DYK According to the Challenge Forum, if digitized data available to mankind could be expressed physically, it would cover an area equivalent to The island.

MoserBaer

Globalisatio

n

DYK

• According to the Challenge Forum, if digitized data available to mankind could be expressed physically, it would 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!

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• World’s 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

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

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

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 production

facility 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 

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 & process integration

• Same strategy applied successfully in the diskette business

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 only

to human brain using dyes, plastic & specialty chemicals• No Indian manufacturer globally competitive then• India’s image- country that only borrowed technology• Created world-class tech & manufacturing processes to

put India on the global map

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, world’s 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)

Dr Amit [email protected]

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

• “There is no greater joy in life than dealing with hurdles that 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)”

Dr Amit [email protected]

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

Dr Amit [email protected]

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- 1/6th 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

Imation JV

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

& R&D• Will dramatically improve MB’s market share in US- the

world’s largest and most lucrative market• JV will effectively & efficiently target new high growth

markets- Africa, Middle East & South America• Substantially mitigates geographic risks• Balanced regional mix of revenue streams

Blu-ray Disc

• Moserbaer is a Contributing Member• MB one of 4 global players • The basic specifications for a next generation large

capacity 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 size disc using a 405nm blue-violet laser

International Focus

• Endeavored to create own space in international market• A pioneer among globalizing Indian firms• Carefully-planned and sustainable model—low costs, high

margins, 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 %

Dr Amit [email protected]

Products

• Optical Storage Media- CD-R/ RW, Pre-recorded CD/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 in India, and we had managed to develop this really low-cost manufacturing process”

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, we

have always felt there will be a significant upside in the near future”

Diversification/Expansion/Integration

• Core optical discs business to solar energy & home entertainment

• In leveraging existing competencies, MB diversified into another high growth segment – Photo Voltaics (PV)

• “If we can leverage our manufacturing strength in a business we think about it. Solar was obvious because it involves 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 15 years & we do not want to be a bit player. I firmly believe we can take a 10% market share and be one of the top 2-3 players in this market worldwide”

Diversification/Expansion/Integration

• Moser Baer Photo Voltaic (MBPV), wholly-owned subsidiary• 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, the

cost 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 or maybe even slightly cheaper than thermal energy”

• Aggressive entry by manufacturing solar cells & modules• Initial project cost Rs 260 crore (60 mn)

Promotion

• Uncompromising adherence to ‘Class 100’ clean-room conditions, climate control, superior machinery, the finest raw materials

• Spirit of ‘zero error’ manufacturing • 100 people work 24 hours a day on process design• 2% annual revenues on R&D, value engineering, product

quality, yields & lowering production cost• Positioned globally as one of the largest data storage

media producers with stringent quality standards

Diversification/Expansion/Integration

• “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 was 631 kiloWatt hours (KWhr). In Canada, world’s 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 as

alternatives to conventional energy needs • Difficult to double power production through conventional

methods in the next 48 months• Emerging technologies & price reduction in solar energy

products could significantly expand this market • MB may just pull it off

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

Global optical media demand

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 led to 68% growth & 6.2 billion units, 2007 would be 9 billion units @ 43% growth, prices may reduce due to economies, healthy margins retained

Next generation formats• Blue lazer technology (BD & HD DVD) can mitigate impact

of cannibalization of optical media demand by emerging 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 expand market demand.

• Complexity & manufacturing capabilities to mass produce these formats, will restrict competition to select group of companies

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

The home entertainment business

• Demand drivers- Rising disposable incomes, hectic lifestyles, growing hardware penetration, large and increasing 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 from 2.5bn DVDs, than its theatre sales. The opportunities are massive”

• Home Video share could rise sharply with increasing consolidation and improving price value proposition

• offered to consumers.

Home entertainment-Key revenue driver abroad

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 through 450 distributors across India

• 2007- Moser Baer VCDs & DVDs @ piracy busting price of Rs 28 & Rs 34

• “We can’t keep up with demand & roll out fast enough. Its a problem, but better than having no one buying our discs”

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 content

type through established channel.• Evaluate alternate distribution platform• Long term• Leader in creation and distribution of quality content

spanning entire entertainment & infotainment segments

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 all mainstream

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 any manufacturing

defect, free replacement•

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%

PV business

• Short term- Rapidly scale up crystalline silicon capacities, 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 technology

verticals.• Emerge as one of the world’s largest & most efficient• Increase integration across the value chain upto BOS.

• Long term- Emerge as leading, multi technology, integrated & efficient, global PV manufacturer

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.”

• And in the process, touch every town where there is a movie loving family

Dr Amit [email protected]

Strategic Alliances / Acquisitions

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

• Launched USB Flash drives in the Indian Market.• Launched 'Platinum' optical media range to ensure data

protection 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 Saimira Theatre for home video marketing & retailing

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

• 2007- Acquired 40% stake in Solarvalue, to ensure assured supply of solar grade silicon

• wafers

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 to

productive investments, high returns & a competitive edge• Comprehensive IT enabled integrated logistics & SCM

system reduced shipment lead time by 20% & delayed shipments to < 0.1% of total despatches

Emerging scenario

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

• MB consolidated position as second largest global manufacturer of optical storage media

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

• Blue laser optical pick up heads & drives that read/write both HD DVD and Blu-ray formats will drive future growth impetus

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 all application classes and geographies

• New businesses will contribute Rs 560-640 crore to the top line in 2008.

Future

• “I have the view from the sky, he knows the nitty-gritty of things” Puri Sr

• “You know, I would like to think of myself as a manager and not a promoter. I have to constantly do things to prove that I am not here because of who I am, but because I am good. As a shareholder I would be insane to sit here if someone else could give me a better return” Puri Jr

• Decentralisation is a key challenge as the need for less hands-on control rises

• Now planning to sell small pen drives• “If you think about it, crystalline silicon solar cells are

semiconductors too. So never say never”