Q) What are the company’s strengths?

Tips has a very strong distribution network and is the only music company with 18 exclusive distributors. The company has a very strong catalogue with over 8000 albums, generating more than 50 percent volume of the total business. This is a recurring income to the company. And all the 8000 albums are in the digitized form, which will help the company in launching the CDs without any delay.

(Q) What are the margins in this kind of business? What is the company’s business policy?

The margin is around 20 percent. Unlike other companies, Tips buys the music rights and they do not pay any royalty. Hence, when the sales are good, the income directly accrues to the company. Moreover, in case the music does not sell, they can combine the songs with other hits and sell the cassettes.

(Q) What is the company’s pricing strategy?

The company has clear cut pricing strategy in the music industry. It has been a leader in charging prices and the others usually follow suit. Recently, they have increased the price from Rs.55/- a cassette to Rs.65/-, when they launched Fiza and Tera Jadoo Chal Gaya.

(Q) How is the CD plant going to add to the profitability?

Sometimes, when the requirement of CDs is small, they are not available in the market. So we are starting our own plant to meet this kind of requirement too. For example for devotional songs. It is likely to contribute to 50 percent of the company’s turnover in future.

(Q) Of all the music rights acquired during the last three years, what has been the percentage of success?

The success rate is usually 80 percent.

(Q) Last year’s success was attributed to Taal and Mann? How do you project your success for the current year?

This year, major portion of the sales is likely to come from "Fiza" and "Tera Jadoo Chal Gaya". The show room "Music World" of Hyderabad has stated the sales of "Fiza" to be on the top. Forthcoming releases like Yaaden is also likely to contribute.

(Q) What are the tax benefits your company has?

The company is enjoying tax benefits like 100 percent tax exemptions upto 2002 and 30 percent exemption upto FY2007. There is zero excise duty on pre-recorded cassettes. The Palghar unit also has 30 percent exemption upto 2001. Under Section 81A, the Silvassa unit will get five year tax benefits.

(Q) What are the company’s future plans?

The company is now focussing on CDs market, which has higher growth potential and is more profitable as compared to the cassette market. Tips is increasing its penetration in the overseas market, i.e. in the Gulf. It is also expanding through internet and e-retailing. The company already has alliance with Warner Brothers for marketing international music in India.

(Q) How do you justify the issue price?

The indicative price is around Rs.350/- for a floor price of Rs.325/- a share. The company’s P/E multiple is 12.4 for pre-issue capital. For the post-issue capital, it is 16.6. The average industry P/E is around 50.

The turnover is expected to grow by 31 percent to Rs.161 crore in FY2001, with PAT growing from Rs.23 crore to Rs.36 crore during the same period. The EPS is expected to rise from Rs.26/- to around Rs.30/- on diluted equity.