The India Cements Limited

Moderator: Good afternoon ladies and gentlemen, thank you for standing by. We welcome you to the conference call of India Cements hosted by Deutsche Bank. We have with us today Mr. N. Srinivasan Vice chairman and Chief Executive Officer, Mr. T. S. Raghupati Executive president, Mr. V M. Mohan Joint President, corporate finance and Mr. R. Srinivasan Joint President, from India Cements, and Mr. Apurva Shah Director from Deutsche Bank. At this moment, all the participants are in listen-only mode. Later we will conduct a question and answer session. At that time, if you have a question please press * and 1. I will now like to turn the conference over to Mr. Apurva Shah.

Mr. Apurva Shah: Thank you so much. Given recent announcements regarding the India Premiership League we just wanted the company to give a brief overview of the transaction and key commercial aspects followed by Q&A with investors.

Mr. Srinivasan: Thank you Apurva. First I want to inform all participants that all those who are participating call, I have a slightly bad throat so in case you are not able to understand what I am saying you can mention it I will repeat it. First and the foremost, we were told that they will not invest a concern about this bid that we made for a team in the Indian Premier League yesterday.

Before I go in to the details, I want to first clearly state what was the reason? It is not a sudden impulsive act. This was a very clear cold analytical position with a view to solely with a view to building our brand more extensively and deeply throughout the important market that we have which is Tamil Nadu. It is a fact that my main competitors Grasim as well as ACC that is Ambuja have for the last two three years or more very effectively utilized cricket as a medium to propagate their brand. All you have to do is look at Australia-India match that is now going on in a far fun place like Adelaide, you will see the entire boundary rope has UltraTech Cement. If you had noticed the previous tour of India by Pakistan as well as Australia you would have noticed that on the ground in the every ground where the match was played you had an UltraTech painted on the playing field. Now what do you think this costs them. In the last two three months, when Pakistan and Australia were here UltraTech would have spent at least 30 Crore rupees on that and that just for people to see that brand there was nothing else attached to it. Those who have seen cricket earlier also would have notice that whenever cricket was played, I mean, the site screen used to be Ambuja Cement that also would cost an arm under leg.

Now what we have come up with is a very innovative method of improving our brand without spending anywhere near the money that my competitors have spent. In fact, this idea originally came to me, I cannot claim total originality because this was pioneered by Cemax in Mexico as a part of the scheme by which to get all the people motivated behind that brand, they bought a football club which won their maximum championship and the impact it add upon the cemax brand improvement and brand image and the price in the market place was phenomenal. In fact this was a case study. So this was also in the back of our client. When the Indian Premier League therefore was announced we went in for a bid. Now what happens, this is the marketing reason because out of this there will be a separate department that will look after this brand promotion as part of the marketing department. There is no great management time that is going to be lost on this. Even now for the last 10 years or 15 years the India Cement is managing 12 club teams in the league. We have been doing this for the last 30 years. There is a separate small department which takes care of it. If there is no great soft management time that goes into it.

As far as the brand management is concern this we will utilize it fully our stockist-retail network or distribution channel will be boiled by the fact that if we can, as you know, cricket is a religion in our country. The fact that we will integrate and interface our network with this to build our brand even better is the main objective. Look at the investment part of it. A lot of misconception is that we are going to invest $90 million dollars, out the money that we have raised now, absolute nonsense. What is it that we are committed ourselves to. We have committed ourselves to $9 million dollars per year for the next 10 years for the franchise. What do I get in return? The TV rights which has been sold for a billion dollars less from expenses will split between the eight franchise owner. So we will get between 9% to 10% we should get, may be less some expenses of BCCI out of that. So if that has been sold for 1 billion we will get 9% to 10% of that straightway. So I invest 98 million I get 90 million plus so there is not one rupee going out of my pocket. Now what else do I get? I get out of the revenue there are two types of revenues one is a central pool revenue which IPL will collect and distribute to the eight franchisee which will be the money paid for the title sponsorship.

For you information, when a foreign team comes to visit India they title sponsor last time when Australia came went for 3 to 4 Crore rupees per match. There will be 56 matches that will be played. So per match the title sponsorship which is sold will be taken and will be distributed after BCCI retains the small percentage balance will go the eight players. Then there will be apart from that official partner sponsorship which will be sold centrally umpire sponsorships and uniform supply team like Nike or somebody will supply that also is collected and redistributed. The local revenues are all belonging to the franchisee that is they gate revenue franchisees. The player’s shirt, if you look at the Indian team now you can see Sahara. Sahara pays about in a year about 130 to 150 Crores to the Indian teaMs. Then leading arms on logo Nike is there, they pay about 100 Crores to the Indian team. So each club team can sell their shirts, they can sell their leading arms, the back of the shirt etc., merchandising hospitality at the ground the entire gate collections and all other revenues arising out of promotions locally when the match takes place all these goes to the team. Now for the brand size 9 million I am getting 9 million back 9 million plus from the TV revenue. All these other revenues will more than cover the cost of running the team. Not one rupee will go out of my pocket. But what is the other plus point for me? The other plus point for me which is my main interest is all my publicity brand building will come free plus some income also. This is why the people have not understood really it would mean to us. For other companies it could be different for me with my brand with craze for cricket in India. This gave us an excellent opportunity which we interact to exploit fully. In addition to this, it is a well known fact if you look at leagues in other countries particularly football leagues in other country, how the value on a property goes up. The property’s value escalates like anything these team could be worth in three to four years will be over $300 or $400 million dollars without sweat. Now at that time, according to the IPL rule for the first three years we cannot move the team out. It is our intention later to put it separately to another company when we pass that first holding period we can go public, we can make an IPO realize the value. In fact the opportunity was there for me as a promoter, as a cricket enthusiast, and being part of BCCI, and involved in cricket for all this time. It was very easy like others to put it in a separate company and exploit this only by myself. That was not the idea, it was not the financial. This is going to improve the brand image to India cement and ultimately it will make a lot of tons of money for the company when we are able to release this in to the public domain three years later. So the idea was the full benefit should come to India Cement. There is no money outflow. Some analyst had said we are going to amortize it over some period what is the expenditure to amortize, it is nothing. So this is the position.

It is a win-win situation for India Cement. We should be applauded for being question and there should be no doubt to the above. There is no question of loss or management focus. We have been running teaMs. We have got department and on top of it, whereas other bidders have to deal with the state association for the ground and therefore there might be some friction in there if it is, we have not bid for any other city. Other people who have bid have looked at it as an investment model and wanted to go any other city. Now no other city would have been on interest to me except may be Bangalore or Hyderabad but the most lucrative market is Tamil Nadu so we only wanted Chennai. We did not even bid for any of the other cities. We had lost Chennai that is it because it was a marketing opportunity for us. So this is my opening statement I am prepared to answer any questions.

Moderator: Ladies and gentlemen, we will now begin the question and answer session. If you have a question please press * and 1 on your pushbutton phone and await your turn to ask the question when guided by the facilitator. If your question has been answered before your turn and you wish to withdraw your request you may do so by pressing the # key. We have first question from Rashi Talwar from Demeter Advisors, you may please proceed with your question.

Ms. Rashi Talwar: Hello.

Mr. Srinivasan: Yes.

Ms. Rashi Talwar: Yeah, good afternoon sir. I actually wanted to ask you that these TV rights have been sold to Sony for a billion is this going to be distributed equally amongst all the teams.

Mr. Srinivasan: Yes, you have asked quite interesting question. This money after the small expenditure of BCCI will be distributed equally among all the teams.

Ms. Rashi Talwar: So there is nothing happens as to which team plays more games given our tournament or perform better there is no incentive on performance.

Mr. Srinivasan: No no. for that there is prize money which is separate. The team earns prize money which the BCCI gives

Ms. Rashi Talwar: Okay. Who allocates the players to the team. You bid for that?

Mr. Srinivasan: You see the BCCI has actually already tied up 50 international players and they are paying them different amounts based upon you know, BCCI’s opinion they have already been contracted. These players are available to the franchise holders to pick from. Each franchisee can have, there is a cap on the foreign place we can have I think about six players. You should use also there is a condition that from the area you come from you must have four players who are under 21, balance anybody you can have in fact we can have all Indian players there is no restrictions.

Ms. Rashi Talwar: Right. The foreign players you will get BCCI has contracted 50 people how does is that get decided who goes to Delhi who goes to Bombay, who goes to Chennai?

Mr. Srinivasan: Basically that is the matter IPL is yet to decide.

Ms. Rashi Talwar: So that is still under consideration if not bidding process as yet.

Mr. Srinivasan: No they will come up with an equitable system also you need not take the players contracted by BCCI. There is no compulsion you must take those players.

Ms. Rashi Talwar: Okay. But for the international players you can go on your own and try and get up players that are not part of IPL.

Mr. Srinivasan: Yes, yes. You can go on your own.

Ms. Rashi Talwar: In the domestic players how does it work, Sachin Tendulkar has to play for Bombay, Saurav Ganguly has to play for Calcutta, what is the process.

Mr. Srinivasan: They have named five icon players, one is Sachin. I mean the strange thing is other than Sachin Rahul Dravid and Saurav Ganguly have been called icon and they must play only for Bangalore and Calcutta but India is not chosen when ODI is also open so that is the irony.

Ms. Rashi Talwar: Sir we can all debate the icon status but who are the one that has been actually chosen.

Mr. Srinivasan: The one chosen are only Rahul Dravid, Saurav Ganguly, Sachin Tendulkar for Bombay, Yuvraj singh for Mohali and that is it.

Ms. Rashi Talwar: So Chennai as such you do not have anybody.

Mr. Srinivasan: Who?

Ms. Rashi Talwar: Chennai does not have anybody.

Mr. Srinivasan: No no icon.

Ms. Rashi Talwar: So how would you go about getting local players you could bid for V. V. S. Laxman or you could bid for Mahendra Singh Dhoni does it work that way.

Mr. Srinivasan: Yes. Also we must bear in mind that India Cement is the company which first introduced corporate involvement in cricket in 1960. We have been running teams from then, a little known fact is the fact that we have got 12 teams in the Chennai league. We have won all the tournaments the ______15.37 Bucchi Babus, Ireland Trophies over these years. We never publicized any of these things. So we are fully there is a group of all cricketers who are very experienced in this and they will be able to pick a side without any problem.

Ms. Rashi Talwar: No sir what I am trying to actually get at is the fact that running these smaller leagues by your not dealing with icon so to speak of people with of global fame is very different than where you are dealing with players that have millions of dollars endorsement and you are trying to provide them incentive to come in and play for your team, it is a different process all together.