Remember Onjus, the forerunner to Pepsico’s Tropicana and Dabur Real? After a history of classic misgovernance, the orange juice in a tetra pak is being relaunched. This time with the Times group as an ally
After its very successful launch about 13 years ago, 'Onjus', the brand that served orange juice in a tetra pak, slowly vanished from shop shelves and from public memory too. Now, a Rs45 crore initial public offer (IPO) is proposed for the brand, which has managed an unsatisfactory grade 2 out of 5 by Fitch Ratings. The poor ratings should ring a warning bell on the quality of the issue. Indeed the Onjus story is an astonishing case of daylight robbery that directly and indirectly involves banks, promoters and now also the Times group.
In May 1997, Onjus, was launched by Enkay Texofood Ltd, as an offshoot of its main business of exporting pulp to Europe and North America which was started in 1990. Onjus marketed 100% orange juice and on this strength gained a 19% share in the niche market of fruit juices available in a tetra pak, virtually creating a new product category.
But the company was run poorly and soon fell foul of the law. In 1999, the director-general of investigation and registration lodged a complaint with the Monopolies and Restrictive Trade Practices Commission, against Onjus being sold as a 'natural' fruit juice. As a result, Onjus was withdrawn for sometime, leaving the field open for 'Real' and 'Tropicana'.
Then there was a second blow. The owners, Enkay Texofoods, were troubled by the poor performance of their textiles business. So, they channelled profits from Onjus into the textiles activity, but it did not help the business. Instead, Onjus went down, and both the divisions were shut in 2001. Enkay became a sick company.
Onjus was almost unheard of for some time, till 2004, when a company called Tunip Agro Limited (TAL) (in)famously declared themselves as the original owners of the brand. This came as a surprise to market watchers and shocked stakeholders. Tulsidas Goyal, managing director of Enkay, declared that no action could be taken against Tunip, because Enkay Texofood had conveniently not registered Onjus as its brand. This turned out to be a sham of a dispute, when it was learned that Tunip is run by Siddhant Goyal, the son of Tulsidas Goyal. The official promoters of Tunip are Siddhant Goyal and Neeta Goyal.
So Onjus, which once resisted being sold to Parle and Dabur who had made lucrative offers, was 'launched' again by Tunip Agro, while the stakeholders were left gaping. So, when the IPO was announced, there was a feeling among Enkay shareholders that they were being cheated. With the money collected through the IPO, the owners plan to set up manufacturing units in Sri Lanka and revamp its units in India.
The stakeholders continue to be baffled about the way Tunip slyly acquired Onjus, even though it is an intangible asset that was built with the money of Enkay shareholders and the company owed money to banks.
Amazingly, Tunip is backed by Bennett Coleman & Co Limited (BCCL), publishers of The Times of India. Two group firms of BCCL acquired 11.68% for around Rs6.67 crore (about $1.4 million) in May 2010, according to VC Circle, valuing the firm at Rs57 crore. "Unlike most of its deals routed through Times Private Treaties or Brand Equity Treaties Ltd, in this case, BCCL has also struck part of the deal through another of its investment arms Dharmayug Investments Ltd," says a VC Circle report.
But it is very unlikely that Onjus will be a runaway hit once again. Jagdeep Kapoor, chairman and managing director of Samsika Marketing Consultants, who charted the successful launch in 1997, is sceptical about the second innings. "It was a brand very close to my heart, but ultimately, we had to part ways. It was a very strong brand. But now it has to work very hard to regain its popularity."
The fact is that while it was gross injustice that Onjus was siphoned out of Enkay, it has not been easy for the next generation of Goyals to build the brand. Tunip Agro is only a six-year old company with revenues of Rs39.90 crore and a net profit of just Rs 0.91 crore for the year ended March 2010 and it has a long way to go before it can claim some success.
Just when two-wheeler makers are reporting bumper December sales numbers, Kotak says it expects a slowdown in this segment next year, due to high petrol and loan rates
In a report to clients today, Kotak researchers say they expect domestic two-wheeler industry growth to moderate from 20% in the current fiscal year to 14% in FY12, due to high petrol prices and higher interest rates.
Two-wheeler companies reported good numbers in December. India Yamaha Motor reported a 70% rise in total sales at 34,839 units. The company's domestic sales for the calendar year 2010 were up 18% at 2,58,987 units and exports were up a substantial 85% to 91,277 units. Hero Honda Motors' sales in December were up 33% to 5,01,111 units, whereas it sold over 5 million units for the full year, a growth of 16%. Bajaj Auto reported subdued growth of 11% at 2,43,675 units for December, 5% growth in commercial vehicle sales at 31,575 units and 4% growth in exports to 95,388 units.
Honda Motorcycle & Scooter India has a target of 1.6 million units for FY11 versus 1.3 million units in FY10. In December, both Hero Honda and Bajaj Auto hiked the prices of two-wheelers by Rs500-Rs1,000 with effect from new year day on account of the rise in input costs.
Kotak believes that the factors that supported a 20%-plus growth for two-wheelers over the past couple of years will not be there in FY12. Some of these factors were the government stimulus measures, substantial salary hikes for government employees on pay commission reforms and pent up demand from FY08-09 when there was flat growth.
"We forecast Bajaj Auto's domestic motorcycle sales to grow at 13% CAGR (compounded annual growth rate) over the next two years." Bajaj's total sales in the nine-month period from April to December 2010 were up 42% at 2.87 million units. Kotak also believes that Bajaj Auto's margins will decline by 120 basis points y-o-y in FY12 and that the company's exports will also moderate to 15% CAGR in FY11-13 compared to 36% CAGR between 2007 and 2011.
Margins will decline because the "limited pricing power in the industry will not be able to fully offset rising material cost pressures and the moderate improvement in product mix will not be able to positively impact margins," the Kotak report says. Exports will moderate, because unlike the last three years Bajaj will find it difficult to gain market share in the countries it exports to-in neighbouring Sri Lanka and Bangladesh, and from Africa, to the Middle East and Latin America-going forward, since it has already achieved a share of about 15% in these markets.
Three-wheeler growth, too, will not be as good as it was in FY09-11 (21% CAGR), Kotak says, because of a high base effect and an increase in personal vehicle ownership. Three-wheeler growth was superb in the last 2-3 years because state governments issued fresh permits.
It must be noted that while Kotak has put a 'Reduce' rating on Bajaj Auto, its target price is only 5% below the current market price. Also, Kotak says in its report, that "at 15 times price-to-earnings on our FY12 earnings per share estimate, Bajaj is currently trading at a 19% discount to Hero Honda which we believe is unjustified. From a relative perspective, we prefer Bajaj Auto to Hero Honda in the two-wheeler sector".
Despite the split between Hero Honda and Honda, the brokerage does not expect any major change in the industry structure over the next two years, but it believes that "Honda could take some market share from Hero Honda". Bajaj's market share will remain relatively stable over this period, it says.
“Residential projects with units below Rs25 lakh will increase dramatically outside Mumbai,” says Ramesh Nair
Ramesh Nair, former managing director of Jones Lang LaSalle India's Chennai and Hyderabad regions, has assumed overall responsibility for the company's western India operations. West India encompasses Mumbai and Pune.
Ramesh Nair, who has been with Jones Lang LaSalle India since 1999, is a real estate veteran with fourteen years' multi-faceted experience. In this period, he has tackled diverse real estate asset classes such as office, retail, land, residential, warehousing and industrial, and he has helped change the real estate fortunes of many domestic and multinational owners, occupiers and investors in South India.
Ramesh Nair's Mumbai real estate predictions for 2011 include that the commercial property market rentals will drop due to a massive addition of stock, leading to higher vacancies. In case of residential property, housing will become even less affordable in the island city; many aspiring home buyers will opt for rentals over the purchase option. Rentals for high-end homes will drop in the face of increased supply of quality apartments across the city. Housing prices will marginally correct in locations with oversupply and inadequate infrastructure where prices have overshot the 2007 peak; the number of speculators will decrease, reducing volatility. Residential projects with units below Rs25 lakh will increase dramatically outside Mumbai. In case of mid-term elections, there will be a wide-spread correction across asset classes and city locations.