-term investments in contracts that come up for development." The company has agreed to pay New Delhi Municipal Corporation a minimum guarantee of Rs 20 lakh per month for 15 years for ad space in bus shelters; it will also share 16 per cent of its revenues with the corporation on any income beyond Rs 20 lakh.

The opportunity, clearly, is massive. But there are pitfalls as well. There is no national policy on outdoor advertising. "International players will hesitate to make substantial investments as site ownership is subject to government permissions and individual whims," says Balsara.

But it's the future that everyone is betting on. "These are early days and we think online and outdoor advertising are the next big things for the media industry and will witness explosive growth," says A.P. Parigi, MD & CEO, ENIL, which is part of the Times Group. He should know; he's the big bull in this market.

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