Having launched smartphones recently, Panasonic India is now pulling all strings to make an impact in the growing smartphones market in the country. Manish Sharma, managing director of Panasonic India tells Sohini Das that smartphones are perhaps taking away market from televisions, and that the future lies in digital convergence.
While the company has already announced Rs 1,500 crore investment in marketing and advertising initiatives over the next three years to take its revenue to $3.6 billion (around Rs 22,000 crore) by 2015, Sharma says rupee-depreciation and rising interest costs are a worry. Panasonic India clocked a revenue of $1.3 billion ( roughly Rs 7,500 crore) during 2012-13.
While the company has already announced Rs 1,500 crore investment in marketing and advertising initiatives over the next three years to take its revenue to $3.6 billion (around Rs 22,000 crore) by 2015, Sharma says rupee-depreciation and rising interest costs are a worry. Panasonic India clocked a revenue of $1.3 billion ( roughly Rs 7,500 crore) during 2012-13.
Panasonic has recently launched smartphones. Going forward, what strategy do you plan to adopt to gain marketshare in the segment?
We have recently launched our first smartphone the P51 in the Indian market and in the coming months we plan to bring five more devices in the range. Going forward, we would eventually enter the feature phones market in India too. As a strategy, we have decided to focus on designing products that are India specific and furthermore focus on optimisation of performance. 'Speed' will be the keyword in the smartphones segment, especially after the rollout of 4G services in the country. Being a camera brand, we have the technology in-house, and plan to use the digital camera technology to enhance the performance of our smartphones in the future. With the advent of smartphones, the ready-to-shoot camera market is anyway shrinking.
We have tied up with Jaina Marketing and Associates, the firm that also owns Karbonn mobiles, for distribution of our smartphones in the country and plan to have 20,000 retail counters across the country within the next three months. Smartphones have so far reached tier III cities, but, eventually it would penetrate the rural markets. Smartphone market in India is growing at over 35% at the moment.
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Is there any plan to integrate technologies across different consumer goods verticals like you mentioned for camera and smartphones?
One interesting trend that I think has emerged in India off late is that the exceptional rise of smartphones is taking away market from other consumer durables segment, most significantly the television segment. While there is no scientific research available on the trend so far, what I presume is that a person's entertainment needs are to a great extent catered through applications on a smartphone; one can watch videos, movies, television programmes and much more on a phone and that too on the go. More, with rising inflationary pressures and shrinking disposable incomes, as one invests on a smartphone, he often postpones his decision to buy a television set.
Therefore, a television now has to be smarter. We are trying to offer that in our televisions, one can watch youtube videos, chat on skype, use the television set as the central hub linking it with the house's security and surveillance systems. We have developed a Viera remote application which would help connect the phone and the television set seamlessly. We are moving towards a world of digital convergence.
What are the other business verticals that you are bullish on?
We are going to focus on the automotive and industrial systems, security and surveillance system, and energy segment like batteries, commercial air-conditioning and refrigeration and enterprise solutions in these segments. We want to develop as a solution oriented company deriving around 50% of our revenues from the business-to-business (B2B) vertical by 2018. We are bringing in Lithium-ion batteries to India, which would targeted mainly at the telecom sector. We already supply batteries to several automotive companies in India, especially Japanese carmakers apart from car stereo systems. We now plan to offer the Li-ion batteries for electric and hybrid cars and are in discussions with some companies in India as well. I cannot name them now. Globally, we are one of the top suppliers to Tesla Motors. As of now we import batteries from our China and Indonesia plants, and do not have any plans to set up a manufacturing unit in India untill we reach a critical volume. Our new plant in Jhajjar in Haryana is currently using only 35% of the available land, and there is scope for expansion. Around $200 million has been earmarked for investment on manufacturing activities in the country from 2010-2015. The Haryana plant now makes air-conditioner and washing machines.
With the rupee depreciating, are imports hurting? Do you plan to increase localisation and/or increase prices?
Yes, of course the depreciating rupee is hurting imports. Though we get the benefits of ASEAN FTA for some countries from where we import, nonetheless we still have to pay duties. And we are definitely looking at increasing localisation in our products and are in talks with local component makers for that, like for example we now plan to source motors for our washing machines from India. As for our television sets, the localisation levels are currently at around 30%. While we are working on increasing localisation, however, it cannot go above 40% as television panels are not made in India. We have factored in fluctuations till the rupee hits 62 vis-a-vis the dollar, post which we would have to pass on the cost increase to consumers. There would be price rise then.
Also, are rising interest rates hurting margins as you offer interest-free EMIs to lure customers in a tough market?
Finance costs are constantly rising. Around three years back, around 18-20% of our consumer durables sales would be financed. Now, around 30% of our sales are through finance route and the average outflow per customer is in the range of 8-9%. I can say, in the past few years, the overall outlay for the company in terms of finance costs has almost doubled, which is obviously impacting margins by 0.8-1%. The last four months have been tough for the consumer durables segment, however, we expect consumer sentiments to pick up by the festival season.