CEOs of Bharti Airtel, Britannia, Tata Steel target higher margins, profits
Large investors in Bharti Airtel, Tata Steel and Britannia are betting highly on the new leaderships of these companies.
While Bharti Airtel's chief executive officer (CEO) Gopal Vittal is focusing on insulating the company's Indian operations from its African business and increasing profits at a volatile time, Britannia's Chief Operating Officer Varun Berry has been mandated to increase the company's margins.
An announcement on Berry's promotion to the post of managing director is expected when the board meets next, insiders say.
T V Narendran, Tata Steel's managing director, aims to cut the company's taken to fund the Corus acquisition. He will also have to stabilise operations at the Rs 22,000-crore Kalinganagar project in Odisha, to be commissioned by next month. (THE FIREFIGHTERS)
"These CEOs have taken charge at a time when there is uncertainty, both on the global and domestic fronts. And, general elections by the middle of this year is not making their task easy," says Shashank Tripathi, leader (strategy), PricewaterhouseCoopers India. "All the three companies will have to set up long-term goals, in terms of innovation and come out with new brands and products that can become revenue champions," he adds.
Through the last few years, the margins of all the three companies have come under pressure and, therefore, promoters and large investors are pushing the company chiefs to target better margins and profitability.
For the CEOs, the only good news is the share prices of Tata Steel and Bharti Airtel have stabilised in the past year, while the Britannia stock has almost doubled.
Challenges before CEOs
Large investors say all the three CEOs have to take tough decisions to improve margins and increase market value. "I am fairly optimistic these three companies will do well, as all of them have very strong foundations. The new leadership has bought fresh thinking and will have to turbo-charge profits; all of them have different challenges," says Rakesh Tarway, head (equity strategy) and vice-president of Motilal Oswal Securities.
He says after the recent telecom spectrum auctions, one of Bharti Airtel's concerns is over. Investors say the company stock has largely traded within a range since it acquired Zain's African operations in 2010, as concern over high debt and low margins in Africa weighed on the company. However, with its domestic business improving and the Africa revenue trajectory stabilising, analysts think there is an upside to margins. "We expect all the bad news to be behind Bharti," says Tarway.
An Ambit Capital study dated January 15 placed Bharti and Britannia among its turnaround plays for 2014-15, saying these companies had clear, time-bound and focused turnaround plans.
"As a long-term investor, we are bullish on these companies," said an LIC official. "We give a lot of weight to strong managements, brands and companies that follow high corporate governance standards."
Vittal, who took charge of Bharti Airtel's India operations as joint managing director in March 2013, is focusing on increasing margins, rather than volume growth. Though competition from Reliance Jio will be a key challenge for the company, Vittal says, "We are the children of competition. Already, there are players in the market who are offering lower rates. I don't think any new company will have any impact on us."
He adds the focus is on content and consumers, increasing usage and driving value. "The company has broken up this strategy by districts to find areas of good growth and invest accordingly," Vittal told investors in a conference here this week.
Investors say the biggest challenge for Tata Steel's Narendran will be stabilising Indian operations, even as its European operations are showing signs of a recovery. The company's high debt will be a major concern for investors. "At Tata Steel, growth in terms of capacity building and new facilities remain our priorities. The challenge for the steel industry will not be demand, but creating capacity to meet the demand," Narendran said.
"We have completed expansion at the Jamshedpur plant and are going strong on building the green-field project at Kalinganagar in Odisha," he adds.
The challenges for the Britannia CEO are clear. Ambit says between 2008-09 and 2012-13, the company lost five per cent value market share and three per cent volume market share. During the same period, rival ITC gained volume market share of three per cent.
"Britannia certainly needs to increase margins and investors have noticed the action taken by the company," says Tarway. In recent interviews, Berry said the company could look at manufacturing efficiencies, as outsourcing costs for Britannia are higher than those of other large companies such as Parle.
Analysts say these CEOs will be have to flexible and prepare groups of new leaders. "All of them have different kinds of challenges and difficulties. How they manage these challenges is something to look out for in the next financial year," says Tripathi.
Large investors in Bharti Airtel, Tata Steel and Britannia are betting highly on the new leaderships of these companies.
While Bharti Airtel's chief executive officer (CEO) Gopal Vittal is focusing on insulating the company's Indian operations from its African business and increasing profits at a volatile time, Britannia's Chief Operating Officer Varun Berry has been mandated to increase the company's margins.
An announcement on Berry's promotion to the post of managing director is expected when the board meets next, insiders say.
T V Narendran, Tata Steel's managing director, aims to cut the company's taken to fund the Corus acquisition. He will also have to stabilise operations at the Rs 22,000-crore Kalinganagar project in Odisha, to be commissioned by next month. (THE FIREFIGHTERS)
"These CEOs have taken charge at a time when there is uncertainty, both on the global and domestic fronts. And, general elections by the middle of this year is not making their task easy," says Shashank Tripathi, leader (strategy), PricewaterhouseCoopers India. "All the three companies will have to set up long-term goals, in terms of innovation and come out with new brands and products that can become revenue champions," he adds.
Through the last few years, the margins of all the three companies have come under pressure and, therefore, promoters and large investors are pushing the company chiefs to target better margins and profitability.
For the CEOs, the only good news is the share prices of Tata Steel and Bharti Airtel have stabilised in the past year, while the Britannia stock has almost doubled.
Challenges before CEOs
Large investors say all the three CEOs have to take tough decisions to improve margins and increase market value. "I am fairly optimistic these three companies will do well, as all of them have very strong foundations. The new leadership has bought fresh thinking and will have to turbo-charge profits; all of them have different challenges," says Rakesh Tarway, head (equity strategy) and vice-president of Motilal Oswal Securities.
He says after the recent telecom spectrum auctions, one of Bharti Airtel's concerns is over. Investors say the company stock has largely traded within a range since it acquired Zain's African operations in 2010, as concern over high debt and low margins in Africa weighed on the company. However, with its domestic business improving and the Africa revenue trajectory stabilising, analysts think there is an upside to margins. "We expect all the bad news to be behind Bharti," says Tarway.
An Ambit Capital study dated January 15 placed Bharti and Britannia among its turnaround plays for 2014-15, saying these companies had clear, time-bound and focused turnaround plans.
"As a long-term investor, we are bullish on these companies," said an LIC official. "We give a lot of weight to strong managements, brands and companies that follow high corporate governance standards."
Vittal, who took charge of Bharti Airtel's India operations as joint managing director in March 2013, is focusing on increasing margins, rather than volume growth. Though competition from Reliance Jio will be a key challenge for the company, Vittal says, "We are the children of competition. Already, there are players in the market who are offering lower rates. I don't think any new company will have any impact on us."
He adds the focus is on content and consumers, increasing usage and driving value. "The company has broken up this strategy by districts to find areas of good growth and invest accordingly," Vittal told investors in a conference here this week.
Investors say the biggest challenge for Tata Steel's Narendran will be stabilising Indian operations, even as its European operations are showing signs of a recovery. The company's high debt will be a major concern for investors. "At Tata Steel, growth in terms of capacity building and new facilities remain our priorities. The challenge for the steel industry will not be demand, but creating capacity to meet the demand," Narendran said.
"We have completed expansion at the Jamshedpur plant and are going strong on building the green-field project at Kalinganagar in Odisha," he adds.
The challenges for the Britannia CEO are clear. Ambit says between 2008-09 and 2012-13, the company lost five per cent value market share and three per cent volume market share. During the same period, rival ITC gained volume market share of three per cent.
"Britannia certainly needs to increase margins and investors have noticed the action taken by the company," says Tarway. In recent interviews, Berry said the company could look at manufacturing efficiencies, as outsourcing costs for Britannia are higher than those of other large companies such as Parle.
Analysts say these CEOs will be have to flexible and prepare groups of new leaders. "All of them have different kinds of challenges and difficulties. How they manage these challenges is something to look out for in the next financial year," says Tripathi.
