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Our business model is different from the existing models: VB Gadgil
By M4G Bureau - July 14, 2015
Vivek Bhaskar Gadgil, Chief Executive & Managing Director, L&T Metro Rail (Hyderabad) Ltd, talks about the Metro's unique business model and innovative ways to engage advertising brands in conversation with Rajiv Raghunath. Gadgil has over 40 years of rich & varied experience in the construction & related fields. He has held various senior leadership positions in the L&T Construction Division including being at the helm of affairs of L&T's International Construction Business for over a decade. He has also successfully led L&T's electrical business (power transmission & distribution) in India and abroad. Edited excerpts of the interview:
L&T Metro Hyderabad has directed sharp focus on transit-oriented development (TOD). You have just launched your TOD brand 'Hyderabad Next'. How different is your TOD plan vis-Ã -vis TOD initiatives taken by other Metro corporations in the country?
'Hyderabad Next', the Transit Oriented Development of Hyderabad Metro Rail project is unique in many ways. It adds significant value to the only true'Transit Plus' Metro rail project in the country, comparing with global benchmarks like Hong Kong Metro on this count.
Hyderabad Next offers the largest scale of TOD (18.5 million sq. ft) amongst any Indian Metro rail project. With developments panning over 15 locations adjoining the Metro rail stations, it offers state-of-the-art facilities across a diverse mix of asset classes including office, retail, hospitality, healthcare and possibly residential.
These vibrant developments will be seamlessly integrated with the Metro rail stations through pedestrian skywalks. Over and above this large development of 18.5 million sq. ft, convenience retail of 0.35 million sq. ft within the Metro rail stations will enhance the comfort and convenience of the users.
The seamless integration with Metro rail, coupled with a set of TOD specific development regulations will catalyse densification of development around the Metro rail stations and enable sustainable growth of Hyderabad, apart from rejuvenating some of the business districts, changing the lifestyle of the Hyderabadis and making Hyderabad a true global city.
Have you looked at any international Metro development plans while firming up your TOD plan?
The principles of development of major international'Transit Plus' Metro rail projects like Hong Kong, Bangkok, Tokyo, New York, London, etc., have been evaluated. While incorporating the best practices, these broad principles have been customised to the Indian context, to derive the maximum benefit.
What are your expectations from OOH advertising in terms of your non-traffic revenues?
Our business model for advertisement business is different from the existing models. We have divided our advertising business into two parts:
(i) Standalone advertising business (OOH) which will include advertisement spaces on piers (pillars), viaduct parapet wall, portals and (ii) outside & inside spaces on stations. This business will be done through empaneled partners (as we call them).
The entire inventory will be installed at our cost and will be maintained by us. The empaneled partners will pay us the empaneled fees and will rent the spaces from us as per our fixed prices and payment policy. The entire business will happen through an online portal which will be accessible only to the empaneled partners. These partners will be able to then sell it in the market as per their prices and relationship.
We have currently selected three partners and they will be evaluated on their performance on a yearly basis. Based on their fulfilling the KPIs their empanelment will be renewed. The business through standalone (OOH) is expected to be about Rs 50 crore per annum once the entire 72 km is made operational.
(ii) The other advertisement business is RIGHTS business which includes station naming rights, Corridor naming rights, broadcasting rights, pouring rights, train inside and wrapping rights and smart card advertisements. The rights business will be handled directly by the internal advertising business team. We have already concluded many business MOUs and have many firsts to our credit both on national and international level, that too before commissioning of the Metro. Rights advertisement business is expected to fetch another Rs 50 crore per annum upon full commissioning.
Are you satisfied with the response from OOH firms to take up ad rights available on your Metro network?
Many of the established national organisations in standalone (OOH) space selling didn't want to experiment. However we did get the established OOH partners on board.
As your network expands, would you give the ad rights to a single entity, or would you prefer giving the rights to multiple OOH firms?
It is too early to conclude on it. As mentioned earlier, we will continuously evaluate the partners' performance and will prefer to have more than one partner.
The OOH industry has been asking for longer tenured contracts from various authorities. What is the tenure of ad rights being given to OOH players?
Our model is more based on the sales and marketing relationship of our partners with end clients. We will continue with them as long as they perform on KPIs.
What kind of OOH media can come up in this space? Is there scope for digital OOH media in your Metro network and infrastructure?
It will be largely backlit. However we may have some scrollers and digital media inside stations.
Rapid growth of transit infrastructure in major cities in India has paved the way for a greater supply of OOH assets. In your view, why would advertising brands want a sizeable presence on OOH media available on L&T Metro Hyderabad network?
Transit media is growing and will grow the fastest in the future as it provides the maximum eyeballs on a regular and sustainable basis. The human mind registers what it sees at the same place again and again.