Grohe of Germany, makers of sanitary products and systems including faucets, has firmed up plans to form a joint venture with the R K Somany-promoted Hindustan Sanitaryware & Industries Ltd (HSIL) in India.
"We are looking at a joint venture. Apart from selling in the Indian market, it will also export Grohe products to other countries," Rainer S. Simon, member of the executive board, Friedrich Groeh AG & Co, said.
At the moment, HSIL is importing a few ranges of Grohe products from the German firm's trading subsidiary in Singapore.
The imports started after quantitative restrictions were removed on April 1. According to Somany, due to the import duty of 64 per cent, these products are two to seven times more expensive than the competing Indian products.
In order to bridge the price gap, the two partners have decided to set up an assembling unit in India once the Grohe products cross a turnover of $1.5 million in the country. During 2001-02, Somany expects to do a turnover of over $325,000 with the Grohe products.
As per Simon, once the products from the assembly line are able to notch a 10 per cent share of the market, the unit will be upgraded to a composite production site.
The current market for faucets in the country is roughly $200 million. Of this, the top-end segment is estimated to be around 10 per cent.
Thus, Grohe would be looking at a full-fledged production base in India once it attains a critical mass of $2 million.
This will be Grohe's first joint venture anywhere in the world. Simon said both the partners will have an equal role in the joint venture.
"HSIL needs our knowledge and expertise just as we need their local knowledge and expertise as well as their distribution network," he said.
At the moment, Grohe has a production base in Thailand and is putting up an assembly plant in China. Almost 70 per cent of Grohe's turnover comes from outside Germany.
Talking about the potential for high-end sanitaryware products and systems in India, Simon said that there is a population of 100 million in India which earns an income comparable to the West.
"Our target is the top 20 million of this population. And this is a sizeable market," he said.
