Moser Baer: The Pricing Game



Moser Baer was formed in 1983. It came out with a public
issue in 1997 to part finance a facility to manufacture 5¼-inch floppy
diskettes. The company has since then ventured into 3 ½ inch floppy diskettes.
This venture was financed by a rights-cum-public issue in 1994. Keeping pace
with technology, Moser Baer has set up a plant to manufacture optical media
storage devices, which includes recordable compact disks (CDRs) and recordable
digital versatile disks (DVDs). The company had a capacity of 43.5 million CDRs
at the end of March 2000, which is expected to touch 760 million units by the
end of fiscal 2002.

FACT
SHEET
  • Website: www.moserbaer.net

  • Address:
    63, Ring Road, Lajpat Nagar III
    New
    Delhi 110024

  • Tel: 011
    6438082-87
  • Fax:
    011 6849544
  • Area of specialization:
    Manufacturer of storage media for data, audio and video applications
  • Revenues:
    (March 2001) Rs 336.08 crore
  • Offices:
    India, Luxembourg, US
  • Listing (Stock Exchanges): Mumbai
    stock exchange, National stock exchange and Delhi stock exchange,
    Ahmedabad stock exchange, Calcutta stock exchange and Kanpur stock
    exchange
  • 52 Week High/Low:
    315/177
  • BSE Code:
    17140
  • NSE Code:
    MOSERBAER

Moser closed the fiscal 2001 with revenues of Rs 336.08 crore
and net profits of Rs 138.57 crore. In the first half ended September 2001, the
company reported revenues of Rs 312.02 crore and net profit of Rs 99.52 crore,
which were higher by 118% and 58% respectively over the corresponding previous
half. In the first half, the company sold 61.10 million units of floppy
diskettes and 175.83 million CDRs. The company achieves 70% of the revenues from
OEM sales supplying to players such as BASF, Sony, Mmore as well as other
European and Japanese multinationals. It also has its own brands such Xydane and
the recently acquired Luxemburg (Europe) based Capco. The company has also
set-up a subsidiary in the United States.

Moser’s expansion of CDR units is being financed by a mix
of equity and loan at a total cost of US$ 233 million or approximately Rs 1100
crore. Warburg Pincus and International finance corporation (IFC) has already
invested US$ 71 million whereas the company recently closed the debt financing
by a mix of European based banks of US$ 84 million, the balance being met
through internal accruals and debt. The expansion, once completed, would make
Moser Baer one of the major CDR manufacturing companies in the world, competing
with the Taiwanese majors. At present, Taiwan accounts for more than 75% of the
global demand with major players being Ritek and CMC Magnetics. However, Moser
Baer’s low cost of production enables it to compete with these global majors.

Moser is currently traded at Rs 279 discounting the projected
March 2002 EPS by seven times and March 2003 EPS by five times. Although the
company faces the risk of technological obsolesce, we do not expect any
replacement for the fast growing optical media storage industry. Moreover, the
low cost of production will ensure that the company would be able to compete
with the major global manufacturers. Moser’s share price has rebounded from a
low of Rs 177 in September to the current levels after the announcement of the
second quarter results. We remain positive on the company’s outlook and expect
upward movement as the company announces its quarterly results.

FINANCIALS

(All figures in Rs
crore)

  2000 2001 2002* 2003*
Sales 154.79 336.08 659.34 900.72
Other Income 1.95 15.83 2.50 3.00
Operating Profit 60.75 194.16 325.21 439.76
OPM (%) 36.49 48.45 46.25 46.13
Net Profit 44.12 138.55 193.17 274.71
Equity # 31.18 46.81 48.40 48.40
EPS (Rs.) 14.15 29.60 39.91 56.76
*Projected  #Fully
Diluted

Year ended March 31

Sushanto Mitra
is the founder of Technology Capital Partners

The views reflected here are of the author and not of this
publication. No liability is accepted for losses based on the information
presented here.

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