“Maran offloaded 58 per cent of SpiceJet shares to Ajay Singh. But at what price?” SUBRAMANIAN SWAMY, BJP leader

He was also part of BJP’s key campaign team in the last general elections and is credited with coining the winning phrase, “Ab ki boar Modi sarkaar”.

Almost five years later, Singh was told that the airline he helped build will either have to be taken over by him, or be left to die. “My sense initially was that the problems (that led to mounting losses and a desperate stake sale plan) were pretty severe. I said I am willing to look at it, but I need to understand what the problems are,” he says.

The Maran-Singh dialogue did not get anywhere at that time. Three months later, Maran approached Singh again.

This time, he was very clear, says Singh: “They said I should take a call, otherwise they will shut it down.”

Goldman Sachs had given “dud” value to SpiceJet. Ac­cording to industry experts, the enterprise value of the company at that time was Rs 3,000 crore in accumulated losses that it had made, and Rs 1,400 crore of liabilities it had. Singh was virtually offered the airline “free”, though it was his responsibility to raise enough funds to steer the company away from its liabilities and turn it around.

The call Singh eventually took is evident from the fact that he today owns over 60 per cent stake in SpiceJet.

 

Jan 2015

Sees fleet reduction, flight cancellations with shutdown

Feb 2015 Maran

sells58.46% stake to Ajay Singh, who now

holds6031% stake as

promoter

Though the takeover was not without controversies, it is very clear that Singh means business. He claims to have cleared all debts of the ailing company in just three months since the takeover in December last year. The company is talking about fleet expansion and fresh hiring. His revival strategy for SpiceJet is to get the basics right.

Experts are not ruling out the revival possibilities either. “They have to recoup a lot of things. Overall, it looks posi­tive,” says Amber Dubey, partner and head, aerospace and defence, KPMG India. “They are back in business. Com-

petition is always good for the entire aviation industry. Not only does it keep us on our toes, it also pushes us to keep improving our products and services,” says Phee Teik Yeoh, CEO, Vistara.

Second Coming

As promoter of the airline, it was a second coming for Singh. His entry as SpiceJet promoter for the first time happened in December 2004 when he, along with his in­vestor friends re-named and re-launched Royal Airways (originally known as Modiluft) — an airline company that had suspended its operations in October 1996 — as Spice­Jet. The following years saw the company pursue a low- cost model to increase its fleet size, network of operations and revenues to culminate into some profit in 2010, the year when Maran took control.

Several things changed after SpiceJet became part of the Sun Network. And some of which proved too costly for Maran. “I think the airline deviated from its principles of trying to reduce cost on a regular basis. You have to keep knocking down costs which I didn’t think was the focus under Maran’s leadership,” says Singh. He also points out that there was a lot of dilution of revenues due to faulty design of promotional schemes. “They went more for spread, in terms of opening up of large number of opera­tions as opposed to having higher frequency. Also, the air­line was functioning under an absentee leadership be­cause Maran was not physically present here (in Delhi, its operational head quarters). It’s a very competitive space, you can’t afford a hands-off deal,” says Singh.

An investor note from ICICI Securities, which an­nounced the suspension of SpiceJet coverage on 17 De­cember 2014, explains the dire situation that compelled Maran to take the airline company to Singh a second time: “SpiceJet has reduced flights across its network from 332 daily to 239 from 1 September till date. It has cancelled 1,861 flights till this month end, which has also affected its brand image. With three consecutive years of net losses and mounting outstanding dues of over Rs 2,000 crore, it needs at least Rs 1,000 crore immediately to keep it off the ground. Given this backdrop, amid high uncertainty over funding, we suspend our coverage on the company and recommend that investors exit the stock.” If SpiceJet was in such a bad shape and seemingly at point of no-retum, how did Singh became interested in it?

“The fuel prices were low, the economy was picking up, the brand was good, and it was a brand that I intimately knew,” says Singh. “I also thought it was a national service. But it couldn’t have been done if there wasn’t a rational reason. I knew there was an honourable way to do it and I had the ability to do it,” he says.

 

SYSKA LED: A Trendsetter in LED Lighting in India

SYSKA LED is the flagship company of the modern, futuristic and diversified conglomerate Shree Sant Kripa(SSK) Group. Within a short span of just two years, the SYSKA brand has succeeded in creating a strong brand recall through aggressive marketing campaigns along with smart sales strategy. SYSKA has been recognized as the “Most Trusted Brand in Household Lighting”by BrandTrust Report.

At SYSKA LED the mission is: To relentlessly strive to innovate and create LED Lighting Solutions which will be efficient, reliable, safe, future-ready and environment friendly. In keeping with this mission, the organization has developed a vast range of specialized eco-friendly LED lighting solutions. These lights consume upto 70% less power than conventional lights like CFLs. They provide excellent luminous efficacy, versatility and uniform light distribution. They are designed to last exceedingly long, give quick payback periods and are completely free of toxic components like mercury, lead, etc., they are extremely durable and come with a 2-year warranty.

SYSKA LED’s expertise covers the entire gamut of LED solutions – including design, manufacturing, supply & installation of fixtures and strong after-sales service. A dedicated team of engineers with over 15 years of experience work round-the-clock with the aim of creating customerdelight.

Demand for SYSKA LED lighting products is growing at a fast pace.” We are aiming to take LED lighting to masses by offering retrofit solutions and emerge as the leader in this LED-based lighting segment, which is the future of lighting”, asserts Mr. Govind Uttamchandani, the dynamic and far-sighted CMD of the SSK group.

SYSKA LED has the most extensive array of LED lighting solutions of international quality for residential,
commercial, industrial and outdoor usage.

The residential range has functional lights like bulbs, tubes, panels to high-end products like chandeliers.This range of products is RoHS compliant. The Commercial range is also vast and has a wide range of retrofit solutions, downlights, 2 by 2 fixtures and sleek panels (withdimmableoption).

The Industrial and Outdoor portfolio cater to a wide range of applications and encompasses street lights, high-bays, tunnel lights, beam lights, garden lights and landscape lights.

SYSKA LED is nowfocused towards rapidly expanding its distribution network across India. They are making their mark through exclusive brand outlets called SYSKA LED Lounges and have robust plans of setting up 200 lounges within next one year. Says Mr. Rajesh Uttamchandani, Director, SSK Group,”In continuation with our commitment to provide the best in-class products, SYSKA looks forward to opening such Lounges across major cities in India. These will also enable us to strengthen our partnership with interior designers, architects, consultants and lighting professionals.”

In addition to its manufacturing plant in Korea, SYSKA LED has started their manufacturing operations at Rabale, Maharashtra and is planning to create a Manufacturing Zone spread across 25 acres in Madhya Pradesh.Thiswill helpthem catertothe hugedemand of LED lighting across emerging markets.

A strong manufacturing backbone, world-class R&D infrastructure, a robust distribution network and a superior sales & service team are the key drivers towards making SYSKA LED the leading player in the Indian LED lighting landscape.

COVER STORY OF JIO

exists in India.

Back in 2001, when Reliance Infocomm had entered the Indian telecom market to provide 2G services and caused massive disruption, mobile technology was a proven technology worldwide. In comparison, Long Term Evolution (LTE) services are still in the nascent stages globally. The entire 4G ecosystem has not yet developed in terms of devices. 3G itself has not taken off the way it should have. There is a lot of potential for 3G services, which is slowly getting tapped. 4G ecosystems has not yet developed in terms of devices, deployment of towers. 4G maturity will take time, which puts aside any apprehen­sions that Jio’s aggressive plans will shake the industry.

The incumbents are ready to fight harder for a larger share of pie. It is not that easy for a new operator to add value customers by just giving discounts and freebies. Jio undoubtedly will get customers initially, but it might not be the case that will help them in the long-term. They, too, need to have quality and loyal customers instead of getting unnecessarily aggressive they are ex­pected to be calculative.

It’s always dangerous to be a rookie in this sector.

Reliance has to play really, j well. They are launching a very new technology that has yet to evolve. Every time they make a mistake, a com­petitor will learn from it.

We feel that every time Reliance will try to make the right moves, the incumbents will try to ensure that they do not compromise their leadership position. After gaining a first-mover advan­tage, Bharti Airtel has been steadily rolling out its 4G services across its licensed circles. Spectrum liberalisa­tion has encouraged non-BWA spectrum holders to foray into the space-using spectrum in the 1800MHz band. Idea Cellular and Vodafone India have picked up large amounts of spectrum in this band in the recent auction and can become potential challengers for Reli­ance in the 4G space over the long-term. Airtel and Idea are established players in the field with millions of users. It is difficult for another player to just enter and impact the market instantly.

The competition is cut throat, and intense and thriving in this segment are difficult. The BWA rollout deadline will also see other players holding spectrum in the 2300MHz band launching services and competing with Reliance in some circles. As per the government rules, all the companies that won BWA spectrum in 2010 are re-

quired to roll out services in at least 90 per cent of their service areas by August 2015. However, we believe at pre­sent Reliance, is better prepared than its competitors for a service launch in the BWA space. Therefore, the company wjll have to build a highly-effective business model around a differential pricing strategy and innovative ap­plications. To make an impact, Reliance Jio will need to offer applications that attract the mass market.

Reliance has spent close to four years strengthening its infrastructure muscle, bringing in more investments, de­vising fresh strategies, signing partnerships (Samsung handsets), and acquiring spectrum. However, the gesta­tion period has been a long one, and the company has failed to convert all the hype into a commercial or main- j stream service launch. Going ahead, the long-awaited launch of Jio is expected to usher in some much needed dynamism into the data segment. Its potentially reasona­bly priced 4G services could give a shot in the arm to the 4G mar- . . •                kets if the business model is

p|VJ y               i shaped properly. As for its

^impact on the incumbents’

* business, the entry of a new Mjitt player like Reliance Jio will

  • ‘•stir the waters, and put pressure on revenue growth, margins and capex over a long time, but in the short- run, the impact might not be what they caused in 2001. At the same, it will result in the creation of huge capacity across the telecom value chain. For the con­sumers, the main beneficiaries, they can look forward to some exciting times and superior speeds. After all, the Jio’s 4G launch is expected to usher in a new broadband era in the Indian telecom sector.

This time market place is different, scope for policy ma­nipulation is limited or has already been consumed, cus­tomer is not gullible, and most importantly, the competi­tors, too have deep pockets, are smart street fighters and are no novices. Whatever happens the ultimate winner would be the consumer and the biggest adjudicator as to who succeeds in today’s world of choices. Incumbents are advised to prepare for tsunami and Reliance Jio to be pre­pared for a long haul pitted as they are against formidable entrenched players. Let us see who is startled, incumbents by tsunami or Reliance by resilience and resistance of the enemy? DEI

The author isformer CMD ofVSNL and currently serves as a director at Sonata Information Technology. His views are personal