The DVD-market driver

BACKSTAGE

From magnetic storage to optical storage, then a deviation to enter the home entertainment space with a bang and now the decision to set up the world's largest thin-film solar fab to make good use of the government's sop to the semiconductor industry. This, in short, is the success story of Moser Baer that has the distinction of figuring among the top three global manufacturers of optical storage media "" compact discs (CDs), digital versatile discs (DVDs) and now Blu-Ray discs.

While all the three players "" the other two being Taiwan-based Ritek and US-based CMC Magnetics "" are close competitors, Moser Baer has altered the rules slightly by getting into the entertainment space too, with full-movie VCDs and DVDs that sell at a mere Rs 28 and Rs 34 respectively. These are the lowest prices in the world and beat even pirated video CDs that sell anywhere between Rs 35-50. Movie CDs, otherwise, cost Rs 50-200 and movie DVDs mostly sell at Rs 300 upwards.

The man at the helm today, Ratul Puri, is undoubtedly charged up about the developments. But how does he marry the two seemingly-different interests? He says: "Entertainment and hi-tech development/manufacturing are both very interesting businesses to be in and we look at the entertainment business as an extension of our technology. The key enabler is a proprietory patented technology that allows us to lower the cost of pre-recorded disks." The company has added "certain substances" to the polycarbonate substrate (used in the manufacturing of optical disks) that reduces the quantity of substrate needed, and hence the overall cost of manufacturing.

It's a smart move both from a technology and financial perspective too. The company's main products, CDR/RW and DVDR/RW, are commodity products whose prices (and hence margins) keep falling consistently. The domestic home entertainment market (mostly film VCDs and DVDs), on the other hand, is estimated to be around Rs 550 crore (around 7 per cent of the total movie revenues).

A large number of these movies will be from the catalogue (not the recent launches but older movies), but there can be good demand for those too at a reasonable price. The company plans to acquire rights to over 7,000 movies and it plans to invest Rs 500 crore in this business over the next few years, which it will finance through internal accruals. And it has started with the right market "" the southern belt which is known for its entertainment appetite.

Puri's other decision to set up the thin-film solar fab too gives it a "first-mover advantage in the manufacture of large area thin-film modules". Thin-film solar modules are ideal for energy farms, rural applications and building-integrated photovoltaic markets. Photovoltaic modules based on large area thin-film technology bring cost parity between solar generation and grid power. According to market estimates, the thin film-based solar modules will see large emerging applications and a robust demand that is expected to grow 10-fold "" from the current 250 MW to 2 GW with a market size of $5 billion by 2010.

Puri, who now steers the around Rs 1,665 crore (March 31, 2006 figures) company says: "Rising toplines and bottomlines hold significance only if they translate into increased value in the hands of shareholders...." With these moves, he's ensuring that he keeps to his words.