MoserBaer Globalisation

8/3/2019 MoserBaer Globalisation

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Dr Amit [email protected]

DYK

According to the Challenge Forum, if digitized dataavailable to mankind could be expressed physically, itwould cover an area equivalent to

The island of Mauritius in 1920

Madagascar in 1940 The Congo in 1960

The African continent in 1980

All the continents by 2000

The whole earth now

And cover 1,700 planets every year by 2020!


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LKD

Typical CD data, if straightened, would be 5 km long Sony certified MB as Green Partner for product envt with

95%, highest for any company worldwide

The first company to produce 15 GB HD DVD-R

Worlds 2nd largest optical storage devices manufacturer

Top 12 global optical storage media brands source from MB

Global Tech-collaborations with Imation & Mitsubishi

In-house patented technology, among 4 Bluray makers

World's 5th-largest manufacturer of MFDs

Cost-effective international quality standards Only large Indian manufacturer of magnetic & optical media

data storage products, 90% production exported


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2007

Sales- Rs 19825 Mn

Net Profit-Rs 1098 Mn

Market Cap Rs 30000 Mn

Over 4,500 employees

4 Plants Production capacity over 3.2 billion discs

Revenue growth at a five-year CAGR of 42%

Consistent financial growth

Creditable, performance amid harsh environment Competition world over facing business upheavals


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Origin

Founded- 1983, New Delhi, by Technocrat Deepak Puri Started as a Time Recorder unit

Technical collaboration with Maruzen Corp, Japan &Moser Baer Sumiswald, Switzerland

Bought out Swiss stake, diversified, but the name stuck

1986- Moser Baer entered the data storage field


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Chronology

1983- Incorporation 1985- 2 crore investment in capacity of 600,000 floppy

disks of 8.0"/5.25" disks

1987- 3.5" disks commences, IPO

1999-2003- CD-R, CD-RW, DVD-R

2003- World's single-largest optical media productionfacility in Noida commissioned

Largest-ever Indian manufacturing deal with Imation, US

Moserbaer PRO ' brand launched in the Indian market

2004- H-P 'Lightscribe' license to make optical media

PE firm Warburg Pincus invests $149 million (Rs 675 cr)

HP SAARC rights- DVD+R, DVD+RW, CD-R & CD-RW

Contributing member of the Blu-Ray Disc Association


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Diversification

Horology industry to Data storage 1987- 5.25" Floppy Diskettes

1993- 3.5" Micro Floppy Diskettes (MFD)

1999- Recordable Optical Media

150-million unit plant to make Recordable Compact Disks(CD-R) & Recordable Digital Versatile Disks (DVD-R)

Optical media project strategy

Create facility to match global standards in size,technology, quality, product flexibility & processintegration

Same strategy applied successfully in the diskette business


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Globalisation

Global market - 0.5 mn in 1987 to 140 mn in 1995

Increasing global opportunities made global scale critical

R&D capability drove global foray

Liberalisation drove the need for globalization

Focus on optical and magnetic data storage media Exclusive preserve of Japanese & Taiwanese players

Key driver- opportunity to create a memory, second onlyto human brain using dyes, plastic & specialty chemicals

No Indian manufacturer globally competitive then

Indias image- country that only borrowed technology

Created world-class tech & manufacturing processes toput India on the global map


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Globalisation

Initial exports to Europe, 25-30% MS Antidumping investigations forced MB to diversify

revenue streams from a growth & risk perspective

2005- Europe- 35%, Americas-30%, Asia-35%

$ 10 mn German manufacturing facility to lucrative EU

markets- 5% volume but 20% value ($ 500 mn globally) Entered Hi-value add , Hi-margin products but tough to

service from offshore locations- a Japanese stronghold

2005- 85% exports, worlds 3rd largest CD maker (15-20% MS), capacity 2.4 bn units, focus on DVD

Top 2 Taiwanese firms- Ritek & CMC (70% MS) R&D JV worth $ 100 mn with Imation (US)

Indian market- 25cr (99) to 600cr (05) to 3000cr (2010)


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Became the second-largest manufacturer of CDs andDVDs within a decade of optical discs foray in 1999

There is no greater joy in life than dealing with hurdlesthat are thrown in front of you in your own business

Cyclical nature of the industry

Domination by East Asian firms We are the first company in the world to ship out

recordable HD-DVDs (next generation optical discs)


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Competencies & Advantages

Global benchmark Industry cost leadership

Industry technology leader

10%-15% less expensive than nearest rival

One of the most competitive manufacturers

18% share of the global optical media storage market

8000 employees at 4 manufacturing facilities

6 international offices

80% production exported to 82 countries, 6 continents


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Competences & Competitive advantages

Improved penetration Efficient & integrated, own world class processes

30% lower investment for similar scale capacities

Leveraged India-specific advantage of high-quality, best-

value human resources and lower per-unit capital cost Global cost leadership, 15-20% competitive cost advantage

Low OEM price points

Focus on single market

Volumes- 1/6

th

of global CDs sold The 3rd largest player in optical storage media segment

OEM supplier to 11/12 major global brands

Strong tie-ups with all major global technology brands


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Imation JV

Strategic JV with Imation Focus on customer service, long-term technology transfer

& R&D

Will dramatically improve MBs market share in US- theworlds largest and most lucrative market

JV will effectively & efficiently target new high growthmarkets- Africa, Middle East & South America

Substantially mitigates geographic risks

Balanced regional mix of revenue streams


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Blu-ray Disc

Moserbaer is a Contributing Member MB one of 4 global players

The basic specifications for a next generation largecapacity optical disc video recording format

Enables recording, rewriting and play back of up to 27 GB

of data on a single sided single layer 12cm CD/DVD sizedisc using a 405nm blue-violet laser


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International Focus

Endeavored to create own space in international market A pioneer among globalizing Indian firms

Carefully-planned and sustainable modellow costs, highmargins, high profits, reinvestment & capacity growth

Deep relationships with leading OEMs

Associated with most global majors World leader in the development and manufacture

One of India's leading technology companies

Presence in over 82 countries

Strong tie-ups with all major global technology brands 5-year CAGR of over 42 %


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Products

Optical Storage Media- CD-R/ RW, Pre-recordedCD/DVD, DVD-R/RW, LightScribe enabled media

Magnetic Data Storage Media- Compact Cassettes,Micro-Floppy Disks (MFD) and Digital Audio Tapes

The optical disc business is a commodity business, but in

the past few years we had managed to build up a brand inIndia, and we had managed to develop this really low-costmanufacturing process


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Investors

Electra Partners invested in Moser Baer in 1999 Our shareholding has come down from 18% to 6% today,

but we have made a nice profit on our initial investment

But every time we have ever thought of divesting, wehave always felt there will be a significant upside in the

near future


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Diversification/Expansion/Integration

Core optical discs business to solar energy & homeentertainment

In leveraging existing competencies, MB diversified intoanother high growth segment Photo Voltaics (PV)

If we can leverage our manufacturing strength in a

business we think about it. Solar was obvious because itinvolves layers of a substrate just like optical discs

$130 million investment in state-of-the-art photovoltaic(PV) cell plant at Greater Noida

Each of the machines has to come on 6 jumbo jets. Just

the leg of the machine is the size of our conference room The PV energy market will be worth $1 trillion in 15years & we do not want to be a bit player. I firmly believewe can take a 10% market share and be one of the top 2-3

players in this market worldwide


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Moser Baer Photo Voltaic (MBPV), wholly-ownedsubsidiary

Production in Greater Noida by April 2008

Initial capacity 40MW, rapidly scale up to 80MW

Also invested in crystalline silicon wafers & concentration

solar energy Only global company with manufacturing & expertise in all 3

methods to generate energy from solar power

Without any significant breakthroughs in technology, thecost of generating solar power from PV panels will drop 40%

just through manufacturing efficiencies. Such a steep decline,will make solar energy from thin film PV cells on par with ormaybe even slightly cheaper than thermal energy

Aggressive entry by manufacturing solar cells & modules

Initial project cost Rs 260 crore (60 mn)


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Promotion

Uncompromising adherence to Class 100 clean-roomconditions, climate control, superior machinery, the finestraw materials

Spirit of zero error manufacturing

100 people work 24 hours a day on process design

2% annual revenues on R&D, value engineering, productquality, yields & lowering production cost

Positioned globally as one of the largest data storage mediaproducers with stringent quality standards


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Dr Amit Rangnekar

[email protected]


India still uses a lot less power than the global average.We can be a global leader in solar power

Per capita electricity consumption in India in 2006 was631 kiloWatt hours (KWhr). In Canada, worlds highest

per capita power consumer, a whopping 17,179 KWhr

International Energy Agency GOI- Per capita power consumption 1000 KWhr by 2012

India has to build renewable energy and solar energy asalternatives to conventional energy needs

Difficult to double power production through conventional

methods in the next 48 months Emerging technologies & price reduction in solar energyproducts could significantly expand this market

MB may just pull it off


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Dr Amit Rangnekar

[email protected]

Optical media strategy

Short term- Increase global market share to 20%, leverage"first to market" and IP position in Blue laser formats

Leverage R&D and technology capabilities in expanding

product portfolio in storage (flash)

Double contribution of value added products (specials).

Medium Consolidate global leadership position

Target "first to market" in near field / holographic tech

Long-term

Dominate media industry & be a technology leader


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Dr Amit Rangnekar

[email protected]

Global optical media demand


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Dr Amit Rangnekar

[email protected]

Product scope

CDR / RW- Global demand 12 billion units in 2007,growth in Asian, Latin, American & Middle East markets.

Global supply consolidates through capacity conversions,demand-supply balance equilibrium, pricing firm

DVD / RW- Shifting consumer preferences, increasing

drive penetration & improving price-value proposition ledto 68% growth & 6.2 billion units, 2007 would be 9billion units @ 43% growth, prices may reduce due toeconomies, healthy margins retained


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Dr Amit Rangnekar

[email protected]

Next generation formats

Blue lazer technology (BD & HD DVD) can mitigateimpact of cannibalization of optical media demand byemerging alternate technologies

1st shipments by Moser Baer offers hope

Pricing of 15-23 GB formats is 15-20 times DVD formats

Demand for next gen HD DVD and Blu-ray media,expected to be 1.7 billion discs over next 3 years

Increasing applications driven by HD video content &improving price value proposition offered will expandmarket demand.

Complexity & manufacturing capabilities to mass producethese formats, will restrict competition to select group ofcompanies

Key players emerging in this high growth segment, willincrease differentiation between technology innovators &developers & the tier-II companies over the long term


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Dr Amit Rangnekar

[email protected]

The home entertainment business

Demand drivers- Rising disposable incomes, hecticlifestyles, growing hardware penetration, large andincreasing content base

India has over 26 million DVD/ VCD users

Barely a quarter of TV owning population in the country

DVD/VCD owners will grow @ 25% per annum. Indian home video market, only 8% (250cr) of Rs 79bn

film industry. Hollywood generates double revenue from2.5bn DVDs, than its theatre sales. The opportunities aremassive

Home Video share could rise sharply with increasingconsolidation and improving price value proposition

offered to consumers.


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Dr Amit Rangnekar

[email protected]

Home entertainment-Key revenue driver abroad


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Dr Amit Rangnekar

[email protected]

The home entertainment business

2006- Idea mooted, work on proposal, board clearance Legal team met Indian content owners & offered leveraged

low-cost disc capabilities to home entertainment

Signed 3-4 deals daily

End 2006- Acquired copyrights/license for 7000 movie titles

in languages- Hindi, English, Tamil, Telugu, Marathi,Malayalam, Kannada, Bhojpuri, Bengali, Gujarati & Punjabi

Strong 3-tier distribution covering 200,000 outlets through450 distributors across India

2007- Moser Baer VCDs & DVDs @ piracy busting price of

Rs 28 & Rs 34 We cant keep up with demand & roll out fast enough. Its a

problem, but better than having no one buying our discs


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Dr Amit Rangnekar

[email protected]

Home entertainment

Short term Acquire copyright/exclusive license of 40% mainstream

films ever produced across all languages

Establish strong pan-India distribution reach.

Selectively acquire new content, scale up business.

Medium term Clear leadership / dominance

Selectively enter content creation, launch other contenttype through established channel.

Evaluate alternate distribution platform

Long term

Leader in creation and distribution of quality contentspanning entire entertainment & infotainment segments


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Dr Amit Rangnekar

[email protected]

Home entertainment strategy

To leverage proprietary manufacturing technology &established network to offer quality product

Sensitive price point will change current dynamics

Superior price value proposition benchmark for consumers

Difficult to emulate for competition

Key differentiator- diversity of content, library size,language options and a strong delivery mechanism

Copyrights/exclusive license/rights of a third of allmainstream films ever made in India

Biggest player in the home video segment

Adopted pull and awareness marketing strategy Hello happiness" campaign to reach out to consumers

and communicate value proposition offered

Certified quality money back guarantee for anymanufacturing defect, free replacement


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Dr Amit Rangnekar

[email protected]

PV Global scene

Energy security- key global concern Increasing dependence on renewable energy sources

PV has most viable technology & potential to bridge gap

EU implementing PV technology

High Global PV demand for energy and systems

The global PV industry 2006, @ 40%


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Dr Amit Rangnekar

[email protected]

PV business

Short term- Rapidly scale up crystalline siliconcapacities, efficient sourcing strategy for raw material.

New technologies, key people to scale up

Achieve best in class cost benchmarks on efficiency &yields.

Medium term- Rapidly scale up different technologyverticals.

Emerge as one of the worlds largest & most efficient

Increase integration across the value chain upto BOS.

Long term- Emerge as leading, multi technology,

integrated & efficient, global PV manufacturer


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Dr Amit Rangnekar

[email protected]

Challenges

Having made the products, distribution was an issue

We had mostly dealt with industrial clients. Distribution

was an interesting challenge. We aim to reach 100,000

distribution points across the country. We want to target

panwallahs and street vendors as well as big retail.


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Dr Amit Rangnekar

[email protected]

And in the process, touch every town where there is amovie loving family


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Dr Amit Rangnekar

[email protected]

Strategic Alliances / Acquisitions

2006- MBPV acquired a stake in Stion Corp, ananostructures technology company in California.

Launched USB Flash drives in the Indian Market.

Launched 'Platinum' optical media range to ensure dataprotection for 200 years and tackle key optical media data

storage problems- scratches, scruffs, smudges & grime strategic sourcing tie-up with Deutsche Solar, one of the

largest global producers of silicon wafers

Entered into a strategic partnership with Pyramid SaimiraTheatre for home video marketing & retailing

Acquired OM&T BV- Philips subsidiary, only Blu-ray discmanufacturing capabilities outside Japan .

2007- Acquired 40% stake in Solarvalue, to ensure assuredsupply of solar grade silicon

wafers


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Dr Amit Rangnekar

[email protected]

Success Drivers

R&D focused, rich research pool of personnel Market driving, global alliances facilitate product & process

development & innovation

Hi-tech manufacturing excellence & low cost leadership

Synergy between Indian and EU operations

Product customisation0 meeting diverse client requirement Tie-ups with 11 out of 12 largest global OEM

Successful CRM- not lost a single OEM customer till date

Deep understanding of business cycles & markets led toproductive investments, high returns & a competitive edge

Comprehensive IT enabled integrated logistics & SCMsystem reduced shipment lead time by 20% & delayedshipments to < 0.1% of total despatches


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Dr Amit Rangnekar

[email protected]

Emerging scenario

Global optical media industry recovery due to continuingcapacity consolidation, consumer demand growth &softening of input costs

MB consolidated position as second largest globalmanufacturer of optical storage media

Global blank optical media products demand- 19 billionunits in 2006 @ 15% driven by 68% growth in DVDR/RWformat demand & shipments of next gen HD DVD & Blu-ray

Blue laser optical pick up heads & drives that read/writeboth HD DVD and Blu-ray formats will drive future

growth impetus


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Dr Amit Rangnekar

[email protected]

Future

To become a dominant player across multiple verticals &across the value chain in solar energy

Leverage mass manufacturing & thin-film coating

capabilities in new growth businesses

To dominate global storage media industry across allapplication classes and geographies

New businesses will contribute Rs 560-640 crore to the top

line in 2008.


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Dr Amit Rangnekar

[email protected]

Future

I have the view from the sky, he knows the nitty-gritty ofthings Puri Sr

You know, I would like to think of myself as a managerand not a promoter. I have to constantly do things to provethat I am not here because of who I am, but because I amgood. As a shareholder I would be insane to sit here ifsomeone else could give me a better return Puri Jr

Decentralisation is a key challenge as the need for lesshands-on control rises

Now planning to sell small pen drives

If you think about it, crystalline silicon solar cells aresemiconductors too. So never say never

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MoserBaer Globalisation