Will spend on promotions, raising capacity and R&D on expectations of a revival in demand.
Hopes of a healthy rise in demand have spurred consumer durables firms such as LG, Samsung, Whirlpool and Godrej & Boyce to line up investments amounting to about Rs 1,000 crore over the next few months for product launches, research and development (R&D) and for upgrading capacity at their existing manufacturing plants.
Each of these companies is investing anywhere between Rs 100 crore and Rs 500 crore. Godrej & Boyce, for instance, will invest around Rs 100 crore in its plants at Punjab, Maharashtra and Uttaranchal. The funding will be through internal accruals.
| PREPARING FOR A MORE DURABLE FUTURE | ||
| Company | Investment | Purpose |
| LG | Rs 500 crore | Research and development, advertising |
| Samsung | Rs 100 crore | To increase capacity at Noida plant |
| Whirlpool | Rs 300 crore | Product development, promotions |
| Godrej & Boyce | Rs 100 crore | To upgrade and expand capacity at plants in Punjab, Maharashtra, Uttaranchal |
"March and April have been very good for the industry. We have overcome three issues — liquidity crunch, credit crunch and lack of confidence. The confidence is returning," Godrej & Boyce's Chief Operating Officer (appliance division) George Menezes said.
LG India, on its part, plans to invest Rs 500 crore in R&D activities as well as on advertising home appliances this year.
"LG is looking to double the amount of investments done in R&D to Rs 400 crore and spend Rs 100 crore on advertising and marketing of home appliances," LG Electronics India's Managing Director Moon B Shin said. Currently, LG has manufacturing units at Greater Noida (near Delhi) and Ranjangaon in Pune, which would be expanded in the next three years. The company may set up another unit by 2012 as a part of its plans to augment manufacturing capabilities, Shin said.
Whirlpool had recently effected a 4-5 per cent price reduction in its refrigerator offerings, which is expected to help boost sales. The company would invest more than Rs 300 crore in product development and promotion over the next three years. It expects a 10 per cent top line growth during the current fiscal, while the same would touch 25 per cent during the year 2010-11.
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Samsung, too, has planned an investment of Rs 100 crore to increase the capacity of its Noida facility. The company is looking to strengthen its portfolio with a new range of air conditioners, refrigerators and washing machines.
The Consumer Electronics and Appliances Manufacturers Association (CEAMA) estimates the size of the industry at Rs 30,000 crore. However, the penetration level of various appliances in India is fairly low. Refrigerator use is about 18 per cent of the total population, washing machine 6 per cent, air-conditioner less than 2 per cent and microwave ovens about 1 per cent, which translates into a great potential to tap new consumers.
Major players in this segment — LG, Panasonic, Onida, Samsung, Godrej & Boyce and Whirlpool — have individually introduced a host of new technology and star-rated products across washing machines, refrigerators, televisions and air conditioners this year.
While Samsung introduced 47 new products in these categories, Godrej & Boyce introduced 13 new air-conditioners and direct-cool range of refrigerators this summer.
Also read: June 13: Stimulus packages put consumer durables back on track