Leading TV, HA, and AC makers in India analyzed, by financials, including income statements, balance sheets, and financial ratios for 2018-19.
India’s electronics production is estimated at Rs 4.58 lakh crore in 2018-19, which despite accelerated growth in recent years, still represents only 3.3 percent share of the Rs 136-lakh crore global market. It is growing at a CAGR of about 25 percent in the last four years, compared to a rate of 5.5 percent in 2014-15.
Favorable demographics are likely to propel the Indian consumption story. This, supported by a stable and reform-focused policy framework, is expected to drive business and private investments. The growth in India’s consumer market would primarily be driven by a favorable population composition and increasing disposable income. The rapidly expanding middle class in the urban and semi-urban areas, and the increasing aspiration-driven demand from rural India, added to the taxation reforms like Goods and Services Tax (GST), are seeing the base for increased market penetration of home appliances. With relatively low home penetrations across appliances in India, and a young population with growing disposable incomes and aspiration-driven purchase behaviors, the industry is positioned for the next phase of exponential growth.
Consumers are becoming more tech savvy and manufacturers have to be ready to offer user-friendly interfaces with new technological developments. This requires commitment to research and development (R&D) and also a constant interaction with consumers and the market. E-commerce channels are increasing their reach and are rapidly growing. The supply chain is optimizing and there is a trend of consolidation within the traditional channel. There is an increased focus on the service delivery mechanism and using it as a differentiator in the consumer’s mind.
The National Policy on Electronics 2019, prepared after extensive stakeholder consultation, with a thrust on exports by encouraging and driving capabilities in the country for developing core components, including chipsets, and creating an enabling environment for the industry to compete globally, envisages to position India as a global hub for Electronics System Design and Manufacturing (ESDM) and achieve a turnover of Rs 26 lakh crore by 2025.
Schemes such as Modified Special Incentive Package Scheme (M-SIPS) to provide financial incentives across the ESDM value chain to compensate for cost disability in manufacturing; electronics manufacturing clusters (EMCs) for providing world-class infrastructure and logistics; mandating safety standards; rationalization of tariff structure, and providing preference to domestically manufactured electronic products in government procurement are under implementation.
The government attaches high priority to electronics hardware manufacturing, and it is one of the important pillars of both Make in India and Digital India programs. Besides the economic imperative, focus on electronics hardware manufacturing up to the integrated circuit or chip level is required due to the growing security concerns. India is a signatory to the Information Technology Agreement (ITA-1) of WTO and Free Trade Agreements (FTAs) with various countries/trading blocs, such as ASEAN, Korea, and Japan. However, the electronics hardware-manufacturing sector faces lack of level playing field vis-à-vis competing nations on account of several disabilities, which render domestic electronics hardware manufacturing uncompetitive. These, inter-alia, include lack of adequate infrastructure, domestic supply chain and logistics; high cost of finance; inadequate availability of quality power; inadequate components-manufacturing base; limited design capabilities and focus on R&D by the industry; and inadequacies in skill development.
The TV, HA, and AC industry
The Indian CE, HA, and ACs market has been growing and still has headroom for further growth on account of surging rural consumption, reducing replacement cycles, increasing penetration of retail, and a wide choice of brands and products at various price points. It is a highly competitive market with different brands including prominent players and emergence of numerous new entrants during the last decade.
In 2018-19, the combined revenue of the leading 15 companies is estimated at Rs 1.69 lakh crore, an 11 percent increase over FY18. Detailed analysis is presented of each company. The financial performance has been compiled from either their respective annual reports or balance sheets submitted to the ministry of commerce.Exchange conversions have been calculated on the exchange rate prevalent on the last day of the accounting year; for instance, for conversion of the balance sheet in Korean won to INR, for the year January–December 2018, the exchange rate on December 31, 2018 has been considered.
Performance has been rated on income statement, profit and loss statement, and balance sheet from the company’s annual report. In case of multi-product companies, for instance air conditioners, to avoid error, revenue from room and split units has not been isolated from that of central air conditioning systems. The company’s total revenue has been taken into consideration for that is the essence of the company.
LG, Panasonic, and Sony, which dominated the Indian electronics market in FY18 saw a decline in FY19, on the face of increasing competition mainly from Chinese and online focused brands in CE and HA.
Videocon Industries, once one of the leading CE, HA, and AC companies, reported a sharp fall in its consolidated net worth in FY19, which had turned negative in March 2018 further fell by Rs 7326 crore to –Rs 10, 944.6 crore in FY19 from –Rs 3618.4 crore in FY18. The company’s consolidated losses widened to Rs 7474 crore during FY19 compared to a loss of Rs 6554 crore in FY18. The company has been posting continuous losses for the past four fiscal years and with this, its aggregate losses amounts to Rs 19,074 crore.
Transforming Indian manufacturing ecosystem
Domestic manufacturing and assembly activities in ACs add up to 40 percent of the total market size. As the need for localization grows stronger, players will make efforts to move from assembly to full-fledged manufacturing.
Domestic manufacturing and assembly activities in refrigerators add up to 55 percent of the total market size. Main door panel (pre-coated sheet) has aesthetic appeal and is currently imported from Korea and China. Compressors, MDI-foaming chemical, evaporator, condenser, and fan motor are imported as well as domestically sourced.
In televisions, open cell panels and chips are predominantly imported from Thailand, Vietnam, Taiwan, and China, and only last-mile assembly is done in India. The government has removed import duties on open cell panels used in the production of television sets, a move that could lower the input costs for TV makers which may now help boost domestic manufacturing and assembly of TV units in India. Custom duty on goods used in the manufacturing of TV panels is also scrapped to give boost to local manufacturing.
The washing machines industry has witnessed strong local manufacturing with a low dependence on imports. Since the electronic content in semi-automatic washing machines is low, the local value addition taking place in this segment is high. Domestic manufacturing and assembly activities in washing machines add up to 75 percent of the total market size. Fully-automatic washing machines require higher electronics content and value addition is highly restricted to local assembly with low local component sourcing. Some of the high-end fully-automatic front-load machines are imported as finished goods from countries like China and Korea. Motor, PCB/control, vanual timers, and mechanical assembly (gear box) are majorly imported.
The government’s undiluted focus on manufacturing through Make in India policies is fast catching the imagination of global and domestic companies. These positive developments leave high hopes for India to dominate electronics manufacturing.
Samsung India Electronics saw sales of Rs 69,122.63 crore (KRW 11,045,500 million) in 2018, as against Rs 62,248.93 crore (KRW 10,393,877 million). Profit for the period saw a decline from Rs 3919.25 crore (KRW 654,408 million) to Rs 1937.64 crore (KRW 309,632 million) in 2018.
During the year under review, Samsung India launched Wind-Free room air conditioners and system air conditioners. The air conditioners integrated Samsung’s exclusive Wind-Free Cooling technology into its design. The range was also displayed at ACREX 2018 at BIEC, Bengaluru. The company announced its 2018 line-up of televisions, including new models in the flagship QLED, mid-range UHD, and the Make for India Concert series. With these products, the UHD line-up increased from 10 models to 16 models. As a part of Make for India innovations, the company unveiled the Concert series, in two distinct variations, Smart Concert and Joy Concert.
Top-load washing machines with the innovative and Make for India ActivWash+ concept were introduced, powered by an energy-efficient digital inverter motor. There are 10 models in this inverter series, with a capacity range of 6.5 kg, 7 kg, 7.5 kg, and 16 kg. The company also launched air purifier AX5500 that rapidly purifies living spaces with aerodynamic air-flow technology. The company launched a microwave range Masala, Tadka, and Sun-dry for 2018 with an innovation that was made specifically for India under Make for India initiative.
In 2018, SIEL forayed into LED cinema screens with Onyx Cinema LED with PVR Cinemas. The company also introduced LED for Home. Also called as Active LED, the LED designed exclusively for home aims to revolutionize the in-home entertainment space. The series includes 110-inch FHD, 130-inch FHD, 220-inch UHD, and 260-inch UHD.
SIEL signed an MoU with BITS Pilani to facilitate advanced learning for its employees at Samsung R&D Institute India-Noida (SRI-Noida). The program is fully sponsored by Samsung and is intended to offer employees an opportunity to synergize theory with practice on a sustained basis. Through such strategic partnerships, SIEL aims to deliver training and skill development to its employees, and thereby accelerate the Make for India initiative.
Samsung R&D Institute India-Bangalore (SRI-B) was conferred the National Intellectual Property Award 2018 by the Government of India in the category of top foreign public limited company/private limited company for patents and commercialization. In India, Samsung has five R&D centers – two in Bangalore and one each in Noida, Delhi, and Pune. The Indian R&D centers contribute substantially to global product development as well as to India-specific products and services under the company’s Make for India initiative.
Samsung India’s digital campaign, showcasing its new digital-inverter refrigerators through a heart-warming story of the relationship between a mother and a daughter, went viral with over 50 million views on YouTube in the first 20 days of its launch. The campaign was conceptualized by Cheil. Another TV and digital campaign, Samsung Service – We’ll Take Care of You, Wherever You Are – showcasing its initiative of taking customer service to the doorsteps of consumers in India’s hinterlands, won the YouTube Ads Leaderboard Award for being the most watched video on YouTube globally. Samsung also took on a social experiment through its campaign Moms Love Non Stop.
The Indian conglomerate of Samsung Electronics was ranked India’s Most Trusted Brand by brand intelligence firm TRA Research. This was the second year in a row that Samsung became India’s Most Trusted Brand. The expansion of Noida plant reaffirms Samsung’s commitment to Make in India. It has doubled the production capacity of both mobile phones and refrigerators.
LG Electronics India Limited (LGEIL) saw sales of Rs 15,459.17 crore (KRW 2,470,306 million) in 2018, as against Rs 15,832.87 crore (KRW 2,643,659 million) in 2017, a decline of 2.36 percent. The profit for the year saw a decline of 0.74 percent from Rs 1395.08 crore (KRW 232,941 million) in 2017 to Rs 1512.33 crore (KRW 241,664 million) in 2018.
LGEIL launched a range of ACs for summer 2018. The lineup consisted of 59 inverter AC split models, which are 100-percent ISEER-compliant, along with the launch of the first window inverter air conditioner. LG complied with the government’s mandated ISEER ratings (Indian seasonal energy-efficiency ratio) that became compulsory from January 2018. With the launch of this range, the company aimed at strengthening its market leadership in the inverter AC segment.
The company took a step ahead to implement AI function across its range of smart televisions, with the launch of the range Artificial Intelligence (AI) ThinQ. Designed to bring a new level of convenience, enhanced connectivity, and a more immersive TV-viewing experience, the new range includes various models under its OLED, super UHD, UHD, and smart TV category. These products are developed and manufactured in India based on consumer insights.
In yet another feat by LG, the company secured 25th position in the 2018 Harris Poll Reputation Quotient Rankings, proving its integrity and positioning as one of the well-reputed global companies. LG also stood at the 4th position in the products and services category under the Top Companies by Corporate Reputation Dimension banner.
During the year under review, LGEIL launched an emotional yet inspirational campaign themed Celebrating The New, revolving around how new innovations and new lifestyle aspirations make dreams come true, and more importantly how dreaming up was shaping a new India in 2018. The launch of the video coincided with LG’s 21st anniversary celebrations in India.
LG India affected a senior-level reshuffle. The company veteran, Rajeev Jain, who was heading modern retail, brand shops, and sell out which involve drawing up strategies to ensure last-mile sale to consumers, was made director for new market development. Jain is now responsible for the new categories LG is entering into like internet-connected fans, air purifiers, and built-in kitchen. Rahul Tayal, who was head of corporate marketing and online sales as a director, was given additional responsibility of modern retail and retail marketing. Vinod Kumar, who was earlier heading sales administration, was made head of sell-out and brand shops. Sales director, Sanjeev Agarwal, was given additional responsibility of managing sales administration. The company also made some changes of product business heads. Anuj Ayodhyawasi, who was the business head for refrigerators, now looks after retail marketing, reporting to Tayal. The refrigerator business is now headed by Vijay Babu, earlier business head of air conditioners. Kulbhushan Bhardwaj, who worked under Babu, was elevated as the business head for air conditioners.
LG India also started open-cell manufacturing of televisions at its Pune facility, with two models and plans to scale it up while deciding to pass on the benefits derived from lower taxation from such manufacturing to consumers, a senior company official said. The open-cell manufacturing of televisions started from May 2018 with 32-inch and 43-inch sizes. LG already manufactures its entire television range in India.
Voltas has reported a consolidated total income of Rs 7310 crore in FY19, with income from operations of Rs 7085 crore and profit after tax of Rs 514 crore. The year 2018-19 was very challenging with the AC industry recording a de-growth of 3 percent.
Despite a challenging and competitive environment, Voltas sold over 1.2 million units. Air coolers faced a more difficult year given their seasonal nature. Nonetheless, based on a recent independent retail audit, Voltas sold around 0.13 million fresh air coolers. The company is focused on expanding its reach across cities by appointing distributors, dealers, and opening brand shops. The brand shops house the latest consumer durable products including ACs, air coolers, and commercial refrigeration products from Voltas as well as white goods such as refrigerators, washing machines, microwaves/ovens, and dishwashers from Voltas Beko.
Voltas has also acquired land admeasuring 65 acres approximately near Tirupati for manufacture and assembly of air conditioners and other related cooling products. Continuing its thrust on R&D, Voltas aims to create technologically advanced products, which are expected to start rolling out from the later half of 2020. The proposed factory will cater primarily to the southern and western markets. The company plans to invest over Rs 500 crore in phases, while simultaneously creating local employment opportunities in the region.
Voltbek Home Appliances Private Limited. To leverage strong brand equity Voltas entered the consumer durables market through a 50:50 JVC with Ardutch B.V. The JVC – Voltbek Home Appliances Private Limited (Voltbek) has started selling white goods products under the brand name Voltas Beko. The upcoming manufacturing facility is located in Sanand, Gujarat and is expected to start production by end of 2019. The company also launched exclusive brand outlets (EBOs) across Tier-II and Tier-III cities, displaying the entire range of Voltas and VoltasBeko products.
Domestic Projects Group (DPG). With its strategic focus on procuring and executing government-backed projects, the Domestic Projects business continued its steady performance during 2018-19. The company set up a manufacturing plant for higher-tonnage cooling products, such as VRF products and chillers in Waghodia, Gujarat.
International Operations Business Group (IOBG). During 2018-19, the division was recognized with a number of external awards, including the District Cooling Company of the Year, the Facilities Management Company of the Year, and MEP Contractor of the Year. The Expo 2020 in UAE has given rise to certain project opportunities, and the company has also extended its reach to a new geography, having secured an order in Bahrain. It also appears that the hitherto deeper concerns on Qatar owing to political issues are beginning to abate.
Outlook and opportunities. Going forward, the demand for air conditioners will be driven by first time users, replacement/second buy users, and high-end buyers, who look for exclusive additional features. At the same time, owing to rising temperatures during the summer months, increasing disposable incomes, and aspirational levels, a stronger rural demand is anticipated. Moreover, environment- friendly and more efficient products with greener gases will push demand. Voltas is well poised to take advantage of these trends and expand its reach across the country.
Sony India Pvt. Limited saw its revenue drop from Rs 7034.63 crore in 2017-18 to Rs 6466.18 crore in 2018-19. Profit after tax also declined from Rs 106.97 crore to Rs 100.83 in the previous year.
Sunil Nayyar was appointed as managing director on April 1, 2018 as Kenichiro Hibi had demitted office as managing director with effect from April 1, 2018, and resigned as a director with effect from April 5, 2019.
The company increased the sales of OLED TV and large-screen 4K HDR TV, together with key differentiated technology; these TVs were well accepted in the market. TV panel sales were good for sizes higher than 32-inch and demand for 4K panels were robust. The category of 32-inch TVs had seen sharp reduction in prices, mostly in the online space while the market remained flat in the traditional distribution channel. During year under review, Sony India had to respond to the market conditions by reducing price for 32-inch Bravia TV by nearly 10 percent in April 2019. Sony India focuses on the premium 4K television sets and screen sizes, 55-inch to 75-inch.
The company’s audio business increased with the introduction of new models of one-box music system, sound bars, and headphones, including industry-leading noise-cancelling headphones, successfully cultivating the market. The company in digital-imaging increased the sales and share of full-frame cameras and lenses, which are well accepted by photographers and videographers.
The company continued to expand the channel-finance program by introducing new financiers and sub-dealers network. Special finance offers and cashbacks were also extended during the festival season. Network expansion in northern and eastern markets helped to meet the aspirations of the customers.
The company continued to lend focus and attention to its after-sales-service operations for the ever-increasing customer base – Sony India’s motivation, Listen and Act on the Voice of the Customer has been the guiding principle to align our service operations to meet the legitimate expectations of its end users. The company’s Customer Centric Division (CCD) is a single-window contact for customer-grievance redressal apart from rendering after-sales service, product demonstration, and pre-purchase information to its esteemed customers. The company’s mission is to provide quick and reliable solutions to its customers with reasonable price, and offers value-add to efforts of the Sales and Marketing division.
Sony India is eyeing sales growth of 10–15 percent in FY2019-20. The TV business will continue to develop products oriented toward the highest levels of image quality, sound quality, design, and ease of use as it achieves an average inch size that outpaces industry trends and drives the premium 4K market. The video and sound business will enhance product capabilities and increase sales in growth areas, such as headphones and home speakers, and create new musical experiences with the release of the 360-reality audio format. The company expects contribution from video and sound segments to rise.
The company is also planning to set up an R&D center to tap into the country’s sizeable pool of talent, with plans for multiple sites. The first center in the country will be opened in Bangalore by 2020, becoming one of the seven Sony’s global research centers. The company looks to expand the diversity of its global R&D operations and this move will strengthen its research and development capabilities in India as it seeks to promote research activities and foster the growth of a diverse pool of engineering talent. Sony India’s expansion of sales network will be based on strategic necessity and natural evolution of brand stores, power retailers, and distributors to increase its footprint in the country.
Whirlpool of India Limited had a strong revenue growth driven by both internal and external factors. Strong macroeconomic indicators drove the overall durables industry growth. In addition, the company’s continuous focus on product leadership, channel expansion, and sales execution helped to grow ahead of the industry. The company’s performance has been very encouraging with 11.7 percent increase in revenue from operations (net of excise duty) and 15.8 percent increase in profit-before-tax versus the previous year.
Demand for consumer durables in India has been growing steadily – driven majorly by rising incomes, increasing urbanization, a growing middle class, changing lifestyles, and easy financing schemes. The year has also been witnessing growth in e-commerce as a key channel for buyers. The company has been focused on ensuring that investments are being made strategically to secure its position as one of the strong players on this new channel. In order to meet future demand in the white goods category, companies have also been focusing on expanding production and distribution facilities in India.
Along with focusing on strengthening the company’s foothold in the mass and premium segments, Whirlpool ensured a notable presence in the premium segments with the launch of advanced global products. In order to expand the portfolio in the premium refrigerators segment, the W-Series global range was launched in India. Direct-cool refrigerators segment witnessed the launch of the IceMagic PRO Series wherein the 6th Sense Intellifrost technology was extended beyond the Vitamagic range to the Icemagic range. Another key highlight was the introduction of the Plasma inverter technology with a class-leading assurance of 25 years of compressor reliability.
The company also focused on strengthening the foothold in the front-load washing machines category by increasing the brand footprint with the successful Made in Europe range of SupremeCare and FreshCare washing machines. The range of Bloomwash Pro Series ushered in the premium range in the top-load washing machines category. The series bagged the 2019 iFDesign Award. The semi-automatic washing machines continued to show strong gains with distribution expansion and driving large capacities with the 2019 iFDesign Award winning AceXL range.
The company also launched its first smart air conditioner. The year 2018 marked the launch of the all-new range of Purasense RO water purifiers. The Jet C Range of convection microwave ovens is a modern blend of European design and intuitive 6th Sense technology making them smarter than air fryers. With the focus on making a strong presence in the built-in category, the company introduced a range of intelligent hoods with silent operation. The range consists of 43 models across three categories – Senso Fresh, Pro Fresh, and Acti Fresh. The company also introduced a range of Intellicook Brass Burner Hobs powered by 6th Sense technology.
In 2018, the company continued to expand its presence in the new adjacent product categories by launching products that are specially crafted to deliver immaculate results for demanding professionals from its European portfolio including dishwashers, ovens, and ice makers in the commercial appliances segment.
Overall, the company’s export business was under pressure. The company continues to focus on the SAARC markets and is confident that with the implementation of its initiatives and structural changes in the coming year, the export business will be on a growth trajectory. The company has already started seeing impressive results in Nepal, where last year the business grew by 40 percent.
In the year under review, Whirlpool continues to make significant progress on executing its service strategy. Whirlpool launched Consumer Service Promise to establish consumer service as a differentiator. It means calling back the consumer within 2 hours of call registration and visiting consumer within 24/48 hours of call registration in 3500-plus cities. The company continues to focus on the following key deliverables:
- Position service as a competitive advantage by introducing Consumer Service Promise.
- Strengthen systems and processes, field service network to deliver this service promise.
- Continue to grow accessibility and visibility of Whirlpool genuine spare parts in the after-sales market.
The company continues to focus on training and development and engagement of service partners and service technicians. The service business continues to grow through both service-partner network and spare-parts distribution channel.
Whirlpool of India Limited
“2018 was an eventful year by any standard. What started as a relatively stable macro environment in the first half saw several ups and downs in the second half. Transport strikes, GST changes, very high currency and commodity volatility, coupled with soft consumer confidence and off takes made for a challenging year. We have delivered industry-beating results again this year, gaining share and delivering our profit targets for the year.
This was possible because of the employees’ efforts, executing the company’s strategy to the tee, a refreshed brand positioning, new product launches including our new premium range of refrigerators, the New Bloomwash Pro, expansions in the semi-automatic portfolio, and several new winning finishes in refrigeration; strong execution of our product/price plans in trade, making strong gains in distribution and winning with several top retailers in organized trade and e-commerce.
The company took consumer service to a new level with the launch of its new service promise to consumers. The backend went all out to support our growth, with all plants and suppliers stretching beyond plan on volumes, while also executing capacity enhancement projects and new product launches; the supply chain setting new records while executing structural changes in our logistics footprint and of course the support functions of finance, legal, and HR ably supporting the field and plants in this aggressive growth trajectory.
We made structural changes in our focused growth categories with the strategic investment in Elica PB for cooking, significant localization of our air conditioning portfolio, and the launch of the new Purafresh range of water purifiers. We are entering 2019-20 on a very strong note, with a strong product plan, enhanced capacity across plants, and most importantly significantly improved execution capabilities.”
Blue Star Limited clocked revenue from operations of Rs 5234.84 crore for the financial year ended March 31, 2019, as compared to Rs 4648.13 crore for the financial year ended March 31, 2018, registering a growth of 13 percent. The company registered net profit of Rs 190.06 crore during the year under review as compared to Rs 143.96 crore in the previous year, registering a growth of 32 percent.
The performance of the room air conditioners (RAC) business was affected by the unseasonal rains and soft summer conditions earlier during the year. Further, with the escalation in interest rates and the NBFC crisis, the cost of consumer financing increased. The company persevered in these adverse market conditions and expanded the footprint in the northern region, aligned with lower market operating prices. The water purifiers business continued to perform well during the year and the revenue during this year in this segment almost doubled over revenue in the previous year. The company has recently started receiving inflow of service revenue in this business category.
Intellectual capital. During the year, a complete range of 3- and 5-star RACs, with specific focus on the cost competitive inverter model series, was launched. The company developed its own designs for indoor units and started manufacturing them, thereby successfully venturing into vertical integration and reducing dependency on vendors. Further, inverter units with the company’s own drive were developed and are currently undergoing field trials. The company’s performance laboratories for air-conditioning and refrigeration products received accreditation from NABL.
Manufactured capital. The Dadra plant performed extremely well during the year under review, resulting in a record billing for the plant. The company also upgraded key equipment at Dadra. The two plants in Himachal Pradesh, which continue to cater efficiently to the fast-growing AC and refrigeration products, had an impressive performance. With the in-house manufacturing of inverter machines and indoor units as well as other products and components, the company continued to unlock enhanced value through which it had embarked upon in FY18. The Wada plant rolled out new products, such as Platinum Series water coolers, configured air-cooled flooded series chillers, configured oil-free turbocor chillers, and inverter air-cooled scroll chillers with R410, to name a few. The Ahmedabad plant continued to invest in initiatives aimed at enhancing operational efficiency. Intelligent application of LEAN/MOST practices led to efficiencies in production, such as improvement in cycle time of split AC outdoor units on the assembly line at the company’s HP plant, enhancement in foaming process of deep freezers at the Ahmedabad plant, and ducted split ACs at the Dadra plant.
Expanding global presence. The company’s international business continued to focus on growth in Middle East, Africa, SAARC, and ASEAN countries. The company’s first international state-of-the-art exclusive showroom in Dubai was inaugurated in April 2019. This showroom displays the complete range of the company’s latest energy-efficient products to serve the UAE market. The international projects, executed through JVs at Qatar and Malaysia, continued to do well. On a consolidated basis, revenue of this segment grew by 16 percent to Rs 2748.11 crore from Rs 2361.07 crore. Segment results registered an increase of 24 percent from Rs 121.96 crore in the previous year to Rs 150.85 crore in the year under review. The segment margins improved from 5.2 percent to 5.5 percent.
Brand equity. The company launched its advertising campaign for Summer 2018 for its RACs. The new range of inverter ACs launched in FY19 took Blue Star’s differentiated value proposition of Nobody Cools Better for the residential audience to the next level, by offering 30 percent more cooling when you need it. A 360-degree mass-media campaign was launched for the summer, which included TV, print, outdoor, and digital. The company ran a campaign for its new range of air coolers. The value proposition for this product category was summer will now feel like winter. The company also launched a campaign for its range of innovative air purifiers with SenseAir technology. Significant investments were made in brand building of water purifiers. The company aired its TVC showcasing warrior babies on the theme of get armed with immunity.
Dealer focus. The Channel Management Center added around 710 channel partners and service associates. The company also expanded its retail distribution reach from RACs, and added about 1047 retailers and distributors across the country, thereby increasing its presence in Tier-II and Tier-III markets by 10 percent over last year. During FY19, the online platform was further strengthened and extended to bring on-board the Water Purifiers Service Associate channel appointments as well. Star Connect launched last year to facilitate the channel partners with the ease of doing business garnered wide acceptance and appreciation. A mobility app was also developed and rolled out.
Vir S Advani
Vice Chairman and MD,
Blue Star Limited
“Blue Star completed 75 years in business on September 27, 2018, and it is heartening that we ended FY19 on an impressive note with growth in terms of new order inflow, revenue, and profitability.
We reported a total income of Rs 5259.53 crore, representing a growth of 12.7 percent over the previous year on a like-to-like basis, whilst operating profit grew by 30.6 percent to Rs 248.46 crore. Net profit increased by 32 percent to Rs 190.06 crore.
In the room air conditioners business, several innovative products were introduced, along with a strategic expansion of our distribution reach in the north. The notable achievement of the year was us mastering the inverter technology and the indigenization of plastic components in order to substantially reduce our imports.
In the water purifiers business, we introduced products at various price points and expanded our dealer network. With nearly 70,000 installations across the country, we are now one of the key players in this product category.
On the international business front, we set up a new subsidiary under Blue Star International FZCO to handle the company’s operations in the UAE market. Blue Star also inaugurated a world-class showroom and experience center in Dubai, establishing a one-stop-shop for our entire range of cooling and purification products.
Our manufacturing set-up is robust and modern, and continues to secure several recognitions. We are driving higher value-addition through backward integration, procurement, and supply chain efficiencies. We made good progress during the year in our Manufacturing Excellence program and TQM mission.
For FY20 and beyond, we remain committed to profitable growth under the framework GEAR – growth, excellence, acceleration, and relationship. We will continue to expand the core by adding products, services, and solutions that are adjacent to our current offerings.”
Panasonic India Private Limited registered a revenue of Rs 4758.62 crore in 2018-19, which dropped 10.6 percent YoY, while the net loss stood at Rs 459.58 crore against Rs 131.88 crore in 2017-18. The sale of products in FY19 dipped vis-à-vis last year, while the proceeds from sales of services increased by 22 percent as compared to last year. The company’s consumer electronics and home appliances revenue dropped by 14.6 percent to Rs 4057.48 crore in FY19.
The televisions market in India witnessed a slowdown due to volatile exchange rates and higher custom duties on open-cell TV panels, which impacted the company’s performance. The company’s appliances business, specifically refrigerators, grew by 74 percent in FY19 while the industry recorded a negative performance of 3 percent.
Panasonic India also amended its memorandum of association (MoA) to allow it enter new businesses, such as IT infrastructure management in areas like cloud, networking, and IT security.
During the year under review, Panasonic India launched two models in their top frost-free refrigerators range, developed and manufactured at its refrigerator facility in Jhajjar, Haryana. The models are offered in 336-liter and 307-liter capacity. In March 2018, the company started domestic production of refrigerators in sizes of 300-liter and 330-liter. In September 2018, the company also began producing smaller sizes such as 260-liter.
The company entered the OLED TV segment and also expanded its 4K LED TV range. The company launched 11 models of 4K LED TV. Later in 2018, Panasonic launched its 4K UHD TV range with FX800, FX730, FX650, and FX600 models. This 4K TV line up is available in 65-inch, 55-inch, 49-inch, and 43-inch.
The company expanded its washing machine portfolio with the launch of top-loading washing machines series, named Stain Master Plus, which comes in 18 different models. The range features Econavi technology that detects laundry load, water temperature, and then automatically adjusts the optimal operation for energy, water, and duration of wash. The washing machines also feature Active Foam technology that removes stains. There is also an in-built heater that can remove 99.9 percent bacteria with hot wash.
The company unveiled air conditioners under Advance and Arch series ahead of summer 2019. The models are available in 3-star and 5-star categories across 1, 1.2, 1.5, and 2-ton variants. With this launch, the company is eying 15 percent growth in air conditioner sales in FY20, driven by premium products. The company expects premium products with features like inverter technology and higher energy-efficiency to drive sales growth for the company. It is also looking at over 30 percent increase in distribution outlets for air conditioners to 12,000 in 2 years as against 9000 in FY19.
Presently the company is witnessing an equal split between appliances and electronics. However, moving forward, Panasonic India expects to see an increased push in the appliances business.
In the financial year 2018-19, Godrej Appliances registered a turnover of Rs 4004.16 crore. In the segment-wise contribution, the calculation has been derived based on the assumption that the segment-wise contribution to the total revenue is in the same ratios as FY2017-18.
During the year under review, Godrej appliances completed capital expansion of Rs 450 crore at its manufacturing centers in Mohali, Punjab, and Shirwal, Maharashtra, which now have the capacity to produce 3.75 million home appliances – 3 million refrigerators, 600,000 washing machines, and 150,000 air conditioners every year. The plants will achieve full capacity in 2020. With the focus on Internet of Things (IoT), the brand began working with external partners concerning artificial intelligence (AI). In line with the aim of gaining 10 percent market share in the air conditioners market over the next 5 years, the brand launched an AC range with the environment-friendly R290 refrigerant, along with a slew of other models.
During 2018, Godrej Appliances increased its presence in Tier-II, Tier-III, and Tier-IV cities, opening up about 100 exclusive brand outlets (EBOs) and 300 preferred brand outlets (PBOs). In an effort to drive premiumization, the brand decided to offer premium products through EBOs. These outlets display the entire range of the brand including refrigerators, washing machines, air conditioners, chest freezers, and microwave ovens. The brand focused on PBOs as well, where the retailer displays Godrej as the preferred brand. The brand gets about 70 percent of store display, enabling much higher visibility. During the year under review, the brand opened 300 such outlets and aims to reach 1000 PBOs in 3 years.
The brand plans to foray into air coolers. It has also lined up several new launches in the washing machines segment. The brand also plans to invest Rs 700 crore to increase its annual appliance production capacity by 19 lakh units by 2022, taking it up to 65 lakh units per annum. The brand will introduce newer technologies and carry out backward integration. This plan takes the tally of Godrej Appliances’ investment in capacity and technology expansion to Rs 1100 crore over a period of 6 years.
In the refrigerators category, Godrej Appliances intends to augment the production capacity by 33 percent in both premium range and mass range. The investment is also directed toward manufacturing of power-efficient chest freezers and 30 lakh units of compressors utilizing newer technology in the product and processes. Part of the outlay will be for backward integration of air conditioners at the Shirwal factory.
Besides premiumization, the brand has also laid emphasis on introducing green, energy-efficient, and technology-led products. The brand is working on a new technology to reduce energy consumption by 80 percent in air conditioners (ACs). As a part of a competition conducted by a global coalition of the Ministry of Science and Technology and Rocky Mountain Institute, the company is working on a prototype that will help slash energy usage by one-fifth in room ACs. Godrej Appliances is among eight other finalists who are working on this technology. It is the only Indian company to be shortlisted.
The brand is sensing an opportunity in rural sales as the infrastructure is developing and availability of power has increased in recent years in those pockets and is working with several micro-financing companies to tap the emerging potentials by introducing more affordable models. Besides catering to the domestic market, Godrej Appliances also exports to neighboring market, but this is around just 2 percent of the total sales.
During FY19, the transformation of Daikin Airconditioning India Pvt. Ltd. continued tremendously. The expansion of business by implementing various strategies, continued with a focused approach on sales and after-sales service during the year. The company enhanced its volume of business with strong support through localization of parts to support the bottom line. The company is adopting aggressive and competitive pricing strategies. Strong and effective advertising and sales-promotion activities ensured presence of Daikin India in every part of the nation. The productivity level too has gone up substantially.
The total revenue for the year ended March 31, 2019 stood at Rs 3678.75 crore as compared to Rs 3233.90 crore for the year ended March 31, 2018, representing an increase of 12.09 percent from the previous year. The company recorded a net profit of Rs 192 crore. The company grew at the rate of 15 percent and 22 percent in room AC (RAC) and VRV segments, respectively.
Market. The company adopted various innovative marketing strategies aimed at creating awareness about the company and its products in premium segment as well as volume zones. The company also undertook the following initiatives to penetrate the market: outdoor and billboard campaigns, print advertisements, residential colony hoardings, exhibitions, product seminars, IPL activity, Club Daigem, retail branding, customer testimonials. The company also promoted room air conditioners in the residential segment through the introduction of new products. India-made HFC32 powered room air conditioners, VRV, and chiller were specially promoted through magazines, seminars, and exhibitions extensively.
Dealer network. The company focused on strengthening its existing distribution and after-sales network during FY19. Growth of 10.59 percent was witnessed in Service Network during FY19. Exclusive Daikin stores (Daikin Solution Plazas) increased from 382 to 400. The company also developed a network of mega authorized service providers with current strength of 15 mega authorized service providers out of total 616 service providers.
Exports. The company continued to operate through a Liaison Office in Sri Lanka, which is helping the company in its goal of expanding its footprint in overseas market as well as to utilize the capacity of existing manufacturing facilities. For the purpose of increasing the business in Sri Lanka, it was proposed to convert the said Liaison Office into a full-fledged branch during the previous year 2017-18; however, the same could not be done and the company is hopeful of doing it in the current fiscal year. Additionally, the company also spread its wings of operation in Bangladesh, Bhutan, and Nepal by appointing distributors (with right to appoint local distributors), with aggregate strength of 25 dealers for RACs, ducted ACs, VRV air conditioning systems and air purifiers and their accessories, cassettes, and other related products. The company did well in this territory.
Important announcements. Daikin Industries Limited, Japan (DIL), inducted Kanwal Jeet Jawa, Managing Director (DAIPL), onto the Board of Directors of DIL. The company entered into a contractual relation with J&E Hall Limited, England, for sale of Hallscrew compressors and packaged products in India and East Africa. Having allocated the East-African region to DAIPL by DIL, the company is proposing to establish a branch office in Kenya to manage the East-African region and thus in the year under review, concrete steps were taken for establishing branch office which shall continue in the next financial year. The company also stepped into e-commerce platform for sale of AC products and air purifiers. The company had committed to make world-class skill institute of DJIME and is at the cusp of fulfilling the same. The first batch of DJIME is all-female batch, which graduated in July, 2019.
Future focus. The company plans to enhance utilization of production capacity of VRVs, chillers, and RAC line. Robust growth is expected in the AC market in the country and Daikin intends to further increase its market share in residential and large-scale projects. The company will continue focusing on localization so as to reduce the costs and impact of foreign exchange fluctuations. To enhance quality and technical upgradation, the company continued its operations in the R&D center, adjacent to its manufacturing facility in Neemrana, in the year under review.
Kanwal Jeet Jawa
MD and CEO,
Daikin Air Conditioning India
“We have significantly strengthened our Indian operations with expanded manufacturing capacity. For the company, the engine of growth has been the factory at Neemrana in Rajasthan, which has enabled us to consolidate presence with a second factory. This is enabling us to address a larger market in the country and also facilitating exports to Sri Lanka, Bangladesh, Nepal, and to select countries in Africa. This will also create a huge employable workforce. And, with the third factory, we will have significant manufacturing edge and cost competitiveness in the Indian market.
We have taken to HFC 32 refrigerant and inverter technology and these have had a positive role to play in Daikin’s ability to provide superior products for the consumers. We expect that sales of high tech inverter range of AC would go up in the industry, as now customers are more conscious and are adopting products which bear the stamp of superior technology and power efficiency. As pioneers of Inverters across the globe, we are confident that the inverterization in the Indian market will lead the way for Daikin dominance in the product category. Our channel or distribution of more than 6400 sales outlets today is powering our growth taking the Daikin products to Tier-I, Tier-II, Tier-III, and Tier-IV cities.
We have been consistently growing more than the industry since 2009. We are looking to sustain this momentum this year as well, as the market points toward a robust year. We are looking at a turnover of Rs 5000 crore in 2019-20. Daikin is gearing up to sell 10 lakh room AC units and we want to increase our market share to 19 percent riding on the back of power availability, increased distribution and sales-service network, Tier-III and Tier-IV cities demand, and brand building.”
In 2018, Haier Appliances India Private Limited registered net sales worth Rs 3026.20 crore as against Rs 2156.75 crore in 2017. For a company that is a fairly young player in the Indian landscape, Haier has come a long way by introducing various innovative and technology-led products that cater to the local needs of the customers.
Haier India, which follows January-December fiscal calendar, over the years, has consistently recorded an optimistic double-digit growth especially for the premium range of products. Aiming to close 2019, with a YoY growth of around 30 percent, the company witnessed remarkable growth in sales of its products in each category.
Projecting an impressive growth trajectory, the brand’s refrigerator business clocked at Rs 1477.70 crore in 2018. While the air conditioners recorded a sale of Rs 474.41 crore, the washing machines segment showcased impressive sales of Rs 353.43 crore. For its televisions category, the company touched Rs 447.62 crore of sales, while deep freezers recorded overall sales of Rs 194.43 crore.
Haier is one of the leading providers of better-life solutions to its consumers in India. The company has transformed from a traditional manufacturing enterprise into a win-win IoT community that has been at the forefront of transforming the home appliances industry in the country.
With introducing continuous innovation and strengthening its philosophy of Inspired Living, the company has adopted the concept of customers as the foundation of growth – cementing its trust amongst the customers. Haier is known for providing a one-stop star service to its customers. From its flagship bottom-mounted refrigerators to the recently launched one-of-its kind Super Silent Double Drum washing machine, the brand has provided a fillip to the home appliances industry – making it a market disruptor in India. Today, the company offers a wide range of products in the leading categories – refrigerators, deep freezers, washing machines, LED flat panels, deep freezers, microwaves, and water heaters.
India has always been a key market for the Haier Group and the company committed to strengthen its presence in the country with continuous investments to expand operations and network. In 2017, Haier announced the expansion of its existing manufacturing facility in Pune, Maharashtra into its first industrial park in India with an investment of Rs 600 crore. This was done post signing a Memorandum of Understanding (MoU) with the Maharashtra Government and the state-of-the-art facility which now produces two million refrigerators and half a million units each of LED TVs, ACs, washing machines, and water heaters in India.
Strengthening its commitment to the central Government’s Make in India initiative and to cater to the growing consumers’ demand in India, Haier signed an MoU with the UP government to set up its second industrial park in India in Greater Noida, Uttar Pradesh. Under this agreement, Haier aims to invest Rs. 3069 crore for setting up India’s largest single manufacturer industrial park which will be spread over 123 acre. The company aims to create almost 4000 new direct employment opportunities along with over 10,000 indirect jobs through this expansion. Once functional, the new industrial park in Greater Noida will hold an annual capacity to produce two million units of refrigerators, one million units each of LED TVs, washing machines and air conditioners.
Being a key accelerator in its marketing strategies, the company has been recognized for its creative campaigns that tend to tap upon the recent trends and educate its consumers about the pressing issues prevalent in the society today. The company that had a marketing budget of Rs 110 crore this year has excelled the art of storytelling. The recently launched Silent Performers campaign for Haier’s Direct Motion Motor fully automatic washing machines gathered wide appreciation across platforms.
The TVC that was crafted for the newly launched super silent washing machines, highlights the riveting stories of India’s leading sportswomen – Hima Das (Arjuna Awardee sprint runner), Dipa Karmakar (Olympian artistic gymnast) and Simranjit Kaur (Indian boxer). The TVC has been picturized on the daily lives of these sportswomen who champion the notion of achieving goals despite unimaginable challenges and lack of spotlight on their achievements. Through overlapping motifs of athletes’ lives and Haier’s innovation in washing machines, the TVC tends to highlight the silent performance of these sportswomen to resonate with Haier’s new washing machine with direct motion motor, which is also a silent performer.
Earlier in 2019, during the launch of Haier’s PuriCool range of ACs with in-built air purifier, the brand ran a 360-degree campaign, led by a TV commercial focused on highlighting how indoor air is as harmful as outdoor air. Prior to that, the marketing strategy for Haier’s iconic bottom mounted refrigerators has evolved over the years starting from Jhukna Mat campaign, which helped in establishing the category in the market. Over the years, the strategy evolved and the brand introduced follow-up campaigns for BMR like Ulte Ko Seedha in 2017 followed by India, Ab Seedhe ki aadat daal lo in 2018 for the newly launched Haier 8-in-1 BMR. This way, the brand focused on building a progressive communication narrative for a category that needs user awareness and visibility.
For a 15-year-old company in India, Haier has catapulted its image in the Indian home appliances market. With the constant year on year growth trajectory, Haier India aims to be one of the top three players in the home appliances segment in the next 2 years.
V-Guard Industries Limited delivered a topline growth of 12 percent, EBITDA growth of 20 percent, and PAT growth of 24 percent for full year FY19, despite the challenges faced during the year in terms of unfavorable weather conditions, floods in Kerala during Onam, and currency and commodity volatility. The growth was driven by water heaters, fans, and wires. Non-south markets contributed to 39 percent of total revenue, as compared to 37 percent in the previous year. The company continued to invest in growing the non-south business further and envisages 50 percent contribution from non-south over the next 4–5 years. A&P spends were at 5.2 percent of sales for FY19. The company unveiled its new identity and mass media communication in 4QFY18 leading up to the first quarter in FY19. Being a 360-degree communication, the activity entailed significant investments. The campaign was received well by both consumers and channel partners alike.
Electronics. The company’s electronics segment comprises voltage stabilizers and UPS systems. Stabilizer sales during the year were adversely affected due to unfavorable weather conditions, which impacted sales of air conditioners and refrigerators. The company designed its new range of aesthetically superior stabilizers to seamlessly blend into the home décor. With a focus on premiumizing the UPS category, smart and next-gen variants were launched during the year.
Electricals. The electricals segment comprises house wiring cables, pumps, switchgears, and modular switches. The company undertook extensive branding initiatives, frequent product improvements to deliver better performance, and safety related enhancements. While the offtake for wires was adversely impacted by the floods in Kerala in 2QFY19, it made a strong comeback during the last quarter of the financial year. The pumps category on an overall basis remained flat in FY19 on account of higher water table across South India, even though non-south markets delivered high-volume growth. Switchgears delivered good growth during the year.
Consumer durables. The consumer durables segment includes fans, water heaters, kitchen appliances, and air coolers. The company is enhancing its manufacturing capabilities to provide flexibility to produce a wider range of SKUs, which is expected to help derive supply chain efficiencies, enable launching more models, improve the quality of products, and make the products more energy-efficient. The solar water heaters business performed well. The company is focused on the market for rooftop residential solar water heaters. In the fans segment, gross margins have been continuously improving over the past few years. The kitchen appliances business comprises induction cooktops, mixer grinders, gas cooktops, and rice cookers. Kitchen appliances represent a large market and V-Guard’s strategy is to progressively expand its presence in this market. Gas cooktops, initially launched in Kerala, were extended to Tamil Nadu during the year and were well received. The company will continue to expand the product offering and geographical footprint of kitchen appliances over the coming years. The air coolers category which was introduced toward the end of FY18 has been tracking well. Air coolers were rolled out to more south and non-south markets during the year.
Manufacturing and quality awards. Perundurai Solar Water Heater Plant bagged the 2nd Runner up position in 2nd CII National Competition on SPC – Toward Zero Defect. Perundurai Solar Water Heater Plant bagged Par Excellence Award in 32nd National Convention on Quality Concepts (NCQC-2018) at ABV – Institute of Information Technology & Management, Gwalior. Chavadi & Kashipur WCD Unit bagged Par Excellence in the highest category Award at National Level QC Contest Quality Circle Forum of India Awards. The plant also got qualified for ICQCC 2019 in Japan.
Outlook. The company will continue to expand its product offerings and enhance its competitiveness in the consumer electricals, electronics, and durables segments. The company has repositioned its brand from a single-dimensional stabilizer brand to a strong consumer brand franchise, catering to evolving consumer needs and aspirations. In the last few years, the company has undertaken several initiatives to build organizational capabilities. The company continues to invest toward putting in place best-in-class processes and systems in areas like new product development, innovation management, and manufacturing excellence in order to make it ready for the future. Over the years, the company has been increasing its in-house manufacture, which is currently at 43 percent. As more of the categories attain the requisite scale, the company envisages in-house manufacture to go up to 60 percent in the next few years. Currently, about two-thirds of the distribution network is in the non-south markets, which contribute 39 percent of the total turnover. The company envisages adding 4000–5000 retail points with the majority of additions in the non-south regions. The company has pan-India presence, offering great long term, sustainable growth opportunities, a well-entrenched distribution reach, diversified product portfolio, resilient business model driven by an experienced management team with strong understanding of business complexities.
V-Guard Industries Ltd.
“FY19 was a year of redefining our strategic agenda to propel us along the growth trajectory more effectively and in an impactful way. It was a year of identifying new priorities as we surged forward toward reimagining the systems and processes of today to build our capabilities for inspiring a better and brighter future. As we embraced the new aspirational trend of increased premiumization in the market, we made a strategic shift toward thoughtful, high-margin products with strong emotional attributes to challenge the traditional and more rational consumption patterns. We made manufacturing excellence a key mantra to lead us toward exponential growth in product capability.
Led by the goal of becoming the brand of relevance and first choice for consumers within our established southern markets as well as in the newly forayed non-south markets, we activated a three-tier digital strategy – across channels, products, and enterprises. With our strong consumer insights to lead us, we saw the potential of the new channels emerging from transforming industry trends and decided to adopt a unique Different Models Different Channels approach to channelize our growth plans.
I am happy to say that we, at V-Guard, have equipped ourselves well to sustain our growth momentum on this competitive landscape, while augmenting our brand equity to connect more deeply with the consumer of tomorrow. In this endeavor, we shall continue to focus dedicatedly on our sustained efforts to boost innovation, R&D and new product development, and roll out differentiated products with distinctive features in markets across the country.
As we move along our clearly defined growth trajectory, we remain strategically focused on minimizing our carbon footprint and creating positive interventions in the lives of those we touch. I would like to thank all the stakeholders of the Company for their unwavering support and cooperation. Together, let us continue to reimagine the contours of the present so that the future becomes a happier place for all of us to share.”
Fiscal year 2019 has been very challenging for the industry with market showing a de-growth of approximately 3 percent. In spite of rising consumer demand for advanced technologies, energy efficiency, and improvement in the standard of living, the growth of the industry was stagnant.
Operations. Room air conditioners business saw a marginal growth on volume basis, while cassette business grew by 33 percent and VRF by 25 percent. PAC volume was marginally lower than last year. On overall basis, there was marginal growth in business as compared to last year while the markets either remained flat or exhibited a de-growth on volume basis.
Room air conditioners. In order to expand its reach in Tier-II and Tier-III markets, the company launched several new products in its inverter AC range, which are designed to cater to the needs of the first-time buyers and mid-segment AC buyers. During the year, the company benefitted from the value growth in the inverter ACs.
Home appliances. In this segment, the company deals in premium range of refrigerators and air purifiers. Hitachi has a complete frost-free range with 21 models and 39 SKUs – starting from 253-liter gross to 722-liter gross capacity in 2-door, 3-door, 4-door, and 6-door in top freezer, bottom freezer, and side-by-side segments. Air purifiers are preferred in select cities, and Hitachi ensures its availability in such markets, which are growing but at a moderate speed.
Exports. In the last couple of years, the company has started exporting to Sri Lanka, Indonesia, Bangladesh, UAE, and Nepal, and this year added Bhutan, Myanmar, Maldives, Oman, Bahrein, Qatar, Saudi Arabia, Iraq, and a few other countries like Kenya and Djibouti in African Continent. With aggressive focus and improved product lineup for exports, the company has registered significant growth over the last year. Looking at the growth of the business this year, the company is positive about further growth of export business in coming years.
Service. The company has undertaken multiple service-oriented initiatives, such as free service camp providing discounted service in pre-summer, a customer delight program, as well as free product check-up in off season. These factors helped the company retain its client base and provide service to over 1,500,000 customers. The company continuously invests in training of human resources and upgradation of their technical skills to ensure better services. During the year under review, the company undertook a major initiative Special Task Force to provide timely resolution to complicated and technical issues and to handle escalated matters. For this purpose, a team of over 100 technicians was formed and was trained to improve their technical skills.
Global Development Center. The new Global Development Center (GDC) has increased the company’s product-development capabilities, particularly in commercial PAC and RAC systems. Located adjacent to the company’s factory in Karannagar, Kadi, this development center consists of an office space of 6600 square meters and multiple labs spread over 12,000 square meters of floor space. These labs include state-of-the-art research and testing facilities for measuring performance, reliability, and electro-magnetic compliance.
Marketing initiatives: The year gone by. The company has a widespread product presence across India, and the credit goes to its effective marketing exercises and vigorous distribution network. Investing in brand-building initiatives and distribution network has contributed a lot to the company by delivering consistency in sales growth. The company promoted inverter ACs in 2018 with its campaign Every Home Deserves Hitachi Inverter AC. Multiple mediums like TV, print, outdoor, and digital media were used to run this campaign. The brand used a range of distribution channels to help its products reach various corners of the country. The brand also partnered with more than 500 distributors in the PAC segment and more than 200 distributors in the VRF segment to enhance its B2B presence in more than 140 cities across India.
Marketing initiatives: The year ahead. Hitachi Cooling & Heating India as a global brand seeks to translate its global reach into market leadership. In order to reach the leading position, the brand worked on a new positioning and value proposition strong enough to differentiate itself and offer a value-add to its customers. With the company’s new brand promise Living Harmony, it aims to be the catalyst of harmony, and by doing that, the brand seeks to be recognized as the master in the creation of living spaces.
Awards. Frost & Sullivan awarded the company with Smart Air Conditioners Award 2018. The company was also felicitated with Copper Excellence Award 2018.
Chairman and Managing Director,
Johnson Controls-Hitachi Air Conditioning India Limited
“We noticed a major shift in buying pattern of AC by customers in residential AC segment. During the year, a lot of advancement happened in technology, such as inverter technology, smart air conditioners, and eco-friendly products, among others, which created demand for new-age technology ACs across India. FY19 was slightly a tough year for us in terms of all-round performance due to sluggish real-estate sector and poor investments in the manufacturing and construction sectors.
The vertical of Hitachi room air conditioning witnessed a significant shift from fixed-speed to inverter ACs. Other segments were quite a mixed bag as cassette ACs witnessed a good double-digit growth of 33 percent, whereas for the packaged air conditioning (PAC), we maintained last year’s numbers with marginal dip in contribution. Manufacturing was another area where the company invested. The company’s annual performance factor (APF) Labs were NABL-accredited, according to revised ISO/IEC 17025:2007 standard, with capacity enhancement and addition of international standards like ISO 5151, SASO 2681.
The company has also given utmost priority to good customer care and service. JCH-IN has launched a series of strategic initiatives, focusing on strengthening the core businesses of RAC and commercial ACs.
With continued investments into brand promotion in local languages, improving the brand recall and fostering channel advocacy, JCH-IN has been making significant progress in improving its presence in South India. In addition, one of the key investments that JCH-IN has made to support the growth is into the establishment of one-of-a-kind training centers, called Engineering Excellence Centers, in four corners of the country, consisting of several practical labs, classrooms, and customer-experience centers.
With productive initiatives and regular investments in new technology, I am sure JCH-IN will emerge as a leading AC player in the Indian industry. With an objective of sustained profitable growth, we shall keep providing a wide range of innovative and advanced cooling solutions. We are committed to deliver the best value to all of you.”
Xiaomi Technology India’s total revenue in FY19 grew by 54 percent to Rs 35,426.92 crore as compared to Rs 23,061.11 crore it had clocked in FY18. Xiaomi continued its high pace of sales growth in the Indian market in FY19, touching the USD 5-billion revenue mark. However, Xiaomi India plunged into losses owing to price war in smartphones, and smart televisions in which it had forayed last year, and for expansion of the business into brick-and-mortar stores which involved higher spending on distribution network and lower margins unlike the e-commerce business, which was the company’s mainstay till FY18. Xiaomi India reported net loss of Rs 148.48 crore in FY19 as compared to a net profit of Rs 301.62 crore in FY18. The company’s manpower expenses too increased 200 percent in FY19.
The company launched multiple successful smartphones in 2019, which are priced extremely competitively. The company also expanded its TV, soundbar, and water-purifier segments. In terms of smart TV shipments, Xiaomi is ranked first in India for five consecutive quarters as of the second quarter of 2019. In May 2019, the company reported that it had sold more than two million television units in India in 14 months of its launch. Mirroring its smartphone strategy, the company launched TV models at lower than market prices.
Xiaomi plans to scale up the assembly of its television sets in India by bringing more component manufacturers to the country in the same way it does for smartphones. Eighty-five percent of the televisions the company sells in the country today are assembled locally, up from less than 20 percent in December 2018. Xiaomi assembles all its TVs in India now, except the 65-inch model. However, a majority of components including the open-cell TV panels are still imported. The company has made significant investment in supporting product categories and scaling up manufacturing of smartphones and televisions along with PCBA manufacturing of smartphones.
Xiaomi India is targeting for half of its overall revenue from offline sales. The company has expanded its retail channel network. As of June 2019, there are 79 authorized Mi Home stores and 1790 Mi Stores in India. Xiaomi launched Mi Home stores in urban areas and late last year also announced the launch of franchisee-owned and franchisee-operated Mi Stores to boost sales in Tier-III and Tier-IV cities. The company has scaled up its after-sales network to 2500 service centers.
And now, it has decided to add a fourth pillar to its offline sales strategy, announcing a new retail concept called Mi Studio, spanning 400–600 sq. ft., which would cater to urban regions such as Gurugram, Kanpur, and Allahabad. Mi Studio will also be franchisee-owned and franchisee-operated. With all this, the company is targeting that 50 percent of its business will come from offline channels by the end of this year. Xiaomi aims to sell products through a total of 10,000 retail touch-points by the end of this year.
The business for Vu Technologies Private Limited includes sale and service contracts of LCD/LED TVs for consumers and LED displays for commercial applications. In 2018-19, revenue from operations stood at Rs 955.35 crore as against Rs 751.96 crore in 2017-18. The net sales revenue at Rs 747.03 crore was higher than the previous year’s net sales revenue of Rs 601.73 crore. The lower profit in 2018-19 was due to unforeseen foreign exchange loss, increase in customs duties, as well as increased competition. The company sold over 1 million TVs across India, during the year under review. Vu continued to endeavor in maintaining customers to their utmost satisfaction levels by registering impeccable track record of quality and delivery efficiency, thereby ensuring their continued patronage for its company’s products and services.
The company unveiled three new line-ups – Vu Pixelight, a 4K display range; Vu Ultrasmart that is at the lower-priced end; and Vu Premium Android with 4K display and Android Oreo. The company exited the entry-level TV segment. The new TV line-ups come with Netflix, Amazon Prime, and YouTube along with dedicated buttons for each on the remote. Other OTT streaming services are also available. Vu also launched a 100-inch TV. The smart TV model, VU 100, supports 4K UHD resolution with HDR. The A+ grade IPS panel reproduces 2.5 billion colors. It is backed by 2000 Watt of sound. The TV features inbuilt eight Dolby-certified JBL speakers and woofers.
The company’s play is being planned between online and offline. Vu currently has around 800 retail outlets across the country and its launches are available in Croma outlets, apart from e-commerce portals. Vu is also focusing on its service network as its customer base expands. The company currently has 300 personnel and 11 offices in service. Vu also works with multiple third-party ASPs. There are three call centers for installation, repair, and product help.
To chart out its next phase of growth, Vu is betting big on technological breakthroughs in the industry, such as Vu VoD Upscaling Technology. The proprietary upscaling technology has been developed by Vu, which combines multiple advanced machine learning algorithms with DSP (digital signal processor) to provide high-end cinema quality playback for VoD content, thus enhancing the OTT experience of Indian users.
Mirc Electronics Limited, makers of Onida has made gross turnover of Rs 642.41 crore in FY 2018-19 as against Rs 735.20 crore for the previous year. The company made a loss of Rs 4.4 crore. The LED/panel segment witnessed a de-growth of 27 percent. The washing machines segment witnessed a growth of 24 percent. The air conditioner segment witnessed de-growth of 7 percent.
Flat panel TVs. The company introduced a number of LED TV models in HD/FHD segment. It has also introduced UHD range of Google-certified TVs. The company migrated to the new range of smart TVs supporting Android 6.0. The company is working on a new range of smart TVs, wherein it will support popular apps. It has also adopted new energy-efficient standards as directed by the Bureau of Energy Efficiency (BEE). The company is also working to introduce voice-controlled remote controls for its smart LED TVs. The company also launched smart UIC Series, an Android 4K UHD smart TV with HDR10. During the year, the company introduced more than 45 new models having resolution HD, FHD, and both basic and smart models with basic audio to KY audio. To improve the utilization of installed capacity, the company initiated OEM production activities for other brands. Initial success was achieved for Reconnect brand.
Washing machines. During the year, the company introduced new models in semi-automatic and fully automatic top-loading categories. The designer glass top models with aesthetic appeal helped to boost the semi-automatic segment. The company has also launched Crystal Series models with 6.2 kg capacity. The Grandeure Series was expanded to include more popular size of 6.5-kg and 7.5-kg capacity of wash load. The company developed and introduced 8.5-kg capacity model with heating feature. The pre-set wash programs are designed to wash varieties of clothes like wool, cotton, and others optimally. Models with stainless steel tubs and new glass designs were added in the semi-automatic range. These were well received by the consumers. In washing machines, one reverberating pain-point of customers was removal of deeply rooted stains or dirt from cuff and collars in an effortless way. This led to the birth of Bristle Wash washing machine (available in 7.2 kg and 8 kg), which uses first-in-class Bristle Wash technology in the semi-automatic category. This machine features an elegant brush with bristles inside the washing tub to clean the stains or dirt from cuffs and collars in a manner rivalling that of a hand-washed fabric. This also features Tri-storm Pulsator which creates storm-like effect from three sides resulting in desired scrubbing action on hard stains.
Air conditioners. The company introduced Zero-ODP (ozone depletion potential) and environment-friendly R32 refrigerant gas in all models. The company is also focusing on the energy-efficient inverter air conditioners keeping in view the growing market for inverter. The company launched 22 models in inverter category. During the year under review, the company introduced new smart AC series – ONYX SMART and GENIO across all markets. The company also introduced magnified cooling with Multiplier Cooling inverter technology.
Microwave ovens. During the year, the company designed and launched Black Beauty Neo microwave ovens that offer auto-menu features like air fryer, milk boiling, egg boiling, roti, and naan.
Outlook. The consumer durables sector basically holds a solid outlook for the long term. Today’s consumers have high awareness and a strong value-for money orientation. The rapid rate of urbanization and the growth of a young population that is enjoying rising incomes is creating a large emerging middle class in India. Apart from the growing income levels, the other important factors are changing consumer behavior and evolving spending patterns. Fueled by the falling prices of consumer electronics, these radical demographic shifts are expected to further transform the consumer durables and electronics market in India. The current subpar penetration levels, compared to the global average for consumer durables and electronics products, such as air conditioners and washing machines, also highlight the significant headroom for future growth. There are some headwinds that India as an economy will have to deal with, which are more geopolitical in nature like volatility in exchange rate, trade war, and volatile oil prices. This has put a huge strain on the economy. Having said that, the company expects India’s economy to grow at over 7 percent in 2020, driven by wide-ranging reforms undertaken by the Government of India, such as GST, Housing for All by 2022, ease of FDI norms and Smart Cities mission. These reforms are expected to help drive consumption and investments in the country as also benefit the larger consumer durable industry.
Gulu L Mirchandani
Mirc Electronic Limited
“The world is a changing landscape with new opportunities, albeit with new roadblocks (US-China trade war). Trade war will compel the manufacturers in China to look for an alternative base like India. India may easily become the next manufacturing hub. When large-scale manufacturing takes place, the prices of components and finished products will come down. New innovations will also help in driving the cost down. This will be in line with the government’s Make in India campaign.
Similarly, the government may also have to introduce flexible policies, such as land acquisition or disposal, as well as power at par with global rates for industries, and suitable labor policies such as those applicable in Thailand and Vietnam. GST rates may also be reduced for consumer electronics industry. Some of the FTA rules with other countries may have to be changed. It is important for India to have a giant manufacturing consumer-electronics hub.
Onida for many years has been ahead of the curve. In fact, the new mantra is to jump the curve and make competitors irrelevant. The next phase of industry is the integration of AI into best-in-class hardware, powered with the voice-assistant feature. Onida continues with its vision to make India proud with Made in India labels. We are also progressively moving toward local manufacturing at all levels, which means doing away with most of the part of customs duty.
Smartness in products has been in our DNA, proven by the new launches in AC and LED categories. We have continued our focus on bringing consumer at the center of our innovation and product development, driven by consumer research. We have worked with Amazon to enhance consumer’s experience by developing an AC which operates through voice command by using Amazon’s Alexa. The Onida Devil, which is one of the most iconic characters in Indian advertising history, has been brought back in all our marketing communications. These are challenging times but we are committed to change and adapt to the new reality and move forward.”
The net revenue IFB Industries Limited from operations on consolidated basis grew by 17.56 percent to Rs 2659.15 crore. Profit before depreciation, finance cost, and tax on consolidated basis as compared to last year reduced by 20 percent to Rs 139.55 crore. The Appliance division ended the year on a stronger note in revenue terms but on EBITDA margins, the performance was not satisfactory.
IFB’s focus remains on the key agenda of localization for some of the high-cost imports. The key actions in quarters ahead is to localize manufacturing for the fixed-speed and inverter ranges of air conditioners. The project, located at Goa, is planned to deliver commercial production by end-January 2020.
Front-loaders. A new range of models was introduced during 2018-19 and this has been well received in the market. Ongoing product development continues to focus on IoT capabilities, water- and energy-efficiency, user convenience, and interface designs.
Top-loaders. The market share for the company continues to expand in this category. The product range has fully automatic top-loaders in the 6.5–9.5 kg capacity segments, with high-end Deep Clean technology and unique wash features. During 2018-19, the installed top-load capacity was stretched and IFB was unable to supply to the market in full. The capacity has now been upgraded.
Clothes dryers and dishwashers. The clothes dryer segment grew moderately. A design upgrade is planned to bolster this category. The same is expected to be complete by the 4QFY20. The dishwashers segment also grew. The company undertook additional promotional and demo placements of dishwashers in large retail outlets and at IFB points.
Microwave ovens. New models, featuring Oil Free Cooking technology, have been already introduced into the market and are helping to drive growth. IFB registered industry-leading growth in this category in a market which has remained largely flat.
Modular kitchens. The stores in Goa, Bangalore, and Kolkata are now fully operational and are building significant enquiry pipelines. A completely new design format has already been in operation in the Goa and Bangalore showrooms since January 2018 and it has received a very good response.
Built-in ovens, chimneys, and hobs. The company continued to increase its presence in all markets with the products displayed in ~750 stores across the country. This includes displays in ~500 IFB Points. The IFB points account for ~45 percent-plus of sales in this category.
Air conditioners. The range of air conditioners is feature-rich, energy-efficient, and delivers superior performance at high ambient temperatures. The IFB range is uniquely placed in the market, with features such as 52°C compliant compressors across all models with green gas and copper piping features designed for high-end performance. However, there was a significant impact of changes in forex levels and additional customs duties in the air conditioners segment. The sales performance for the year was below expected level.
Over the last few quarters, the company has added 9500 retailers to the IFB network and this will be a key lever to the growth plans for the future. The IFB Points and the IFB website contribute ~14 percent of sales by volume. The CSD/defense canteens and institutions contribute 1 percent of the company’s sales by volume, and are a significant channel for direct customer contact. The company expects this contribution to remain stable in subsequent quarters with growth in industrial category and also institutional sales of products like air conditioners. The channel of dealers, sales and service dealers (SSD) segment, largely catering to customers who buy air conditioners, contributes 1 percent of sales. It will grow as the company drives expansion in the air conditioner business.