Dear Colleagues,

Over the last five years we have had a dream run as a company. In July 2008,  we grew to be a billion dollar company, growing at 20% per annum, nicely profitable, growing shares in almost all geographies, expanding our editions into newer territories and winning important competitive battles. Why do I call it a dream run? Because we met success everywhere, including against competitive attacks in large markets. This encouraged us to think of expanding even more rapidly. We made plans to double our capacity, launch many more new editions, take Mirror to other cities and continue to grow our business at the same pace.  Not only our business, we all grew both professionally and personally in the last 5 years.

Starting May-June last year, the first road bump in the form of newsprint prices hit us.  We started paying between 60-70% more for newsprint than we had been paying previously.  This depleted our profitability to less than half of what we had enjoyed previously.  We saw some of it coming, and took necessary steps to mitigate it as much as possible.  Small cover price increase, rationalization of pages, strictly incurring only necessary costs were our focus then.  By doing these, we were able to keep ourselves profitable though at a reduced level during the first three months of August, September and October.  Actually October was our best month in the history of BCCL in terms of revenue, though our profits were at half the level of what we had originally expected. All because of the higher newsprint costs.  At that stage, we thought we will be able to cut more costs and restore the company to its original financial health.  Profit is like oxygen – if we don’t have it, the company and its employees eventually suffocate. We needed to ensure a level of profitability which provided enough cash for us invest in future growth.  Till October we were confident that we would be able to do so.

The last four months have turned out to be very challenging.  Instead of growing like in the previous three months, we saw advertising decline by almost a quarter, and, because over 90% of our revenue comes from advertising revenue, this has been huge barrier for us. I am happy that we took precautionary steps to reduce the costs, but, unhappy that these have not been enough to restore our profitability.  I am happy that we have not eroded our competitive position, in fact we have become even better, but unhappy that we have had to borrow money significantly to continue our capacity expansion.  I am happy that all our colleagues have risen to the challenge, but unhappy that the challenge seems to be lasting longer than a few months.  Frankly, I have not seen anything like this in my working life.

In times like these,  we all are asked to make personal adjustments and sacrifices for a greater cause; to nurse the company back to the pink of health it once was.  I am sure all of us are working harder, and, hopefully smarter to overcome the challenges that we face.  Today, every advertisement is a battle won and every rupee earned is hard fought.  Advertisers and Agencies have simply cut their planned promotional budgets, a mistake in my opinion as advertising is the best way to ensure top of line growth, but, I guess they are dealing with their own issues and demons.  We are trying innovative approaches including integrated solutions of all the media that BCCL owns, to provide an effective solution to our advertisers. But, each deal seems to require much more persuasion and does not bring as much revenue as it used to.  I am confident that with our continuing innovations towards advertising sales, we would gain competitive position, and when recovery does happen, and it inevitably will, we will be best placed to ride it.

In the meantime I am asking each one of you to do even more.  As a token of our oneness with the company, I am suggesting the following steps:

a)    There will be no salary revision in August this year
b)    There will be no TVP pay out in August this year
c)    There will be a roll back of increment for all employees starting March 1, 09.  This will be graded, i.e. employees who got a smaller increase will get a lower reduction and the employees who got a higher increase will have a higher reduction of their increment. This is explained in the attached table.

I know this will affect everyone, but it will help in nursing the company back to health, and that will allow us, to once again, continue our growth both professionally and personally.  Our future in the company depends on how quickly and effectively we put it back on the path of profitability.  I am sure I can count on all your support towards this goal. What we do now, in the next few months, will greatly determine how we come out of this challenge. And resume our company’s and our own professional and personal progress. About this I am sure.

Warm regards, friends.
Ravi