The Hindu Business Line : `Infomedia seeks push from three growth engines'

There has been much momentum at Infomedia India Ltd ever since ICICI Group came in as main equity holder. Present as venture capitalist, would the financier desire to trim its stake as the media company improves its performance? It may at some stage, said Mr Prakash Iyer, Managing Director, Infomedia. "We have a long way to go. ICICI's vision for the business is to not just buy and sell but buy, build and sell,'' he said in an interview.

Excerpts:

Can you give an update on your joint venture with Reed?

We have incorporated the company Reed Infomedia India and are in the process of hiring people; pretty close to putting the start up team together. The intent is to launch the first title in the quarter ending September. `Variety' may not be the first title but it would be among the first two or three to come in; the first would be a large business-to-business jewellers magazine called JCK.

Will there be outsourced printing work from Reed coming to you?

Printing is probably the least attractive business opportunity. Magazines are time-sensitive; printing and then airlifting, does not make sense. Besides, in the total print cost of a magazine, the bulk is paper. And often paper is coming from that part of the world. So you are paying the freight to bring it here and even if you have great cost arbitrage advantage it is only on the ink and labour component. Labour is 15 per cent of total print cost. So even if I give 75 per cent cost advantage, it is on 15-20 per cent of print cost; that is not significant and gets offset by freight and prompt delivery-requirement.

So when you talk of publishing services, the work is the intermediate between content and printing?

Absolutely right. I can do a lot of such work for Reed. For example, magazines require layout and we can do that.

You have mentioned that eventually you would like to be in an SEZ. One understands this from the publishing business's perspective but can an Indian SEZ bring advantages to printing as well?

It could compete. The trick would be to get scale. Typically, if I have two printing machines I will have two engineers. The idea would be to have 10 machines and one maintenance engineer and run them round the clock, seven days a week, no restrictions no power problems. Infrastructure to my mind would be the biggest challenge. Particularly from a supply chain stand point. I may look at printing but my interest is more in the non-print space.

Abroad, the economics of publishing favours outsourcing. What is the long-term outlook for your own special interest publications?

The work we do in publishing services is unrelated to special interest publications. It is books and journals, not magazines and within that it is not popular books, but scientific publications. Popular books don't need to come here for typesetting because their volumes are huge. In scientific books, encyclopaedias etc, volumes are small and the cost per page is high. Which is why there is a case for those titles coming here.

We have identified three growth engines - yellow pages, special interest magazines and the publishing services business. In special interest magazines very clearly the intent is to drive growth. We are going to look for new titles, new products, better ways to sell, better ways to find larger audience, more ways to reach that audience, may be multimedia and events.

What is the growth rate here for special interest magazines?

It has grown faster than general interest. Subscription tends to be restrictive; it will never explode. But advertising grows.

What is the road ahead for Yellow Pages?

It is core but for a few years we actually struggled to grow it, at a time when there was no competition. We are now trying to work through a plan. It is a huge industry around the world, probably driven by lifestyles in which people don't talk to one other, it has become a habit to refer the yellow pages. Cut to India - why would you turn to the yellow pages when you can ask anyone? But it works. Advertisers in the B2B space find yellow pages effective. Typically 80 per cent of advertisers come back year after year.

Further, the typical cycle time to produce Yellow Pages was one year; in a city like Mumbai you would get 10,000-12,000 advertisers in that period. But in smaller Ludhiana, we truncated the business cycle. The same team now does a Punjab industrial directory also. Costs remain the same, while revenues double. leverage. There is nobody else who offers 19 cities; the challenge now is to get to 30 cities and then 50.

You had said that 75 per cent of your revenues come from yellow pages and special interest magazines. In terms of profitability how does it work? How would incomes play out over time with publishing services business growing?

Publishing services business will contribute to profits next fiscal. Revenues from publishing stood at 60 per cent; printing 30 per cent and 10 per cent came from small businesses including leather, diary, even a film. We are consciously pulling out of these businesses.

In yellow pages we should see double-digit growth rates. As costs are fixed, every incremental rupee will contribute 75-80 paise to the bottomline. So it is a hugely attractive growth opportunity. Publishing services will also contribute handsomely.

What is ICICI Group's take on Infomedia? Will it slowly offload given the improved business?

We have a long way to go and have only scratched the surface in all our businesses. From ICICI Ventures' perspective, their vision for the business is to not just buy and sell but buy, build and sell. Yes they would want to exit at some stage when they feel the company has been built. We are setting up partnerships with people who could be buyers of the business. ICICI Ventures could sell to a publisher or even sell parts to various entities.