Moser Baer is one of the biggest success stories of Indian manufacturing industry. Just a few years back, I used to feel proud, whenever I used to see its story in print media and online. It was a perfect example of the spirit of entrepreneurship, how a company started from scratch became the second largest manufacturer of optical disks in the world. In this age, where even the term manufacturing reminds us of China, it used to shine as one of the few flames of the Indian manufacturing story. The company was started by Deepak Puri, with international collaboration to make storage devices. The company started with floppy disks, but got into mainstream near 2000, when seeing future growth in optical disks, they invested huge amounts into capacity addition. Soon, Moser Baer started exporting all varieties of optical disks throughout the world through its manufacturing plant in NCR.
The only real competitors for it was some Taiwanese companies like Ritek, who seeing the growth of Moser Baer, started shifting their manufacturing to China. The move to China was going to lower the cost of disks drastically, thus reducing the profit margins of company. In response to it, Ratul Puri son of Deepak Puri, took a bold decision to increase capacity to 3 billion disks a year and thus forcing the prices down. But, what they forget was to see the ongoing change in the storage industry. The biggest factor in technological industry is the continuous change; the prices of flash devices fell and the world moved on to pen drives and thumb drives from CD’s and DVDs. The additional capacity increase brought a major debt on the company, while the decreasing demand eroded margins further.
Now, the company is in shambles. One of the major investors, Warburg Pincus has sold his stake at a huge loss. The current CEO, Ratul Puri knows this and has shifted his focus to solar power. He knows that his company is still a leader in micro-coating of surfaces, and has the potential to move ahead in this sphere due to increasing demand. But, again China factor has come into play. Due to government subsidies and a favorable business environment, China is now the world leader in solar panel manufacturing and produces a quarter of the world production. The lower prices and high volumes of Chinese players are one of the most difficult challenges for Puri. Further, the failure of Moser Baer is shadowing the moves of Moser Baer Projects; it is becoming more and more difficult to raise capital for the capital intensive solar panels manufacturing projects. His current investors applaud his project execution skills, while the previous investors are not happy with the current scenario of company. The share price has plummeted to 5 Rs from the high of 340 in 2007.
Had Puri and the board of Moser Baer predicted the future properly, they would have invested more in other storage media application. But rather than diversifying into multiple areas, they put all their eggs in a single basket. Only the future knows, what will happen to Moser Baer, but for meanwhile I am keeping my fingers crossed and wishing Puri a good luck.
The only real competitors for it was some Taiwanese companies like Ritek, who seeing the growth of Moser Baer, started shifting their manufacturing to China. The move to China was going to lower the cost of disks drastically, thus reducing the profit margins of company. In response to it, Ratul Puri son of Deepak Puri, took a bold decision to increase capacity to 3 billion disks a year and thus forcing the prices down. But, what they forget was to see the ongoing change in the storage industry. The biggest factor in technological industry is the continuous change; the prices of flash devices fell and the world moved on to pen drives and thumb drives from CD’s and DVDs. The additional capacity increase brought a major debt on the company, while the decreasing demand eroded margins further.
Now, the company is in shambles. One of the major investors, Warburg Pincus has sold his stake at a huge loss. The current CEO, Ratul Puri knows this and has shifted his focus to solar power. He knows that his company is still a leader in micro-coating of surfaces, and has the potential to move ahead in this sphere due to increasing demand. But, again China factor has come into play. Due to government subsidies and a favorable business environment, China is now the world leader in solar panel manufacturing and produces a quarter of the world production. The lower prices and high volumes of Chinese players are one of the most difficult challenges for Puri. Further, the failure of Moser Baer is shadowing the moves of Moser Baer Projects; it is becoming more and more difficult to raise capital for the capital intensive solar panels manufacturing projects. His current investors applaud his project execution skills, while the previous investors are not happy with the current scenario of company. The share price has plummeted to 5 Rs from the high of 340 in 2007.
Had Puri and the board of Moser Baer predicted the future properly, they would have invested more in other storage media application. But rather than diversifying into multiple areas, they put all their eggs in a single basket. Only the future knows, what will happen to Moser Baer, but for meanwhile I am keeping my fingers crossed and wishing Puri a good luck.
