Havells eyes doubling exports, to focus on home market

Plan to strengthen in five categories and double exports in 2-3 years

Havells India, the electrical equipment major, in the news last week for eyeing  Videocon's appliances brand, Kenstar, proposes to focus its attention on the domestic market, a shift away from its earlier strategy of looking at international markets.

An electrification and infrastructure push by the central government is considered to raise the growth prospects for domestic electricals entities. Anil Rai Gupta, chairman and managing director, told this newspaper: "There is so much opportunity over the next two decades in India that I remain confident we can continue investing and growing here. While we will look at international markets, it will largely be through exports, which we propose to double from five per cent now (of sales) to 10 per cent in the next two to three years. Acquisitions are not ruled out but we'd be happy to do it in the domestic market."

Havells closed 2015-16 with consolidated net sales of Rs 8,167 crore, a drop of 10 per cent over the previous year. This was on account of the sale of its international subsidiary, Sylvania, among the top four lighting companies in Europe and Latin America, in December 2015. 

Havells had paid Rs 1,350 crore for Sylvania in 2007, the largest buy an Indian electricals manufacturer at that time. It was also counted among those Indian acquisitions where a smaller company was buying an international major far larger than it. Despite pushing Havells into the top five electricals companies in the world, the international entity was a drag on the former's profitability, due to poor demand growth in its core markets of Europe and Latin America. 

With the Sylvania chapter behind it, Gupta says the focus for Havells will be on five segments -- protection devices such as miniature circuit breakers, cable & wires, lighting, consumer durables and switchgears under the Standard brand. Cable & wires and the Standard businesses contribute 40 per cent and five per cent, respectively, to Havells' revenue. The rest comes from MCBs, lighting and consumer durables.

The plan, Gupta explains, will be to increase contribution from lighting and consumer durables, reducing the dependence on commoditised businesses such as cable & wires, where margins are thin.  "Our strategy is to get a greater share of the consumer’s wallet by launching new products that fit into the broader umbrella of consumer electricals, that we can push through our existing sales channel."

As part of this strategy, Havells recently entered the personal grooming space, dominated by the likes of Philips, Panasonic and Braun.

In consumer durables, Gupta explains, the plan will be to look at acquisitions that can bulk up its portfolio, which has kitchen appliances, fans, water heaters and air purifiers. Industry sources say Kenstar's cooling portfolio, including air conditioners and coolers, are the only new segments for Havells if it acquires the business. 

In the past, Havells' name has appeared as a potential buyer of the Lloyds consumer durables business, as well as Crompton Greaves' consumer electricals portfolio, both of which fizzled. Gupta says the asking price of domestic targets remains steep, compelling the firm to step back. “We are always looking to potential acquisitions but valuations have to be reasonable,” he said.