Greeting card companies Infrasoft Technologies--which owns 123greetings.com--and Archies have had contrasting fortunes over the last few years.
Intrasoft's revenues have grown steadily while Archies growth stagnated. For FY15, Intrasoft reported a profit after tax (PAT) of Rs 5.96 crore in FY15, compared to Archies' reported Rs 4.12 crore.
Raghav Moolchandani, Business Development at Archies told the channel that changes in market in last few years and the company’s late entry into the e-commerce business have impacted growth. Moolchandani said Archies is now diversifying into new segments like stationary and is reviving its old segments to drive growth.
Arvind Kajaria, Managing Director, Intrasoft Technologies does not expect his company to make profits near term as it is reinvesting its cash in infrastructure, existing e-commerce business and management.
Kajaria said the company has tied up new suppliers and retailers as part of its new strategy. The company recently launched a mobile application for its online greeting cards site. Mobile application business is growing at faster pace than the traditional e-commerce route, he says.
Below is the transcript of Raghav Moolchandani & Arvind Kajaria's interview with Reema Tendulkar & Mangalam Maloo.
Mangalam: While your topline has been growing, it is the margins that continue to be a worry. They are stable at around 1.5 percent mark, so is there any possibility of your margins improving going forward?
Kajaria: We are in e-commerce business. At the moment, that is where our focus is. In any cyclical business, we need to grow the business. Right now, what we are doing is using all our positive cash flows and reinvesting back into expanding our management team, technology and infrastructure.
The choice clearly is not to grow and declare higher profits, which is always an option but the way especially retail and e-tailing are, if you don’t reach a particular size, you become insignificant. If you become insignificant, then your partners, whether they are market places or logistics partners or your vendors, don’t give you the economic respect that makes the business viable in long-term.
You will see margins at a gross profit level, but at the EBITDA level, we will continue to reinvest back into the business. You can clearly see where the money is going, but as numbers go, for the next foreseeable future it will be difficult to declare higher and higher profits.
Reema: What about your revenues then. FY15 revenues were at Rs 344 crore. What will be the growth rate in your topline since that is where the company's focus is on?
Kajaria: Our model is a shop-in-shop model as we have explained earlier as well. We are partnering with more and more market places and adding more suppliers - a combination of both. It increases business as the process improves from the existing market places. We are adding couple of more market places, so new business from there, increase volume of supplies from the existing suppliers and new suppliers. We have four corner stones for increasing our revenues. We have grown from around Rs 150-320 levels in the past two years.
We have been growing at about 100 percent a year for the last five years. We are quite positive as the technology fits in and integrates with all the other people, we hope to continue with the momentum.
Reema: What has been the problem for Archies? For last so many years, there has been no growth in your revenues. If we look at your bottomline, last year you had a profit of Rs 4 crore but few years ago your profit was in excess of Rs 10 crore, which means its halved in the last few years. Any plans that the company has in the e-commerce segment?
Moolchandani: The market has been changing rapidly in the past four-five years as we have seen before that. The company has seen quite a bit of change. We are doing a lot in terms of its expansion - to get its growth on track. Even though a late entrant in e-commerce, which I would say from the last one year when the company got aggressive into this space, is already consistently showing growth of about 200 percent. Therefore, we see it as a very important category or market space for us in the coming years.
Archies is taking further more initiative to expand its horizon into the stationary segment, notebooks and looking at how humongous this market is within India and looking at the kind of percentage the organised market takes place. Archies has already taking an entrance in it and growing within this space as well. Archies is also into perfumes and deodorants business which itself has a huge market space and we are looking forward to go within that rapidly.
The market has changed over the years, but looking at these exact points the future from this financial year is very positive. The market will see Archies coming back to its own charm, which we think was before. It's definitely still connected to the youth and all the efforts and hard work taken is in place.
Mangalam: The greeting card segment - you have 123greetings.com, any plans to monetise that? We understand that the company is not generating enough revenue. How do you plan to monetise that and if not monetise that, are there any plans to offload that?
Kajaria: The model is that we look at media business dependent on advertising for our revenues. We do generate advertising from people who are looking to sell their products online. It is a good business, we are very happy with it. It is not growing as much as the stores business primarily because of competition from so many apps and so many other forms of communication, but the intent to expand on to a wider horizon what we call the human expression place - we have added 123invitations.com - which is similar to greeting card except that it is for invites.
Mangalam: Any plans to move into mobile space considering you are getting competition from apps?
Kajaria: We have added our mobile side, which I would request you and your users to start using. It is entire 30,000 cards that are available on the app. The app business is actually moving much faster than the desktop business, so we are very glad we have entered it. That is where we think the future is. The app is also supportive. We do make revenues from our greeting cards business as well.
Related Tags:Greeting card companies, Infrasoft Technologies, Archies, profit after tax, Raghav Moolchandani