The Hindu Business Line : Maintaining growth in the slowdown era

"Today we are the single largest player in the domestic market with a market share of 30-40 per cent. We face competition here mainly from imports."

Mr Ratul Puri, Executive Director, Moser Baer

NEW DELHI, Jan. 22

THESE are the days when most CEOs of technology companies talk in uncertain terms about the future. "The vision is hazy'' and "outlook is unclear'' are some of the refrains that are often heard when they talk of the future.

But Moser Baer India Ltd (MBIL), the Delhi-based manufacturer of optical storage media, is still growing at rates that were once associated with top-rung software companies. For the quarter ended December 31, MBIL touched a growth of 62.5 per cent for its net profit while it expects to double its turnover for the fiscal.

Mr Ratul Puri, Executive Director of MBIL, talks to Business Line about how his company has been able to notch up such impressive results amidst the general slowdown. Excerpts:

Globally, the technology sector is down with even giants like Intel feeling the heat of slowdown. How did you manage to record such results in the third quarter?

Personal computer sales are slowing down, but the sales of CDR-RW drives are growing. To us, that is much more important. We have seen sharp increase in sales of CDR-RW drives globally from around 16-17 million drives in 1999 to around 35-40 million in 2000 to around 65-70 million in 2001.

A survey in the US amongst prospective PC buyers has shown that recordable drives are the number one peripheral choice. Also, prices of drives have come down from $300 two years ago to $ 30 today. Those are the two factors that have driven the sales.

What is your current product portfolio?

Our major products are now recordable CDs (CDRs), rewritable CDs, recordable DVDs, floppy diskettes, tape products aimed at professional storage industries and pre-recorded CDs and DVDs.

The largest volume product now is CDRs. In the beginning of the year, our capacity was 380 million and this will be 760 million by end of March 2002 on the optical media side.

The prices of your products are going down significantly and yet you have improved profitability?

Yes. We have seen prices drop in the third quarter itself by 8-9 per cent over the second quarter. What benefited us in this context is the new process that we have developed called `Pc12D- XT'. This process has helped us significantly reduce material consumption, improve productivity and throughput and minimise wastages.

We have been working on this process for nearly a year-and-a-half now. We started implementing it at the end of second quarter and completed it by the end of Q3.

Through this process, we have driven down the amount of components. For instance, the net amount of polycarbonate is down because the process allows us to go for slightly thinner disks. We have also reduced the amount of die that we use in the disk and switched from a palladium-based die to a non-palladium based die.

Our target essentially is to reduce the net amount of die that we use in the disk, because 70-80 per cent of the die that goes into a disk is wasted; it is not used actively for storage of data.

Your major market has been Europe. How do you go about addressing other markets and what are the strategies that you have for those places?

Europe today accounts for 50 per cent of our business, the US 20 per cent and the rest of the world the balance. We are now focussing in a big way on the US market, where we opened a subsidiary a year ago. Beyond that we will venture into markets such as South America, Africa and West Asia much more actively. We are also now active in Japan.

Our strategy for the US market is not retail-driven: we are addressing the duplicator and professional market there plus the OEMs. We believe we can get better pricing thorough OEMs. We now have nine major OEMs as our clients.

As for the domestic market, it is estimated to be around 300-400 million units in size and Rs 500-600 crore in value terms. Today, we are the single largest player here with a market share of 30-40 per cent. We face competition here mainly from imports.

For us India will become a much more important market in the coming years as domestic sales are now contributing upwards of 20 per cent of revenue from the earlier 3-4 per cent.

What is the current level of research and development (R&D) in MBIL?

We have now around 100 people in our R&D, of this around two dozen are PhD holders. We invest 2.5 per cent of our revenue in R&D. So this year it will be around Rs 15-17 crore. Last year we invested Rs 6.9 crore.

We are continuing to add R&D capabilities in the US and Europe too. It is being done through a natural organic route but we are also open to an acquisition. Recently, we have also filed for three patents in the US.

You aspire to be amongst the top 2-3 players in the sectors that you are operating in. Does that target entail fresh investments in new capacities?

We are well on our way to do that. If we see strong growth in the market, and we see the returns on investments at the current rates, we will grow to maintain our market share. If the growth continues to be healthy, we will invest further to maintain our market share.

Currently, we are running fairly strong with cash generation. So we don't see any financial requirements for the current projects. But going forward we can move into expanding other areas like CD rewritables and DVD rewritables.

If the growth in these areas looks interesting, we may further expand capacities and then there may be some capital expenditure.

Do you face the threat of imposition of anti-dumping measures by some countries?

The possibility of different countries levying anti-dumping duties against us always exists. But we are not aggressive with pricing in the markets we operate. We typically operate in the top-end of the market. Even in India, we don't operate at the bottom-end.

We have been investigated against by many countries in the past just because our volumes in some markets are very large. But because of our pricing policies, it will be difficult for any country to prove dumping against us. It is always an area of concern. But because of our pricing, we believe we are reasonably safe.

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Maintaining growth in the slowdown era