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The man behind Deccan Chronicle's success
Surajeet Das Gupta | November 12, 2005
T Venkattram Reddy has made a fetish of winning. His office in downtown Secunderabad has a glass case full of trophies picked up at the Hyderabad Race Club. But that is Reddy having his fun.
The 46-year old newspaper baron is gambling for more serious stakes when it comes to work. While everyone has been focused on the mother of all newspaper wars in Mumbai, the chairman of Deccan Chronicle has quietly unleashed an operation in Chennai to rattle the foundations of one of India's oldest and most respectable papers, The Hindu. If his audacious plans succeed, he could pull off a spectacular media coup.
Before you scoff at this outlier's chances, take a look at how he has moved into one of the inside tracks.
Five years ago, the Deccan Chronicle was a not very distinguished single-state player in Andhra Pradesh, selling about 140,000 copies and occupying a modest 10th spot in the all-India English newspaper rankings - certainly not one of the big boys in the media game.
Today, he sells 400,000 copies in Andhra Pradesh and claims to be selling another 300,000 in neighbouring Tamil Nadu - where he launched in May - making him the country's fourth largest English newspaper.
If you believe his numbers (his rivals question them) and add the circulation of The Asian Age, in which he recently acquired a 90 per cent stake, the combined circulation of his English newspapers (which have started sharing resources and even pages) comfortably crosses 800,000.
In other words, he may be within shouting distance of both The Hindu and The Hindustan Times, which sell about 10.5 lakh (1 million) copies each. In the great newspaper sweepstakes, the Deccan Chronicle has emerged as the dark horse -- and way ahead of such vaunted titles as Indian Express, The Telegraph, The Tribune and Deccan Herald.
His financial performance has been equally breathtaking. When he priced his public share offering at Rs 162 per share late last year, many people thought the issue was hopelessly overpriced -- with a price-earning multiple of 26 that was roughly twice the then Sensex average.
But in his latest quarterly results, Reddy has shown a stellar 91 per cent growth in sales and 51 growth in profits, so his share price has actually soared to Rs 300 -- in telling comparison with the Hindustan Times, which has seen its share price dip from its initial offer price.
None of this seemed a likely scenario five years ago, when Reddy was being challenged on his modest home turf by both The Hindu and The Times of India.
Instead of keeling over like other regional papers have done in the face of an onslaught from national titles, Reddy changed gear and put on a burst of speed -- adding pages, dropping price, introducing colour, and bringing in M J Akbar as his new editor.
In no time at all, his sales soared and, equally importantly, he retained leadership in the state. Adds M J Akbar, group chief editor, "We designed a paper that was content heavy. We have the maximum number of fully thought-through pages and a complete arc of news. It is a glocal paper, with local plus global news. Our research showed that the age group between 18-35 years was not being addressed by The Hindu; that was the market we aimed at."
In many ways, the flamboyant Venkattram Reddy is the unsung newspaper baron who sharpened his teeth warding off The Times of India challenge in Andhra Pradesh.
Now he jokes: "I am used to battles. In Andhra, I was to be obliterated, first by The Hindu, then by Indian Express, followed by Newstime, and The Times of India, but I survived all that." Today, he is still the leader in Hyderabad by a mile. And acquisitions in Karnataka may give him a footprint in that state.
Having protected his home turf, Reddy decided last year to take the next step and go on the offensive -- and again surprised the big boys by getting one step ahead of them.
Everyone thought it would be The Times of India that would take on The Hindu in Chennai, but Reddy jumped the starter gun while The Times of India was still in the paddock.
The result has been a welter of claims, accusations and counter-accusations. The 125-year-old Hindu sells 10.47 lakh (1.05 million) copies across the country, of which 264,000 are in its Chennai fortress. Astonishingly enough, Reddy says he already sells 3 lakh copies from Chennai, less than six months after launch.
Now, if everyone would just believe him. Deccan Chronicle in Chennai is yet to get an independent audit done by the Audit Bureau of Circulations (which requires that it complete a six-month period first); almost everyone in the newspaper business exaggerates numbers; and Reddy has not always had his numbers accepted by auditors without a second look.
N Murali, joint managing director of The Hindu, says that the Deccan Chronicle's claims about a ramped up circulation are no more than clever artifice, that the Re 1 paper (in comparison with Rs 3.25 charged by The Hindu) doesn't reach readers at all, because it's more profitable for hawkers to sell it as waste paper.
"Given the highly lucrative deal offered to distributors, I would reserve our estimation on sales at the reader end," chips in Manoj Kumar Sonthalia, chairman and managing director of Express Publications (Madurai) which publishes The New Indian Express in Chennai and other southern centres. "Our circulation has grown after Deccan Chronicle's entry into Chennai."
Bunkum, retorts Reddy. For one, he isn't offering distributors a 60 per cent margin, as his competitors allege. And once he gets his ABC certification for the July-December period, the circulation figures will speak for themselves. "We have already run out of printing capacity," he says, "forcing me to divert one of the printing presses that was to be installed in Trichy to Chennai as an interim measure. The new press in January will double printing capacity to 600,000 copies a day."
Old style readers may continue to prefer The Hindu's sedate approach to news, its excellent production qualities and its high-brow opinion pieces (Karunanidhi once referred to the paper as the "Mahavishnu of Mount Road"), to the Deccan Chronicle's loud headlines and earthy content, but there is little doubt that the battle has been joined - and only partly because of the pricing games that Reddy has played (ICICI card-holders, for instance, can buy a whole year's copies of the Deccan Chronicle for just Rs 99).
Reddy insists that his sights are set on big numbers. He hopes to hawk no fewer than 500,000 copies of the Deccan Chronicle from Chennai in the next six months. Then in April, the Deccan Chronicle will challenge The Hindu for leadership in the larger Tamil Nadu market.
Two presses in Coimbatore and Trichy will have the ability to rustle up print runs of 2 lakh a day each. So what is Reddy aiming for? "By April-May next year," he puffs contentedly at his cigar, "we will become the No. 3 English daily in the country. With Coimbatore and Trichy, we will overtake The Hindu."
Cocky? That's pure Reddy. But his next move is likely to be even more audacious. With the newspaper war moving out of Mumbai to the south (The Times of India is moving into Chennai, and Daily News and Analysis is expected to add Bangalore to its Mumbai print base), Reddy is readying a move in the opposite direction by charging into Mumbai and re-launching The Asian Age.
But why Mumbai, where both DNA and the Hindustan Times have quickly lost fizz after a lot of launch-related noise? Because, says Reddy, 25 per cent of the Deccan Chronicle's advertising revenues come from Mumbai-based companies.
They could now get a beachhead in Mumbai by paying only a small premium (instead of the high ad rates offered by competitors). Besides, The Asian Age already has a presence in the city and he has to just build on that, hoping after the re-launch to do about a lakh copies in the city.
As preparation for the coming battles, the Deccan Chronicle has cash reserves and a comfortable cash flow with which to take on The Times of India.
Ask him how he plans to take on its impending launch in Chennai, and he is dismissive: "We will see when they come; we already have a head start over them."
Meanwhile, taking a leaf out of The Times of India group's book on deal-making, Reddy has bought the retail store chain Odyssey for Rs 61 crore (Rs 610 million). He hopes to expand the 12-store chain by adding 10 more outlets, mostly in the south, and increasing turnover to Rs 100 crore (R 1 billion).
The purchase has unusual logic to back it. Reddy explains that the stores are stacked with products from well-known companies who are also his key advertisers. The quid pro quo? If they tie-in with exclusive advertising deals with the Deccan Chronicle, they get premium display space in the stores.
"He fashions himself on Vijay Mallya," says a Hyderabad-based businessman, "and likes the good things in life -- cars, horses, watches, the choicest cigars."
He drives a Porsche Cayenne S, and friends say he picked up a Rolex Daytona Cosmograph watch recently. Those who disapprove of his brashness say he can be a boor; he certainly did something to upset the Congress party, which did not offer him a second term in the Rajya Sabha.
Joining his father's business at 21 (his father Chandrasekhar Reddy was a businessman and a Congress politician), he decided to sell most of the 20-odd sectors because they were too diverse, ranging from aluminum foils to soft drink bottling plants and hotels, even making money printing the Bible.
The result was flak from Hyderabad's social set who saw him as a brash upstart.
Among the many businesses he exited was as a bottler for Ramesh Chauhan's Parle. Today, Reddy chuckles, "Getting into businesses is easy, but the important thing is to know when to get out of it and make money."
Of course, he learnt a few tricks of the trade from Ramesh Chauhan, who told him he would never let bottlers become so big that they could dictate terms to him. Reddy says the same lesson holds good in the newspaper distribution system.
Like his father, he dabbled in politics too.
A Rajya Sabha MP with the Congress in the early '90s, he (according to political watchers) is using his newspaper now to build bridges with the Congress rival and Telegu Desam supremo, Chandrababu Naidu -- of whom Reddy has been bitterly critical in the past. Reddy rubbishes these allegations. "My being in the political system has nothing to do with the paper. We run the paper on what people want, not what the owners want."
But what do advertisers want? The Hindu says the Deccan Chronicle's entry has made little difference to the market, and it certainly hasn't had to trim its ad rates. Insists Murali: "In its Chennai edition, the Deccan Chronicle's advertising is quite insignificant, covering only 15 per cent of the total space."
The Hindu, however, is cashing in on its editorial quality and its 125 years of tradition, apart from adding new supplements and more colour pages to ward off the challenge. Sonthalia of the Express says he will leverage bilingual strength in the Tamil Nadu market with Tamil brands like Dinamani to take on the Deccan Chronicle.
Media experts acknowledge the churn created by the Deccan Chronicle's foray into Chennai, but report little evidence of any radical shift in advertising. Says Meenakshi Madhwani, media auditor, Spatial Access: "The Deccan Chronicle has made some dent in the retail market but it does not appear that The Hindu is losing great volumes."
Avers Naresh Alambara, general manager of a media buying house in Chennai: "Retail players are considering Deccan Chronicle if they cannot afford The Hindu, or want to reach a specific sub-segment. Exclusive ads are hard to come by."
Adds Himangshu Shekhar, investment director in Mindshare Fucrum, another media buying agency: "As of today, no one can bypass The Hindu and have a robust print plan, but perhaps some advertisers see pricing benefits due to bundling with Deccan Chronicle's Andhra edition."
That encourages Ambareesh Baliga, vice president of Karvy Stock Broking, to say, "Deccan Chronicle has targeted Chennai and other south Indian markets to capture the large colour ad market and increase its blended ad rates in the mid term. Also, Tamil Nadu does not have many pan-India English dailies, so it will be a lot easier to make money than in Mumbai or Delhi."
But others warn that Reddy needs to be vigilant as newsprint prices are rising again. Says J Shah, head of research in Mumbai-based KRC Research, "They are sitting with a large cash flow, but the major challenge will be the increase in newsprint prices, which might effect profitability as well as margins."
But finance director P K Iyer of Deccan Chronicle counters: "The effect of newsprint is over-played." A premium for advertising in colour, he says, should reasonably offset it.
As you walk out of his headquarters in Hyderabad, Reddy shows you his mini-museum of old printing machines. He explains that a scrap dealer was willing to pay only Rs 20,000 for the six machines. For that price, Reddy says, it made more sense to keep them, if only as museum pieces.
But for now, Reddy is only alive to the future. Would he like to be remembered as the newspaper baron who came out of nowhere to take on the southern newspaper titan? "You have to move on," he quips. "Some day we might want to be No. 1."
Additional reporting by Sanjiv Shankaran in Chennai and Sonali Krishnan in Mumbai