India Inc to focus on Bharat

VISION 2006 IV

Corporates convinced that 2006 can see a surge in demand from rural consumers.

In the last six months, Titan Industries Managing Director Bhaskar Bhat has spent much of his time in the rural areas of Uttar Pradesh, Tamil Nadu and Karnataka. Bhat believes this is the right time to focus on India's hinterland as the "rural demand for lifestyle products is bound to grow if there is a value proposition".

Titan will be rolling out 200 retail outlets in rural markets this year. In an attempt to make its products attractive to rural buyers, the company will cut the prices of its Sonata brand to below Rs 300.

Titan is not the only company that is training its guns on the rural market. With farm incomes rising (one indicator is strong tractor sales), and expected to go further up this year because of good monsoon, much of corporate India is getting ready to tap the rural market.

Says S Sivakumar, CEO, agri-business at ITC Ltd, "With a bumper rabi crop, agriculture growth in 2005-06 should be at least 3 per cent compared with 1.5 per cent last year."

He feels that "this year, there can be a bigger demand for telecommunication products, rather than for motorcycles".

Both Bhat and Sivakumar are convinced that 2006 can see a surge in demand from rural consumers. This is also the reason why Asian Paints' marketing team is gearing up to push the "Utsav" range of distemper and enamel paints. This is to cater for first-time users of branded paints in rural India.

"The growth rate in rural areas this year should match that of the metros," says Amit Syngle, Asian Paints' general manager, marketing.

Syngle, who has spent the last six months touring the interiors of Rajasthan and Maharashtra, observes that rural buyers are becoming brand conscious and are willing to look at "value-for-money" products.

He believes that people in rural areas are definitely saving less and that they are willing to upgrade to higher categories of any product.

That rural consumers are no mean spenders is something Manoj Kohli, president, mobility, at Bharti Tele-Ventures, has discovered during his visits to the smaller towns in Rajasthan, Orissa, Kerala and Punjab.

"We have learnt that not only is there local traffic, there is a lot of STD traffic too, and we have had to upgrade capacities," says he. Kohli feels that many rural townships have people richer than their counterparts in some urban townships, and this makes the networks viable.

"Growth in rural areas will, of course, be much higher because the penetration is lower," he explains.

While one set of CEOs is criss-crossing the countryside, another lot will spend 2006 roaming the world.

Having bought out businesses across the globe this year, many corporates will now focus on integrating them with their Indian operations.

Srinivasa Addepalli, head of corporate strategy at VSNL, who has spent much of 2005 in Europe and North America, says, "We have to create an international organisation, since we are doing business across the world and are dealing with global customers and vendors."

In a lighter vein, he adds, "One simply cannot afford to be jet-lagged these days, because you can be in three different countries in the same week."

Kuldeep Drabu, director of Videocon, which bought out the Paris-headquartered Thomson SA for $292 million, hardly sleeps these days because he has to keep track of operations in Mexico, Poland, China and Italy.

"The working hours are much longer now, wherever you are, because we have plants in so many countries," says he. Drabu is grappling with cultural differences and some language problems but he is not complaining.

"Right now, my priority is to relocate production to plants in India and China where costs are lower," he says, adding that the overseas work culture has not been too different, except perhaps in China, where language can be an issue sometimes.

Which is probably why Amit Kalyani at auto ancillary maker Bharat Forge is making a serious effort to learn Chinese after having brushed up his German.

Kalyani spends a good part of his time either in China or in Germany, where Bharat Forge has bought companies, and is busy putting the operations in order. "We have to get our China unit up and running this year," he says. Bharat Forge also supplies auto components to DaimlerChrysler and Toyota.

For Dilip Sanghvi at SunPharma, the priority right now is to hire people for Able Labs in the US, which it snapped up for $23 million. "We have bought just the assets, so we need people," he says, adding that work has been progressing well at the Valeant Pharma plant in Hungary, in which Sun Pharma bought a small stake this year for $10 million.

"We hope to file new products soon and, once we get approvals, the marketing will be done by our subsidiary Caraco," explains Sanghvi, who says he is quite happy with his acquisitions.

Going global is becoming a way of life with Indian corporates: Kalyani says Bharat Forge aims to earn 50 per cent of its revenue from overseas ventures by 2008. So, it will remain on the prowl for any synergistic fit.

As will others. At Godrej Consumer Products, which recently bought out UK-based Keyline Brands, Managing Director Hoshedar Press says his company hopes to earn half its revenue from overseas operations in about five years.

That means Indian firms are likely to continue to shop abroad for companies in 2006, given that there is plenty of cash to spare and appetite too. 

YET SHOPPING ABROAD BECKONS
Acquirer	Company Acquired	Value (Rs crore)
Tata Steel	Millennium Steel	1,818
Videocon	Thomson SA	1,280
Matrix Laboratories	Doc Pharma	1,190
VSNL	Teleglobe Holdings	1,080
Tata Chemicals	Brunner Mond	508
Aditya Birla Nuvo	St.Anne -Nackawic Pulp	450
Dr Reddy's	Roche (Mexico)	271
Bharat Forge	Imatra Kilsta	250
Tata Tea	Good Earth Teas	144
TCS	FNS	117
TCS	Comicron	104
Sun Pharma	Able Labs	104
Apeejay Surendra	Premier Foods (Tea)	60