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"We are looking beyond optical media"

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DQI Bureau
New Update

One of the largest optical media companies, Moser Baer had been growing at a

fast pace, until the oil crisis happened. No thanks to increasing polycarbonate

prices, the key raw material for optical media, Moser Baer saw fortunes tumble

quickly. For the first time in its

history, the company showed losses. However, it has quickly bounced back, and

remains upbeat about the future. In a freewheeling interview with Associate

Editor, Yograj Varma, Deepak Puri, chairman of Moser Baer, talks about the fall

from grace story, about hardware manufacturing and his future plans.

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On losses and losing the growth momentum



I guess each business has its ups and downs. The US-Iraq war and the rise in

oil prices hurt us very badly. We were comfortable till last year as we had

adequate supplies of polycarbonate, the key raw material. However, post

December, the new polycarbonates hitting the market were priced 2.5 times

higher. This hit us, and our competitors, very bad. However, things are looking

better. I think you will start seeing the difference from the next quarter

onwards.

On acquiring companies in the lean phase

Deepak

Puri, chairman, Moser Baer
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While we have a comfortable cash position and good financial partners, I

think it is not a good idea to buy out bigger competitors. We are already among

the lowest cost manufacturers in this business and I think we have made ample

investments for future growth. We already have a very dominant position in the

optical media business and buying other players will not add much value. Also,

buying out competition will restrict us from looking at other investments, which

the company is very serious looking at. One being the photo-voltaic space. We

are evaluating other investments as well.

On low promoter stake of 18%, and related take-over vulnerability



What vulnerability? I think that one or two people-primarily promoters,

run our business, across the globe. Our investors are such that they rely on the

promoters to bring value, and there is no question of our position being

undermined. Moreover, even if they decide to sell, as part of the agreement, we

have the first right of refusal.

On hardware manufacturing



I think we have a very vibrant service sector. But to me, it is selling

labor. I think we should start looking at selling beyond services, going into

hardware or into some finished software. Unfortunately, that is not happening.

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Add to that, the Indian government (previous and current) does not understand

the hardware business. Let us take the example of cell phone manufacturing in

India. It is a very complex operation if you start looking at the entire value

chain. As no phone assembler makes the component himself, he has to have very

tight control of inventory. Since most of the components will be imported, they

will factor in the time lag in clearing imports. By the time that it takes the

material to reach the factory, the model would have changed. I think the

government has to mitigate these difficulties.

Another example is Intel. When Intel announced its plans for India, all

semiconductor companies were watching the deal carefully. I think the day

semiconductor comes in, your first step has been taken. And Intel was very

serious. But look at the offers Intel has had from other countries. In China,

the government is ready to offer land for the facility. In Israel, the

government pitched in with 25% of the investment. Obviously, they have similar

expectations from India, but that will not work in India given our political

system. So, I think, real hardware manufacturing is still some way away.

On new plans for Moser Baer



We are not de-risking our optical media business. We are one of the

strongest organizations in optical media and our focus will continue to be on

optical media. However, I think we have reached a stage where we have to look at

other things also. As announced recently, Moser Baer will be looking at solar

photo-voltics seriously, as the next line of business. There is a lot of synergy

between that business and our existing one.

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On industry-academia thrust and R&D thrust



I think we need to ramp up the industry-academia collaboration. Look at the

US. About 80% of students are funded to do R&D. In India, the depth of

knowledge is huge as high technology R&D is happening and is funded largely

by the government. I think the IITs are a hotbed of knowledge and we have tied

up with them. I am told that the projects are working out very well. We have

also tied up with various organizations across the world. It is like following

the Mughal example. The Mughals, in order to get entry into a new region, would

marry their daughters to the local kings; appoint Vasirs; and become part of the

kingdom. We share technologies with these organizations, which helps in

bettering our products. We realized that there are areas we needed to work on,

in terms of new technology, and the IITs have been working on them for the past

15 years. Given such rich knowledge base, I think the best way for us was to

partner with the IITs, rather than duplicate the effort. The Indian tech

institutes have very enthusiastic students headed by brilliant professors. I

think partnering with them is a win-win situation for both.

On the Moser Baer branded products



While we have introduced our own branded products in India with good

success, we are also planning to do the same in some countries in South Asia. As

we have taken a policy decision of not competing in markets where our principals

are strong brands, we are looking at some countries in South Asia.

On HD DVD and Blue Ray



I think there is an impasse right now. Both sides have invested heavily and

they are not going to give up easily. This is not a question of just standards

but million dollar investments in R&D, and, more importantly, billions in

expected revenues. Both these sides are well funded. I think that the way out of

the current impasse is that both sides should come together and work out common

standards. However, until such time, the stalemate continues. From Moser Baer's

perspective, we are fabricators. Our job is not to be part of the politics but

to ensure that we are ready to roll out any or both technologies as and when the

time comes. I think we will be production-ready in the first quarter of 2006.

Since we are part of the consortium, we are working on the specifications and

also developing our own IPs. Right now it's a wait and watch situation.

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