Jul 12, 2012, 08.23 AM | Source: CNBC-TV18
CNBC-TV18's Anuradha SenGupta caught up with the WPP boss Martin Sorrell to find out the ad firm's latest acquisition and a whole host of other topics.
Below is an edited transcript of Martin Sorrell's exclusive chat on CNBC-TV18. Also watch the attached videos.
SenGupta: How much bigger does the new acquisition make WPP after it goes through?
Sorrell: It is about USD 230 million to revenue but it is not so much smooth or perfectly formed as they say. It adds about 1-2% to our digital revenue. So, we will now be up to about 31% of our revenue. Last year, we were about USD 16 billion of revenue. This year people are expecting about USD 17 billion (in revenue). So, it will add to USD 230 million this year. That is their forecast. They are the leading independent digital agency.
SenGupta: You have wanted this for a while now, right?
Sorrell: Yes, we have been persistent.
SenGupta: So how soon does AKQA get into India given your focus on BRICs and countries like India?
Sorrell: They (AKQA) have that plate full at the moment because there is China, Brazil — two of the BRICs that they are focused on at the moment. I am sure Russia and India will come quickly. As soon as they make up (their mind), we will help them to get into these markets structurally and technologically. As you know, we have upto 7,000-8,000 people in India. A lot of exciting things are happening. We were just looking at the figures prepping myself for you. We will hit USD 500 million of revenues this year.
SenGupta: That was the target in any case, right?
Sorrell: That is what we said we like to do. It wasn’t a target. It was a wish and I think we are about USD 485 in the Q1 or F1. And despite some of the uncertainties we are seeing in India, because as you and I were talking about before, life has changed, views have changed, but our business remains strong in India.
SenGupta: In fact, you have preempted me. You have heard about S&P’s downgrade for India couple of months ago. The S&P’s calling India the first fallen angel.
Sorrell: If India is a fallen angel, I would like to be a fallen angel.
SenGupta: Are you still as bullish on India as you have always been, given that first quarter gross domestic product (GDP) came in a 5.3% and the rupee is at the lowest against the dollar, in relative terms?
Sorrell: With all due respect to the media, they have to earn a living and fill time slots and spaces with speculation. I mean it is not like saying China has a hard landing. It is not a hard landing in our view. You could argue it is a soft landing or no landing. So, in each of these BRIC countries, if Russia is growing up 4-5%, we are growing at 10%. India is growing at 5%, we are growing at 10%. If China is growing at 7-8%, we are growing at 14-15%. If Brazil growing at 4-5%, we are growing actually more than 10%.
SenGupta: Do you continue to remain bullish and confident of all the aggressive bets you have made on these countries?
Sorrell: I don’t think there are aggressive bets. I think they are well educated bets because it is higher risk, higher reward. Clearly, if an economy is growing at 5-6-7-8% or more, it is riskier than if it is growing flat lining or even growing negative because the chance of rebound is much easier. Obviously the bigger you get, in India you have had many years of bigger compound growth rate. The bigger you get, the tougher you get.
You see that with companies and countries are no different. I think one of the things that does surprise me is the speed of the change in India. I was there only a few months ago and I would say people were relatively optimistic.
SenGupta: What is your agency is telling you? They are telling you that you will stay on course to make USD 500 million out of India this year?
Sorrell: We are consumption driven. We are investment driven. We have benefited by all those people rising up in India from poverty and becoming economically self sufficient. The growth of the middle-class and this applies not just to India but also to China and Russia and Brazil. We have benefited from the growth of the middle-class and the lower middle class and that has benefited our business and benefitted our consumption.
If you look at China, the twelfth five year plan is about consumption rather than an investment, it is about healthcare safety net, social security safety net because that is the reason people save, they save for their parents old age and their old age and then finally some outsources business. So you look at that twelfth five year plan as being a mandate or manifesto for businesses such as ours. So I remain very bullish. If we cannot get the growth in Western Europe or indeed in the United States, we have to get the growth in countries such as India. It is still I think the fastest growing democracy in the world.
SenGupta: So the fact that it has slowed down is not a concern for Martin Sorrell?
Sorrell: No. Would I have a faster growth? Of course I would! This is about a marathon and I still believe that China and India have been on the wrong side of history a couple of hundred years. I don’t know how long being on the right side of it history will lost whether it will be 200 years or shorter period time but I would settle for 50-100 years.