GOLD LOCK STOCK & BARREL...Why to blame us....Afterall the whole world is Mad after this Maya!!

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Indian Multiplexes Industry: An Overview.....Major Shift post Consolidation

Indian Multiplexes Industry: An Overview In the last three years, exhibition cos have seen a big rise in revenues and operating margin, Post Consolidation Multiplex companies present a picture of healthy consolidation as they have recorded a significant improvement in their revenues per screen per quarter and operating margins after expanding inorganically over the past three years. PVR and Inox Leisure have reported a growth of 28-58% in revenues per screen per quarter since their respective acquisitions. The growth has come from a combination of factors, including consistent increase in average ticket prices, increasing contribution of revenues from food & beverages as well as advertising segments, expansion in non-metro cities and, perhaps most important, their bargaining power with producer-distributor groupings that share part of the revenues from sale of tickets. There have been two major acquisitions in the multiplex industry over the past three years. Inox Leisure acquired Fame India in 2010, a move that strengthened its presence in western, southern and eastern regions. PVR acquired Cinemax India in November last year, thereby consolidating its presence in the western region considerably after having established itself in the North. Prior to the acquisition, Inox Leisure and Fame India individually generated average revenues per screen per quarter of . 59 lakh and . 41 lakh, respectively, from June 2009 to June 2010. The merged entity has been recording an increase in average revenue per screen per quarter. According to an ETIG analysis, the average revenue per screen per quarter for Inox Leisure has increased to . 79 lakh after acquisition, leading to a growth of 58% in average revenue per screen per quarter in the quarter to September 2013. Similarly, PVR and Cinemax India individually generated average revenues per screen per quarter of . 86 lakh and . 57 lakh, respectively, from June 2010 to December 2012. The merged entity has generated . 91 lakh revenue per screen per quarter in the quarter to September 2013, spelling a growth of 28%. “Besides robust box-office collections (with a consistent growth of 7-8% in average ticket prices), a major factor that contributed to the growth of revenue per screen per quarter is the strong growth in food & beverages revenues in the last three years,” said Nitin Sood, chief financial officer of PVR. Among the chief reasons for growth in revenues from food & beverages is the frequent change in the food menu. “At Inox, apart from usual snacks, we constantly innovate on our food menu. We have different varieties of sandwiches and other items, which are improvised according to the changing taste of patrons,” said Alok Tandon, chief executive officer of Inox Leisure. The contribution of food & beverages to the company’s revenues in April-September 2013 was 21%, compared with 15% in the corresponding period in 2010. Consistent increase in advertising revenues also contributed to the growth in revenues per screen per quarter as multiplexes increased their presence across the country. Inox Leisure is present in 40 cities with 288 screens, while PVR is present in 38 cities with 402 screens after their respective acquisitions. This has added to the advertising revenues as well, which, in turn, enhanced revenues per screen per quarter. “Due to enhanced presence in tier-II and tier-III cities, our advertising revenues are also growing by 30% year-on-year for the last three years,” said PVR’s Sood. Analysts, however, say the increased bargaining power of exhibition companies is the biggest driver of their growth. Multiplex companies get half of the revenues earned from sale of tickets during the first week of release of a film, while the rest goes to producer-distributor entities. In the subsequent weeks, the share of revenues changes between multiplexes and producer-distributor entities depending on the collections. PVR, which commands as much as a quarter of the screen capacity of the entire multiplex industry in the country, now has an average bargaining power of 47.2% with producer-distributor entities, compared with 48% earlier. This means it saves 0.8% of its collections, directly enhancing its operating profit. Another factor is the improved product mix that these companies implemented after the acquisition. Following the increase in screen count, these companies also cashed in on the demand for regional films, which not only ensured them more revenues but also tax benefits in select states. “Regional cinema is playing an active role in enhancing overall revenues of multiplexes,” said Alok Tandon, chief executive officer of Inox Leisure. An analyst with an institutional broking house agreed. “As regards regional films, the overall budget, quality and more importantly boxoffice collections have improved dramatically. It is a serious business for multiplexes.” For PVR, the contribution of regional films to box-office collections has increased to 12-15% from 6-7% three years ago. Multiplex firms have improved their operating profit and revenues. Inox’s EBIDTA per screen per quarter before acquisition was . 5 lakh, while Fame’s average EBIDTA was . 4.6 lakh. Post-acquisition, the merged entity Inox Leisure has an average EBIDTA per screen per quarter of . 9.7 lakh, a growth of 98%. On the other hand, PVR and Cinemax India both had average EBIDTA per screen per quarter of . 14 lakh before acquisition, which grew 30% to . 18 lakh after the acquisition. Importantly, this expansion has not over-leveraged the balance sheets of these companies. On a full-year annualised basis, PVR is currently trading at a debt-to-EBIDTA ratio of 2, while Inox Leisure is trading at ratio of 1.4. These are manageable levels since debt-to-EBIDTA ratio of more than 4 stretches the balance sheet.     Ref: An ET Article

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Indian Telecom Industry: An Overview.....Impact of FDI Opening whether result into M&As!!

Telecom Industry An Overview : M&As are for real or just mere talks!!

Various PnCs if it moves towards Consolidation...

New rule to kickstart consolidation

Telecom M&As: Time for consolidation

Now that the Department of Telecom has cleared the revised merger and acquisition (M&A) policy for the telecom sector, consolidation among the top three operators is virtually ruled out though there is ample scope for them to weigh acquisition of regional operators. Here's a look at five possible scenarios...

Scenario 1

Bharti Airtel buys Loop Telecom

TARGET: GSM Operator Loop Telecom ~6% and ~10% revenue and subscriber market share, respectively, in the Mumbai service area

USP: Holds 8MHz in the 900 MHz spectrum band

REASON: Airtel, with revenue market share (RMS) of ~21%, closes the gap with Vodafone, with RMS of ~35% in Mumbai

HURDLES: One, Bharti Airtel would breach the spectrum holding limit (~29% of overall spectrum supply vs the permitted limit of 25%). Hence, it would have to surrender part of the 1800MHz spectrum holding. Two, no reservation for incumbents in re-farming of 900MHz spectrum and high debt levels of Loop

Scenario 2

Idea Cellular buys Loop Telecom

TARGET: GSM Operator Loop Telecom ~6% and ~10% revenue and subscriber market share in the Mumbai service area

USP: Holds 8MHz in the 900MHz spectrum band

REASON: Post-deal, Idea's RMS would be about 15.5%. Overtakes Tata Teleservices (RMS: 13.5%) and Reliance Communications (RMS: 10.5%) in Mumbai

HURDLES: No reservation for incumbents in refarming of 900MHz spectrum and high debt levels of Loop

Scenario 3

Idea Cellular buys Aircel

TARGET: Aircel, a pan-India wireless operator with about 5% and 7% revenue and subscriber market share, respectively Has spectrum in the 900MHz band in four of its legacy circles (TN, Assam, North East and J&K; RMS 21-26% Has 3G spectrum in 13 circles (including key circles like Kolkata, AP, TN, and Karnataka) and 4G/LTE spectrum in eight circles

REASON: Idea, the No. 3 pan-India operator with RMS of about 16% currently and about 21% after the deal, would close the gap with No. 2 Vodafone with RMS of about 23% on a pan-India basis. In terms of market share, Idea would gain 1.5-3.0x across circles like Kolkata, West Bengal, Orissa, Rajasthan, HP, Bihar and more substantially in TN, North East, J&K and Assam The deal will have scale advantages for Idea, which would help it lower EBITDA losses in these circles

HURDLES: One, the merged entity would breach the spectrumholding limit in circles where Aircel has 4G/LTE spectrum

Two, in the absence of an active strategy to rollout 4G, we believe Aircel may consider either surrendering the spectrum to the government or selling it off as a separate asset

Three, high leverage on Aircel balance sheet and concentrated revenues could hurt interest

Scenario 4

Vodafone + Quadrant Televentures (Punjab)

TARGET: Quadrant, an incumbent operator in Punjab service area with ~4% and ~5% revenue and subscriber market share, respectively

Holds 4.4MHz of the 900MHz band and 2.5MHz of CDMA spectrum in the 800MHz band

REASON: Vodafone, with about 19% RMS, would gain a notch on market position and overtake Idea Cellular as the No. 2 operator in Punjab.

HURDLES: No regulatory hurdles seen

Scenario 5

Tata Teleservices + Telenor buy Aircel

TARGET: Tata Teleservices and Telenor may consider a partnership. This combo could also consider acquiring Aircel

REASON: The three together could become the No. 4 operator pan-India, with about 14% market share. Aircel's 3G spectrum is a good fit for Tata Tele and the combined entity will have 3G licence in 19 circles (pan-India excluding Delhi, Mumbai and Himachal)

HURDLES: One, the combined entity would breach the spectrum-holding limit in five circles due to Aircel's 4G spectrum

Two, merger of the two pan-India operators and one regional rival would take considerable management effort to pull through

Three, high leverage on Aircel's balance sheet will be a challenge 

Though the rules have been relaxed, there are complexities on biz operations in the market, Significant Consolidation may not be there in immediate future...

“Consolidation will not be very easy given the various permutations which are now emerging,” chief financial officer Vsevolod Rozanov told ET, adding that the company itself isn’t looking at any M&A deal till it becomes Ebitda positive the internal deadline for which is the end of 2014. ET had reported earlier that Sistema was in preliminary talks for a three way merger with Tata Teleservices and Aircel, both struggling to survive in an intensely competitive market.

Rozanov said that only four private telecom operators could operate in this market but the challenge will be how the remaining market divides itself between the consolidators.
The Indian market currently has as many as 12 operators in some service areas and the sector has been desperate for favourable merger and acquisition (M&A) rules as intense competition has left them bleeding. Most of them have huge debt on their books, taken mainly for expansion and the 3G spectrum auctions in 2010. Some haven’t even rolled out services in some areas.
The new M&A guidelines cleared by the empowered group of ministers on Tuesday eased consolidation by allowing companies to merge or acquire another so far the market share doesn’t exceed 50% in a circle, up from 35% allowed earlier. An operator, however, will be entitled to only one block of spectrum which had been allotted at an administrative price, or without an auction process. The merged entity would need to pay the market price for any additional bandwidth beyond that one block.
The government has also decided to retain the spectrum cap of a merged entity at 25% of total airwaves assigned for access services and 50% of the bandwidth assigned in a given band, by way of auction or otherwise, in the concerned service area. Analysts say the guidelines rule out any merger among the top three operators Bharti Airtel, Vodafone India and Idea Cellular. They mainly encourage smaller operators to combine with each other, though some of the bigger players can acquire specific circles of smaller operators.
“We expect meaningful consolidation in the bottom half of the market with only 2-3 of the 4th-8th operators surviving in the long run,” brokerage IDFC Securities said in a note.
In another note, Rohit Dokania, an analyst at Batlivala & Karani Securities, said that while the new rules did give room to Bharti Airtel and Vodafone India to pursue M&A activity on a circle-wise basis, but the fact that they would need to pay for bandwidth in excess of 4.4 MHz was a damper.
The rule “obviously ensures that only operators with 4.4 MHz spectrum (in a specific circle) can acquire some other operator – thus only two smaller players are encouraged to merge,” Dokania said. Analysts though were unanimous that clarity was needed on issues such as spectrum trading, spectrum usage charge (SUC) and one-time spectrum charge to encourage M&A.
The government has already asked Telecom Regulatory Authority of India to submit recommendations on trading, which the regulator is scheduled to do by mid-January, a week before the auction slated to start January 21.
The government has also indicated that it is in favour of a flat spectrum usage charge instead of the current cascading system based on the quantum of airwaves held, which, operators and analysts say, acts as a deterrent to an M&A deal.

Ref: An ET Article By ANANDITA SINGH MANKOTIA & ROMIT GUHA  

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Economic Power Or Just a Haughty Dragon....Who Never Ceases To Make Claims Of Its Spurious Unending Borders!!

The Dragon’s Disputes China has territorial dispute with all nations it shares border with and 8 other nations. A look into the phenomenon:  INDIA China illegally occupies 38,000 sq km (Aksai Chin) of land in Jammu & Kashmir. It also holds 5,180 km of Indian territory in Pakistan occupied Kashmir under Sino-Pak agreement of 1963. At the heart of Sino-Indian boundary dispute is the issue of Arunachal Pradesh (90,000 sq km), which China describes as “Southern Tibet”. Beijing is demanding that at least the Tawang Tract of Arunachal Pradesh, if not the whole of the state, be transferred to China JAPAN Parts of the East China Sea, particularly the Senkaku Islands. Also, on occasion, the Ryukyu Islands, on the grounds that the completely independent Kingdom of Ryukyu was once a vassal state of China. The Kingdom of Ryukyu terminated tributary relations with China in 1874 AFGHANISTAN Afghan province of Bahdashan (despite bilateral treaty of 1963, China still encroaches on Afghan territory) BHUTAN Bhutanese enclaves in Tibet, namely Cherkip Gompa, Dho, Dungmar, Gesur, Gezon, Itse Gompa, Khochar, Nyanri, Ringung, Sanmar, Tarchen and Zuthulphuk. Also Kula Kangri and mountainous areas to the west of this peak, plus the western Haa District of Bhutan BURMA China claims large areas of Burma on historical precedent (China’s Yuan Dynasty, 1271-1368). There are unspecifi ed border disputes with Burma TAIWAN China claims all of Taiwan, but particular disputes are: Macclesfi eld Bank, Paracel Islands, Scarborough Shoal, parts of the South China Sea and the Spratly Islands. The Paracel Islands, also called Xisha Islands in Vietnamese, is a group of islands in the South China Sea whose sovereignty is disputed among China, Taiwan and Vietnam KAZAKHSTAN There are continual unilateral claims by China on Kazakhstan territory, despite new agreements, in China’s favour, signed every few years    LAOS China claims large areas of Laos on historical precedent (China’s Yuan Dynasty, 1271-1368) BRUNEI Over Spratly Islands. The Spratly Islands is a disputed group of more than 750 reefs, islets, atolls, cays, and islands in the South China Sea. About 45 islands are occupied by small numbers of military forces from the People’s Republic of China, Taiwan, Vietnam, the Philippines, and Malaysia. Brunei has also claimed an exclusive economic zone in the southeastern part of the Spratlys encompassing just one area of small islands on Louisa Reef. This has led to escalating tensions TAJIKISTAN Chinease claims based on hi precedent (Qing Dynasty, 1644 CAMBODIA China has, on occasion, claimed parts of Cambodia on historical precedent (China Ming Dynasty, 1368-1644) INDONESIA Parts of the South China Sea MALAYSIA Over Parts of the S. China Sea, particularly the Spratly Islands MONGOLIA China claims all of Mongolia on historical precedent (Yuan Dynasty, 1271-1368). In fact, Mongolia, under Genghis Khan, occupied China NEPAL China claims parts of Nepal dating back to the Sino-Nepalese War in 1788-1792. China claims they are part of Tibet, therefore part of China PHILIPPINES Parts of the South China Sea, particularly Scarborough Shoal and the Spratly Islands NORTH KOREA Baekdu Mountain and Jiandao has also on occasion claimed a North Korea on historical grou (Yuan Dynasty, 1271-1368) RUSSIA 160,000 square kilometres sti unilaterally claimed by China, China signing several agreem SINGAPORE Parts of the South China Sea SOUTH KOREA Parts of the East China Sea. China has also on occasion claimed all of South Korea on historical grounds (Yuan Dynasty, 1271-1368) VIETNAM China claims large parts of Vietnam on historical precedent (Ming Dynasty, 1368-1644). Also, Macclesfi eld Bank, Paracel Islands, parts of the South China Sea and the Spratly Islands                           An ET Article...

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Sovereignty v/s Surrender : Food Security Act at stake , Hunger cannot be negotiated...

For a developing country like India , where millions of people are loosing their life, becoming victims of malnutrition , stunting, and prone to other life threatening diseases due to lack of 'food' , can there be anything more imperative than ensuring access to food to all citizens in general and the poor in particular.

We ( Our Parliament ) did this humane act , making access to food a legal right under the Food Security Act 2013 but now , due to our prior commitments on International platform ( WTO in this case ) , the implementation of this Food Act seems a distant reality.  

Under the Agreement On Agriculture signed in 1988, the member countries ( developing ) are bound to restrict their domestic support also known as “Aggregate Measurement of Support ” (AMS is the difference between the Procurement price and a “fixed, external reference price” for a product, say rice, multiplied by its total domestic production )  for agricultural products below 10 % of the current value of production. Price support to farmers are considered trade and production distortionary and comes under the category of Amber Box subsidies i.e. to be reduced and as India attempts to implement the Food Security  , there is little doubt that India will breach this ceiling of 10 % and thereby , violating its commitments under the WTO Agreement on Agriculture (AoA).

WTO : Bali Round 2013

 At Ninth WTO Ministerial scheduled for next month in Bali , a continuation of Doha Round 2001 ,  for negotiations to facilitate the increase of global trade ,  India is sure to face resistance  from the developed countries on its Food Security Act. The developed country’s argument is that if the state agencies start buying from farmers at well above international prices on a large scale, then it acts as an implicit incentive to the local farmer to produce more and that would squeeze out global grain suppliers leading to trade distortion.

India’s way out

India will have to primarily convince the members based on the following aspects :

·   * The proposal, as mooted by G33 ,  to categorise higher-than-normal procurement prices — for the purpose of ensuring food security — as a permitted agri-subsidy.

·   * As the AMS rule is unfair because the “external reference price” is pegged to 1986-88 levels ( Wheat price Rs 354 per quintal )  , there should be a more recent base price to arrive at cap levels.

·  * India may invoke clause 18.4 of AoA which says “ due allowance shall be given ‘‘ to the inflation factor while assessing whether the MSP violates the AoA. And the actual inflation should be considered.

Peace Clause : A trap and surrender of Indian sovereignty

The developed country’s offer to accept the Article 13 of AoA is not a solution for a country like India where Food is still the most desirable object .  It will impact India in two major ways: 

·  * Agreeing to peace clause will be an acceptance of the notion of Food Security Act as market distortionary.

· * It will also be a surrender of India’ s sovereignty as the Act is enacted by the Supreme Parliament with a vision to annihilate hunger from the country.

· *  After the peace clause gets over , it would be possible for member countries to use WTO dispute settlement mechanism to challenge Indian subsidies , if not withdrawn by India after four years.

We strongly believe that Indian diplomacy will overcome this impediment , leading the developing countries , and ensure that the legal right given to its citizen will not be compromised.


By - Shobhit Anand

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