"Books for education make perfect sense," says MM Kohli of The Printers House

PrintWeek India (PWI): How are things on the web offset segment?
MM Kohli (MMK): There has been a market change. Certain markets  have closed down, whether it is because of Greece, downturn in America and Europe and other things. I am not an economist, but a blacksmith; yet I can tell you that it is going to take some time before the turnaround comes. Hence, we have to live with the new set of rules and start concentrating on other countries. From our point of view, there is definitely a downturn in America, Canada and Europe, and therefore, we have scratched theses regions off our books. We are concentrating more on Asia, Africa and Latin America and we see a lot of potential here.

PWI: The outlook for TPH in 2011. Is the market picking up?
MMK: Where the order books are concerned, we are full. In fact, 2011 is going to be the best year in the history of The Printers House (TPH). We would be touching 1,000 units. We have not allowed the downturn to be a hurdle in our efforts and marketing. If you are a global player, you will never ever find, that all markets are down or peaking.
And we expect the Asian, African and Latin American markets to pick up as these are the places where education has not peaked, so over there education has a long way to go. Education would require books, stationery, printed materials and that is what the print industry caters to.

PWI: The Asian country that has been very interesting to TPH in recent years ...
MMK: Unlike most other people, we started exporting to China some 15 years ago. We have now started concentrating on neighbouring markets like the Myanmar, Afghanistan (which is a new player), Nepal and Bangladesh. We have supplied several machines to Mauritius too. Most of the  presses in these countries are from Orient.

PWI: Education is a key sector, which supports the growth of the printing industry. Apart from that, what else would you think contributes to the growth?
MMK: When it comes to India, we need to split it into two parts – domestic and export market. India has got a very developed book printing market. Crores of books are printed  in India. There are government tenders too. Several companies have dedicated their print shops for the export market. And they’re endeavouring to enter countries which do not have the facility – and to-date were getting the books printed in Europe or America. The boom has come for: (a) Indian exporters who have captured the market outside; (b) India itself is increasing its book production; and (c) you have people in developed countries who want to print books in India – the cost being cheaper in India.

PWI: What about the TPH plant in Faridabad? When PrintWeek India visited it last time in early 2011, you were spending a lot of money upgrading it with Okuma MCR; a 5-axis CNC heavy-duty equipment machine……..
MMK: To keep up with this increasing demand, we have automated all TPH plants from two-axis to five-axis machines. We are working with the same workforce; we have automated the plant substantially. This reduces the setting and moving time. It reduces the possibility of human error, usage of electricity, and opens up space and productivity.

PWI: Is is the right time to invest?
MMK: The time to invest is when there is a downturn, because then you have all the time to throw out the rubbish and introduce new technologies in. That is what we have done. Currently we are going through a steep climb and because of that, we would be doing 30%-40% more than the last years.

PWI: One of the regional daily publishers said that after every 17 kilometres, we have introduced a new edition. Do you think it is an exaggeration?
MMK: They are saying that for the following three reasons (a) our infrastructure is horrible; (b) facilities provided by the government like rails and road transportation etc is unreliable; and (c) the cost of transportation with the ever-increasing fuel-prices creates uncertainty. Hence, micro editions becomes important. The above three factors have contributed in newspaper publication groups launching micro-editions between 100-200 kilometres. This is part and parcel of the management decision. However, nearer to the metros, you have editions at a distance of 60 kilometres. In all suburbs here, the population is much more than in Zurich (the largest city in Switzerland), the requirements of machines and editions, are therefore, pretty justified. The only concept that bred this is that the publishers think – my newspaper must reach my audience in the language the reader prefers.

PWI: Talking about cheap labour in India, is it  really viable or it is a myth...
MMK: Cheap labour is passé; you cannot find them anywhere now. But several industry people are of the opinion that we do not need cheap labour. Automate the whole process. The minimum wage has become so high that the ‘cheap labour’ is no more available. On the other hand, what you also take a look at is the productivity of the labour. Our institutions who train these workers have to buck up and not just leave the onus on the industry to train them. The Swiss initiative I am talking about is great. But what we need is many more Indo-Indo initiatives. We need more IITs, ITIs. Just imagine a country with a population of over 1.2 billion having a mere 4,00,000 graduate engineers. That’s pathetic.

PWI: The minister of micro, small and medium-scale industry has said that according to a new cabinet resolution, 20% of the government requirements would be procured from the MSMEs. Moreover, of these, one-fifth will be procured from the institutions run by tribals.
MMK: This concept is not new. TPH ventured out to Kabul, which had no printing machines at all. An entrepreneur came to us and since there was no printing press there, he said that no Indian worker would stay and work there. So what we did was, we trained the Afghan people in India and sent them to work there. Today, the people working at printing houses in and around Kabul are mostly Afghani people. Myanmar is another such example from our kitty. We say, instead of giving fish, teach a man to fish and feed himself every day.
In the micro sector, we need to find an entrepreneur who has the education and talent to create an enterprise. Micro finance has not worked in India, but worked wonders in Bangladesh. Conceptually it is very good, but who’s going to train the people who will be running the enterprise machine; teach them to bargain prices and all. What this might give way to is that it might lead to a person misusing the name of a tribal and use it to run the business and garner the incentives.

PWI: Today domestic demand at TPH dominates with 70% of the capacity utilisation. What about the emerging markets?
MMK: Currently the ratio of our export to domestic sales is 30:70. The export market is going through a total revolution. The very rich countries like Libya have suddenly discovered  democracy. Once there is democracy in these countries, the need for multiple voices will increase. Therefore, this market will grow and there is plethora of such countries. Wherever you are saturated, someone will come to fill some other vacuum. Just like in China, one fine day, they started importing machines. But if I wish to sell a machine to Pakistan, I need to cheat. I need to first export the machine to UAE, label it there and sell the machine to Pakistan. But I haven’t, and no one in the industry, bowed down to do this.

PWI: Due to drop in demand, manufacturers of 2x1 presses are cutting prices, resulting in greater quantity of machines and not value to that extent. Is this an advantage for TPH?
MMK: TPH sells quality and we never compromise on price. Today there are at least 20 copycats in the market, but they can only go so far because they don’t have the infrastructure to create quality that we deliver. I would lose every tender if
I fought against price, yet I have never lost a tender. Because, when it comes to quality parameters we have always delivered. You not only have to maintain quality, but after-sales service too.
I was selling when there was one copycat and I still sell when there are scores of them in the market. I refuse to give two different standards of machine for export and domestic purposes, as this would mean that I would have two standards of machine under the same name. And how can you tell a worker to tweak a machine to make it better than the other. And if you want top quality, it comes at a price.

PWI: When will TPH produce a faster 4x1 press?
MMK: If I could tell you that, you would be the first person to know. Not in volume. 4x1 presses will go to those who have huge circulation and revenue. The average speed of such a machine is 60,000cph. Mathematically, you should print 3,00,000 copies of one edition in the window of four or five hours’ time you have to print the copies. So this huge number of copies can only be achieved in metros. And, how many newspapers in India have the numbers? For the sake of argument, let’s say 50. These presses are built to last. So after selling to these fifty organisations, where will you sell more? In the meantime, half of the industry has already ordered these presses, be it The Times of India or the Deccan Chronicle. But yes, new demands keep coming up.

PWI: Did your association with KBA help you in giving a thrust to your brand in some way?
MMK: What happened is that we have been producing machines, which work at the speeds of up to 50,000 cph, but with the KBA, we have developed it into a house that can cater to all the market needs. Also, we have got very good leverage because we were represented by KBA in all the regions where they have a presence. In the market, the people know that if a 200-year old KBA associates with us, it must be for a reason.

PWI: We import from Europe. But the European manufacturing model of 50 Euros per hour and 30 hours a week is unviable. Is the time ripe for India to reverse engineer and create critical parts in India?
MMK: The more I think of it, the more I feel that manufacturing has to step out of the 50 Euro per hour model. It’s not sustainable. The margins they are working are, if we look at their balance sheets, it is either 1% or 2%. While orders have been declining, so is the demand for sophisticated high-speed machines. So, you were doing it with huge volume at 2%. But when you decrease the volume to half, you don’t get two percent, because there is certain fixed cost that you need to incur. It’s not just critical parts. Last time, when I met PrintWeek India, I had said that not everybody who is making machines here, is making all the requisite auxiliaries. But since then, it has happened exactly how I had predicted. People from all over the world have started setting up shops in India.

PWI: For how long are we going to call ourselves a developing third world country! China scores due to their factories which produce high quality ancillaries ... How can we project this across the globe under one umbrella?
MMK: Barring one or two brands, the others do not share a global footprint. In other words, the brand equity is not recognised. Establishing a brand equity is a very painful and time-taking process. Now what is happening is that in other fields, the CII, ASSOCHAM, Chamber of Commerce, FICCI etc. have been very active. To make print as brand India, these institutions would have to contribute a lot. Unfortunately, our export promotion council too is not very active.

PWI: What is the installation status for the sale of TPH towers and folders?
MMK: We have around 1,000 four-colour towers of the 9,000 printing units (installed by us) all over the world.

PWI: At $17 billion, the entire media and entertainment (M&E) industry in India is less than half the size of the world’s largest media company – the $38 billion Walt Disney. The two biggest companies, Zee Group and Times Group, have only recently hit the billion-dollar mark. My question is: are the numbers adding up? Should TPH be worried about the newspaper market?
MMK: In the foreseeable future, I don’t think TPH needs to worry. However, in the long-term, we would need to rethink our strategy. As far as those figures are concerned, Walt Disney is a phenomenon. It has happened in no other country in the world. And it evolved over a very long time; they started ages ago. However, having said that, Zee, Times Group and all others who are coming up, you will see all of these emerging into much larger enterprises. Maybe not at par with Walt Disney; but yes, lot more will come up. Branding has become very important all over the country. For example, PrintWeek India has taken lot of pain to be recognised as a brand and you’re still fighting every day to wave the flag.

PWI: When the electronic media entered, there was a fear that it might hamper newspaper circulation. Instead, what happened was that the circulations increased. Do you think the same will happen in case of internet and other things?
MMK: It depends on several other factors such as education, access to technology, infrastructure provided for all that grows parallel with this, all new technology will find a place in the market. It’s like one time we had only Ambassadors and Fiat cars, today we have a plethora of car manufacturers fighting for the same space, and still growing every year. There was one time when people ordered Bajaj Vespa scooter when they enrolled in a college and got delivery of the scooter when their children were born. Today, Hero alone produces two-million bikes a year. There is an upsurge in so many other factors, you can’t look through a crystal ball and say some would exist and others won’t.

PWI: Do you think the Orients and tucker-folders are going to be your star thoroughbreds in the stable for 2012?
MMK: We introduced tucker-folder about 12 years ago. After that we have produced so many other folders. We have around five folders – with two 1:2 and 1:2:2 folders as new additions. So as time will go by we will continue to produce more new folders and new Orients.

PWI: Are you worried about the jitters that we are seeing in Europe, especially in Greece?
MMK: I think Italy will be the next in line. In the era of globalisation, effect would be there, and will not ‘just’ affect printing. But as I said, Europe has already been written off by us. Of course, this means less customers and lot of headaches for the European manufacturers. Nevertheless, if something of the likes of Lehmann Brother and real estate fiasco, which happened in US are replicated in other European nations, then it would be a sorry state for the whole industry around the globe.

PWI: When we spoke to Sanjay Gupta, editor and CEO Jagran Prakashan, he said, "The price to earning (PE) multiples for newspaper companies in India have come down from 25-27 times to 15-18 times over the last three years." Do you agree?
MMK: Well, I won’t dispute Gupta’s views; he’s a very wise man. But you know, it’s euphoric to have a PE of 25 times. If this is going to happen, it’s not going to happen throughout the industry. One or two players might have it. Jagran is a very respected player. If you compare this to other industries, the players there would be happy to even get 15 times PE. Because nothing is forever. Competition is hell of a motivator. So holistically, you can’t wear blinkers; competition will drive the profits.

PWI: In the past, you have mentioned your reservations about secondhand machines. Is there a problem within our industry where we have disparate voices, lack of  omprehensive policy. Today, we hear of print firms purchase 2006 heatset presses at throwaway prices from a mortgaged UK or US firm. Does this affect pricing?
MMK: Not at all. Firstly, TPH is not in the heatset business. Heatset is a very niche market for magazines. These machines are basically tailor-made, the requirements are very small, and the prices are very high. The secondhand machines are equally prevalent in the western markets. The only difference is that a ten year-old machine, which the buyers in the West are not ready to purchase, are imported happily by printers here in India; because the price is much lower. There is very little import of coldset machines. It’s around 1% of the total market. Majority of imports here are sheetfed machines. Now, with the technology changing, the old heatset machine being imported now, do not comply with the environment norms of European countries. And since, we are a bit lackadaisical about our pollution norms, Africa and Asia became a happy dumping ground for such machines.

PWI: The other major issue is fragmentation. According to an estimate, of the 73,000 odd newspaper titles, only 990 are active members of the INS. The rest just exist. How can we build a strong newspaper industry in spite of these circumstances?
MMK: ABC and IRS have to become very tight to control these. Perhaps, we should ask Anna Hazare to do something about it (laughs). Once you make the registration norms more tight and monitored, you will find these things resolve. To start a newspaper today is very expensive. It would take many years before you start making profit. You have to look at it minutely. If you have stringent norms, all these will reduce in numbers.

PWI: The government has committed a budget outlay of Rs 3,500-crore per annum for literacy – and we find there are not enough machines to produce school books.
MMK: This is an incorrect impression. There are as many
machines as you want.

PWI: So is there a "manufactured" scarcity of books?
MMK: The process of prescribing and approving the syllabus consumes lot of time due to red-tapism. At the same time, the opening date of a new session is fixed. If you put it on a CPM analysis, you will notice that if the "x" amount of time required to print the books is not provided, the books would come in late. But the smartest thing the government did was to print the books on web offsets, which meant that five-times more books can be produced in the same time.

PWI: And finally the old debate about what is the ideal cut-off for web offset?
MMK: One thing is definite – the larger cut-offs have gone. The 630 mm, 600 mm, 578 mm, all of these have disappeared from the market. Except for the book printing needs. For the newspaper, it would be probably dictated by Asia. Japan started with the 546 mm and I think if the choice will be between the 546 mm and 533 mm, the 546 mm cut-off will prevail. In the tabloid market, the Berliner-format like the Mint. But in India, tabloid is not yet that popular as we are not habitual of reading the newspaper in the afternoon or evening. However, when things will change, the market would pick up. During the 1960’s the cut-off that was most prevalent was the 578 mm; only for a very short time did the 600 mm come into the market. Then, in the 1990s, the 546 mm came in; and now we are in the experimental stages of the 533 mm. But I don’t know if that would succeed.

PWI: What are TPH’s plans for Drupa 2012?
MMK: Aha! See us at Drupa. My plan is to tell everyone to visit us at Drupa and see for yourself.

PWI: One of your main competitors ventured into the packaging sector. Is TPH contemplating such a move?
MMK: No. Never. If we plan to go for a horizontal growth rather than vertical, we might go for something else. Mind you, packaging a very lucrative sector. But that’s not our forte.