Essel Shyam Communication Ltd provides telecom/IT and media broadcasting technology services for enterprises, broadcast and media companies, governments and security agencies. Its telecom services include shared hubs, customized telecom networks and broadband; broadcasting and media services include local or remote teleport facilities, satellite, origination and play out, MCPC platform and outdoor broadcasting. The company also provides knowledge process outsourcing services for multimedia, healthcare and pharmaceutical, biotech, genetic engineering, design and legal markets; BPO services in areas such as NOC support, managed IT, travel, healthcare, media and broadcasting, HR, legal and general marketing. In addition, it offers IT services, which include Internet and software support and development, as well as remote infrastructure management, technical support, enterprise resource planning, media technology, data centre, network management, e-governance and software design services. Further, the company provides RFID managed business, project management and system design and integration services for telecom, media broadcasting and call centre BPO projects in India and internationally.
The company was founded in 1996 as Essel Spacelinks Limited and later on, its name was changed to Essel Shyam Communication Ltd in April 1997. The company is based in Noida, India. Essel Shyam Communication Ltd operates as a subsidiary of Essel Group and Shyam Telecom Ltd. The company was promoted by the Essel Group of companies through its group company Rama Associates Ltd (RAMA) and Shyam Group of Companies, through its group company Shyam Microsat Private Ltd (merged with Shyam Basic Infrastructure Projects Private Ltd) (SHYAM).
Essel Shyam Communication Ltd is a 50:50 joint venture between Essel Group and Shyam Group. It had started commercial operations in March 1998 with pure play VSAT connectivity services, and it now offers a full range of VSAT/Telecom services along with Media Broadcast services and BPO/KPO services. The company is now a multi-faceted technology aggregator cum solutions provider. The company has a good client base spread across different industries such as print media, satellite channels, cable TV networks, manufacturing, stock brokers, PSUs and State Governments. It has developed a niche in this area by innovating new market segments in the areas of media and entertainment (video streaming) along with a variety of new innovative businesses around media, telecom and related IT. Subsequently, after 2006, the company diversified its operations into business, technical and knowledge process outsourcing. They obtained an Internet License (Category A) to establish, maintain and operate Internet services throughout the country. They also obtained a license from the Ministry of Information and Broadcasting for providing SNG/DSNG services to various broadcasters for live coverage of events. Today, they operate or manage DSNG van fleets for several premier Indian news channels.
Recognizing the potential of ubiquitous broadband service in the growth of GDP and enhancement in quality of life through societal applications including tele-education, tele- medicine, e-governance, entertainment and employment generation by way of high-speed access to information and Web-based communication, the Government has finalized this policy to accelerate the growth of broadband services.
Essel Shyam, a Telecom/IT and Media Broadcasting Technology service provider, has customized solutions for Internet and telecommunication using state-of-the-art technologies. The solutions are designed for the specific business needs of their customers in various segments, including enterprises, small, medium and large; broadcast and media companies; Government; security agencies and various other customers.
Market
VSAT technology was used commercially for the first time in 1980 by Equatorial Communications, USA, for providing commodity news service on one VSAT. By 1984, more than 30,000 earth stations were installed for numerous data broadcasting networks all over the world. Interactive VSATs became commercial in 1984 when high-speed facsimile was introduced by Federal Express, USA. This resulted in extensive applications development using VSATs in ‘C’ Band, ‘KU’ Band by Equatorial Communications, AT&T, GTE Spacenet, Hughes Network, Scientific Atlanta and COMSAT STM Wireless. The average annual growth in the VSAT market in the European nations was 20 per cent in 1997 with higher growth rate being in developing countries. VSAT systems find applications in diverse fields such as banks and financial institutions, manufacturing industries, retail and distribution, government organizations, defence and security systems and oil and mining.
In terms of market potential, India is one of the biggest markets for VSAT service providers. Huge geographical spread, low tele-density and a strong demand for reliable communication infrastructure will give a big push to the VSAT market in India.
VSATs were first introduced in India in 1985 when district headquarters and state capitals were connected with New Delhi using NICNET, India’s first network that used VSATs. The real growth came in 1995, when the industry was opened to private players. However, a series of roadblocks resulted in the industry fighting for revenues, and it is only now that things are on the upswing once again for VSAT players. Looking at the emerging opportunity, ESCL entered into the market at the most opportune time, that is, 1998.
The VSAT applications have demonstrated an unprecedented growth, especially from 2005 onwards in India. The industry is growing at a steady pace of 20,000 terminals on a year-to-year basis, especially as an outcome of technological developments. India can see a penetration of more than 5 million VSATs in the next 10 to 15 years across enterprises, government, SMEs and consumer segments.
The VSAT installations touched 123,807 in fiscal year 2009–10 from 101,773 in 2008–09, that is, a growth of 21.7 per cent. Bharti Airtel grew by 21 per cent with a market share of 31 per cent. Its nearest competitor Hughes showed 20 per cent growth and commands a market share of 29 per cent.
Hughes also got some path-breaking assignments in the last fiscal year—a huge order for ` 40 crores with the Indian Navy. ISRO is planning to put satellites, especially for this. The deal is important given the fact that it will be connecting submarine aircrafts. In the field of distance education, Hughes dominated by securing orders with Edusat and Educom. Through 2,500 VSATs of Hughes, 19 movies per week were screened and live IPL matches were telecast. The launch of the DVB-S2 technology by Hughes in India with the latest ACM/AIS on its HX platform is an important technology breakthrough. This offers customers high QoS bandwidth to run their core applications.
ESCL of Sheet Balance Financial
The company has grown fast as evident from the average annual growth in revenue of 49.5 per cent between 1998 and 2010. The company has been earning cash profit from the very first year of its operations. The compound average annual growth in cash profit has been at 90.1 per annum between 1998 and 2010 (Table 15.3). The company has been private limited and by not paying dividend has been conserving internal generations for growth purpose. It appears that the company was planning to come up with a public issue in the latter part of 2006, as evident from having declared dividends between 10 per cent and 25 per cent between 2001 and 2006. The company incurred net loss during the first two years of its operations. However, subsequently, it has been consistently earning profits. The company’s net margins were adversely affected in 2003 and 2009 but again could earn as high as 18.86 per cent net profit margin in 2010 (Table 15.5).
Reserves and surpluses of the company have increased from ` 1,505 lakhs in 2001 to ` 11,528 lakhs in 2010. The company’s net block increased from 1,453.1 lakhs in 1998 to 6,786.7 lakhs in 2010, that is, an increase by 4.67 times within a period of 12 years (Table 15.4). The company’s growth has been driven by internal generations and loans, as evident from loans outstanding having increased from ` 846.15 lakhs in 2001 to ` 5,465.13 lakhs in 2009, and thereafter having come down to ` 4,502.7 lakhs in 2010. It appears that the company is likely to be debt free soon.
Strategy Growth
Being a niche player in the technology and communication services, the company’s business strategy focuses on the following points:
providing value-added VSAT/RF telecom services, teleport services, SNG/DSNG, BPO,
KPO and IT services using a mix of technologies with state-of-the-art equipments servicing the high-end requirements of customers through direct interaction and tailor-made solutions to suit their specific requirements
providing end-to-end solutions on a turnkey basis to the media and entertainment sector
constantly innovating new technologies to ensure lowest downtime, quickest uptime and quality communication through satellites
Challenges
In spite of the accelerated growth, the industry is saddled with a number of challenges, such as the following:
Import equipments for importing VSATs require number of clearance from the government because of security concerns.
Private players in the industry are in a disadvantage, as USO funds get given to BSNL only.
Private players feel that they do not have a level playing field, and, therefore, government subsidies should also be given to private players.
An industry expert feels that the dish size should be reduced to 50 per cent. The reason that the United States has the world’s maximum number of VSATs is because the dish sizes of the VSATs are comparatively smaller, which has subsequently allowed the penetration in houses as well. VSAT deployment needs to be made easy similar to set-top boxes.
Introduction of newer technologies such as 3G and BWA will pose an added challenge to existing operators. Overall, the regulatory environment remains the biggest hurdle. Other challenges that are looming large are capex for VSAT networks, poor infrastructure, providing better SLAs, visibility in terms of uptime and overall value for money. Fluctuating dollar price can also escalate the already existing pressure on the industry.
Directors of Board of le Profi Brief
The company is managed by professionals since its inception. As per the Memorandum and Articles of Association, ESCL shall have a minimum of 3 and a maximum of 12 directors on its board. In terms of a joint venture agreement entered into between RAL and SMPL, the board of directors of ESCL will be on the basis of proportionate shareholding. However, a shareholder having less than 10 per cent of equity would not be entitled to the board-level representation. The chairman of the board of directors will be nominated by each of the SMPL and RAL on a rotating basis, for a tenure of two years at a time.
Directors the of le Profi Brief
Lalit Jain, M, LLB, FICWA, has more than 25 years of extensive experience in various reputed Indian companies. He has been associated with multidisciplinary functions covering financial, costing, commercial, legal and administrative matters besides general management. Jain has been involved with the operations of ESCL from its inception and has been largely involved in liasioning with various government authorities and marketing of the services of the company.
Mahendra Nath Vyas is an M.Tech. from Indian Institute of Technology (IIT), Mumbai, with specialization in Microwave and Satellite Communication. He has 25 years of experience in the field of Satellite Communication. Vyas started his career as a design engineer in ISRO, where he developed a sub-system for India’s first communication satellite transponder APPLE, which is in use now in the current INSAT Satellite. He was later on associated with various defence VSAT networks during his tenure with India’s leading electronic company, Bharat Electronics Limited. He had managed complex Digital SCPC VSAT Networks in India. He is also an RFID+ certified professional. Vyas has also been involved right from the inception of the company.
Amitabh Kumar is currently the director (Corporate Technology) for the Essel Group. He is responsible for advising the Essel Group Companies, including Zee Telefilms, Siticable and other group companies on technology and new projects. He is also responsible for the Broadcast Network of Zee with broadcast centres at Noida and Singapore as well as its International Broadcasting Network. He was earlier with VSNL as director (Operations), acting chairman and managing director and was responsible for the growth of the Internet and the launch of Satellite Broadcasting from the Indian soil among other initiatives.
Sanjeev Kumar Kakkar is an M.Tech from Delhi University and has rich experience of more than 15 years in Communication Technology. He was earlier working with Shyam Telecom Ltd, as vice president, R&D Department, and is currently working as vice president with Shyam ACeS India (P) Ltd.
Subhash Chander Dhingra is an MBA and FICWA. He has more than 35 years of experience and has held positions at senior levels in leading PSUs, regulatory bodies and companies. He brings with him the knowledge and experience of operating in a vast canvas.
Vinod Kumar Bakshi is a postgraduate in Public Administration and has rich experience of more than 30 years in domestic and overseas marketing, administration, advertising and public relations. He is a member of the Central Film Censor Board. He had been involved with various organizations in the business of broadcasting, such as BBC, and has also won several awards from various creative organizations.
1. What have been the key secrets of the accelerated growth of Essel Shyam Communication Ltd? Analyse them.
2. Analyse the financial statements critically to identify the parameters that have resulted in accelerated growth of the company.
3. What would be the key challenges for the business growth of a company in the future?
4. What strategy is the most desirable to achieve accelerated growth in the coming years?
Justify your answer.