Exports Dominate

Updated: Apr 27 2003, 05:30am hrs
Moser Baer India (MBI) clocked an impressive 57 per cent increase in sales at Rs 1069 crore during the year to March 2003. Its consistent growth performance has much to do with increasing acceptance of its products by global OEM manufacturers, continuous innovation, cost competitiveness, quality and wide distributional network. Yet a steep rise in raw material expenses has robbed it of a better growth in profit. Raw material expenses were up 96 per cent at Rs 463 crore. Operating profit grew 31 per cent to Rs 425 crore. Operating profit margins slid from 47.5 per cent to 39.7 per cent. Net profit rose only 13.6 per cent at Rs 245 crore

MBI manufactures computer tapes, data cartridges, magnetic tapes like compact cassette, compact disk (CD), digital video disk (DVD), memory stick and multimedia cards. The company claims to enjoy more than five per cent share of the global data storage market with a large network spread in 92 countries.

Export contributes 85 per cent to total sales dominated by European players. MBI has developed five global brands through its strong distribution network in Europe and America. Today major companies like Sony, Verbatim, TDK, Maxell, Imation, Samsung, Emtec (formally BASF) etc outsource their requirement from the company. MBI presently supplies its products to eight of the top ten global companies and has strategic relationships with some of these companies for sale of products, raw material sourcing and collaborative R&D programme. It has increased its customer base significantly that results into mitigating the risks of customer concentration and enables it to step up its share in major markets.

The optical media industry is highly consolidated with a majority of producers being based in Japan & Taiwan which account for more than 70 per cent of the global capacity. MBI is currently positioned as one of the largest manufacturers of optical media products in the world. USA and Europe account for around 60 per cent of global demand.

In domestic market, MBI has 45 per cent market share in storage media products. MBI added significant manufacturing capacity of CD, DVD and magnetic tapes. World market for DVD segment (recordable/ re-writable and pre-recorded) has been growing at more than 70 per cent per annum.

MBIs impressive financials do have a few caveats.It has been stuck with huge inventories of Rs 240 crore and sundry debtors worth Rs 260 crore as on March 31, 2002.

Collectively, current assets of Rs 680 crore are equal to its annual sales. This is rather strange since most exporting companies have lower sundry debtors as they export against letters of credit. The company reasons that its sales is predominantly export oriented. Sales to western markets result in long working capital cycles relative to other industries. MBI imports much of its raw material requirements and exports a bulk of its output to reputed companies in the world that results in a long working capital cycle. But such explanation may not impress investors much.