Company Analysis: Havells India

The fast moving electrical goods industry is very dynamic in todays world. The industry includes companies manufacturing electrical goods, ranging from household articles like cables, switches, capacitors, etc to industrial goods like heavy duty switchgears, tripping MCBs, etc. Todays world is progressing rapidly. There is need for automation in industries. Even homes are becoming modern and developing fast. There is a need for better and safe goods as said above. Recent times have seen a boom of activities like infrastructures ad real estate. This has given a further push to the sales of this industry, creating a competitive market which demands quality, and better affordability, along with safety issues as well. Though the real estate growth is on a downslide, the infrastructure facilities will always be on an improving scene. Even in India, the government is investing heavily on infrastructural facilities. Metro rails or monorail networks are being built across major cities. More and more villages have electricity now. There is demand for better, cleaner, safer and more economical power. The quality of life and expectations are increasing every day.

The companies are undergoing changeovers to make automation possible to cut costs and improve quality and services. The changes allow companies to modernize, cut costs, and go green, in an effort to give back something to the environment. The purchasing power of the common people is also increasing. They want to live in better homes. They want their kids to be safe, their home free from hazards like fire. Also, they want to own appliances that make their life easy. As long as the economy keeps on growing, this industry will continue to be in demand as well.

PEST analysis of the industry

1. Political: There is need of modernization. The technologies are developing faster than before. Older ones are fast becoming outdated. Also, generally the newer technologies are cheaper, and it makes sense for the governments to invest in them. Hence, governments of many countries are encouraging this industry segment.

2. Economical: No doubt, very high investments are required for heavy electrical goods and machinery. The countries have to plan these investments in their annual budgets, and have to choose technologies wisely. If not decided properly, these investments may turn out to be a failure, and lots of money and time wasted.

3. Social: The technologies always are adopted keeping in mind, the purpose they will serve to the society, to the people. The investments made belong to the tax payers. Also, these industries are large scale, and hence have huge number of employees, generating god employment. Safety issues need to be considered, to prevent shock and fire hazards.

4. Technological: Despite being repeatedly said that technologies develop fast, there are quite a few products, sturdy enough to stay in the market for a long time. Hence it makes sense to invest wisely, considering negatives and positives from every angle. The rate of technological advancement varies according to each country, depending on the resources available.

Competitor Analysis: The major competitors of Havells India include Anchor, Legrand MDS, etc. For study purposes, I have selected Anchor for comparison with Havells. Havells being a relatively newer company, and having recently been under brand renovation, has a fresh appeal, compared too Anchor. Anchor also manufactures switches, fans, etc goods. But in peoples perception, Anchor lacks variety. Also they consider Havells to have better quality. The pricing is similar, among the same range products. Havells has worldwide reach, while Anchor is yet to develop considerably in markets outside Asia. Goods manufactured b Legrand are more expensive, and so, comparison isnt feasible.

About Havells
Havells India Ltd is a billion dollar Fast Moving Electrical Goods (FMEG) company, and also a power distribution equipment manufacturer. The major products of the company include cables, wires, switchgears, intelligent swithche,fans, motors, CFLs, etc. the company has so many products in almost each segment, that it is very well known and perceived in the market.

In 2007, Havells had acquired Sylvania, a renowned lightning company, and thus became one of the top 5 lightning companies of the world.Havells owns some very renowned brands like Crabtree, Havells, Sylvania, Standard, etc. The company has 14 state of the art plants in India in the cities like Noida, Baddi, Haridwar, etc. It has presence in over 15 countries apart from India including Europe, Latin America, Africa, etc. The company has over 160 sales and service centres present in the country, under the name Galaxy, which assist customer in needs, domestic or commercial. Havells became the first company, to offer door to door assistance to customers via Havells Connect.

Founded in 1971, by Mr. Qimat Rai Gupta, the company started off with manufacturing energy meters at Tilak Nagar, New Delhi. Gradually but definitely, the company grew quickly making various acquisitions along its way, to become a 1.3 Bn dollar firm today. This has been possible by the collective efforts of near about 20,000 employees working to make a collective appeal. The company boasts of various quality control certificates like Kema, ISO, ISI, etc. which further garner the consumer trust, and improve market credibility.

Financial Performance

Segment wise performance, over major products.

Revenue Mix over FY11-13E

39%

17%

27% 17%

As seen in the above pie, the company has nearly distributed segmentation, with not too much dependence on a single segment. The cables and wires form the major segment, with about 39% contributuion to the company sales. 2nd most important segment is switchgears, which contributes 27%, while distribution equipment and lightning products are equal contributors, at 17%.

The ownership Pattern Havells India is still majorly owned by its promoters while some pprtion of its stocks are opened to public, or owned by FIIs, NRIs, etc. as shown.

Share Holding Pattern (%) as on Mar11

27% 62%

SWOT Analysis

Strengths Weaknesses 1. The companys widespread distribution 1. Globally small market share. network is one of the best in the industry. 2. A slump in the real estate, which has been a major buyer of its products. 2. It is making very good investments in developing countries. 3. The companys acquisition policies will suffer, if the market continues to 3. Vast product range and excellent slow down. marketing through TV commercials. 4. Heavy investment in R & D. 5. First company to provide door to door service.

Opportunities 1. The company can acquire firms in China, where cost of production s relatively lesser. 2. Launching Havells retail outlets is a very good idea to promote its products. 3. The motors and pumps business in India is unorganized. The company should see how it can make the best use of this chance, as there are many farmers in India.

Threats 1. Due to the obvious safety issues, the electricity sector is highly regulated by the governments, and very less freedom is given. 2. Due to unorganized markets, there are quite a few sub-standard products, which are available cheaply. 3. There is very high competition in this sector, the major competitors being ABB, Anchor, Crompton Greaves, etc. who are ready to pounce.

Various Strategies The company has never stopped from improving itself, and is ever-growing in terms of brand recognition, safety equipments, better market share, better perception and credibility. In this section, we analyse and try to understand some key points as follows:

Alliances and Joint Ventures The company has been very instrumental in this aspect. It has been making good alliances/ JVs with other firms, and utilizing collective strength to achieve desired goals. For example, in 2011 Havells India formed a Joint Venture (JV) with the Chinese company Shanghai Yaming Lighting Co. to sell energy efficient products like CFLs in China as well as India. Both companies together invested $59 Mn each in Jiangsu Havells Sylvania Lighting Co. which had a manufacturing plant in the Jiangsu province, China. China, known for its cheap production costs, this JV was very successful and it is expected t give a turnover of $100 Mn, after the first 3 years of its operations. The company could produce affordable lightning solutions, thus, optimizing its resources to generate good returns.

Product Innovation The company, while delivering quality equipments, is also popularly very well known for its marketing strategies. The TVCs produced by the company to advertise its products, have been amongst the best ones. With such attracting and thought provoking TV commercials, the company aims to create a special place in the minds of the consumers, which further authenticate its brand value.