LG to invest Rs 900 crore over five years

LG Electronics India Private Limited (LGEIL) plans to invest Rs 900 crore in the next five years in the production of optical storage devices, GSM-based phone handsets, and air conditioners. Of the total amount earmarked, Rs 200 crore will be ploughed into the segments In the next calender year itself.

Speaking at a launch of LG's new GSM handset, karaoke systems and Express line of notebooks, Managing Director Moon B Shin said that most of the production will happen at the company's state-of-the-art facility at Ranjangaon in Pune, which will include production of optical storage devices.

The production, expected to be about 30 million units in the first year, will primarily be for export to European markets. Shin adds, GSM handset product line would be expanded to and capacity increased to 18 to 20 million by 2010.

Production of airconditioners at the Pune plant will begin in November, 2006 and will add 300,000 units to the company's existing capacity of 500,000 units a year.

Production of slim TVs, which the company currently imports, would also commence by November next year and would involve additional tooling costs of around $1 million, Shin said.

LGEIL plans to increase the number of GSM models from the existing 12 to 23 by next year and a target of 1.5 million GSM handsets have been set which would comprise 10 per cent of the market share.

The company's goal is to produce 20 million handsets by 2010 at the Pune unit and has already started producing the same from March this year with a capacity of 40,000 to 50,000 per month, Shin informed.

"We plan to make India a major export hub and are eyeing revenues of $250 mn for 2006 and plan to raise the share of exports to 30 per cent by 2007, from the current 7 per cent," Shin said.

The company exports to Africa, Middle East, Latin America and microwaves to Russia as well as Nepal and Bangladesh. LGEIL currently has five notebook models, sales of which contribute about 6 per cent to the total turnover.

Shin said that with a bulk of the investment having gone for the greenfield project in Pune, the company will only contemplate other greenfield projects after the next five years and probably explore locations like Chennai and Bangalore.

The company plans to close the calendar with a turnover between Rs 7,500 to Rs 8,000 core and is on target as on date, signed off Shin.