Financial Daily from THE HINDU group of publications
Monday, Apr 29, 2002
`Usha Intl making the most of China factor'
Mr Sunil Kumar Wadhwa, Managing Director, UIL
NEW DELHI, April 28
BRAND `Usha' has been synonymous with sewing machines and fans in India.
Over the years, the Rs 410-crore company, Usha International Ltd (UIL), belonging to the Siddharth Shriram group, has forayed into other home appliance products as well.
Being a trading company with a diverse product portfolio, UIL is optimistic about its performance in the stagnant consumer durables industry.
Mr Sunil Kumar Wadhwa, Managing Director, UIL, in an interview with Business Line unveiled the company's strategies and plans for the future:
How has the year 2001-02 been for the company? What is the turnover of the company and what are the expectations for the current year? What is Usha International's contribution to the turnover of Shriram group of companies?
The year 2001-02 had been a difficult year for the consumer durables industry. Most companies have made losses. Our major competitors such as Bajaj, Polar and Khaitan have all made losses. The electric fans industry has declined by nearly 15 per cent as per the Indian Fan Manufacturers Association figures. Against this, Usha has shown a growth of nearly 40 per cent in the export and 10 per cent in the domestic markets.
While the financial results have yet to be declared, on an overall basis the topline growth will not happen.
We will report similar turnover as last year of about Rs 410 crore. However, this is good considering that on an overall basis, the consumer durables industry has performed badly and most companies have shown losses/declined in topline growth.
A National Council for Applied Economic Research study reveals that there has been a negative growth in the sewing machine industry? What are the factors responsible for the growth in Usha?
It is true that sewing machines have shown a negative growth as per the NCAER study.
However, UIL's turnover has been almost the same as last year (about two per cent lower). In the case of sewing machines, about 25 per cent of the sales comes out of purchases by the Government/State/other institutional bodies which use machines for various developmental/employment activities. Again, there has been a slowdown in this segment.
It is clear that there is not going to be a great organic growth in the sewing machine business. Hence, we have to expand the market size and open up the replacement market.
Strategies are being put in place to make the above two happen, especially with regard to the introduction of new products which will trigger replacement buying and the brand new buying programme which will ensure growth in certain select segments.
Which products are growth drivers for Usha International?
Broadly, the contribution of various product groups in UIL's turnover is as follows: Fans - 35 per cent, home appliances - 12 per cent, engines & motors - 12 per cent, auto products - 6 per cent, air-conditioners & refrigerators - 2 per cent and exports - 37 per cent.
Contribution of auto components looks smaller because the above represents basically the contribution out of domestic market where UIL is handling only a few States. However, it is a very major constituent to UIL's turnover in the export market.
We are explicitly clear that next year all product lines are to grow. Fans, sewing machines, engines and motors, home appliances and air-conditioners will grow in the respective segments.
Most of the growth will come at the cost of competition as Usha has put strategies in place to take higher market share in the relatively slow/stagnant consumer durables market.
Siel has entered into a joint venture with Daikin for air-conditioners recently. How productive is the joint venture going to be? What is the current investment? And, do you plan to increase this figure?
Usha International is a distributor for Daikin products in Karnataka, Kerala and eastern India. Usha International sells air-conditioners from its own company showrooms acting as dealerships in other States. Daikin does its own marketing. UIL has nothing to do with the overall marketing of Daikin air-conditioners.
What are the strategies adopted by Usha to tap the competitive air-conditioners market?
Last year, the turnover was Rs 10 crore. This year, we are looking at about Rs 25 crore turnover from Daikin products.
Basically, Daikin is at the top-end of the air-conditioners market with specialised products for the discerning buyers. For example, recently UIL bagged an order from one of the respected software companies in the country for specialised application.
Daikin product is not in the mass market. It will take two to three years for this product to grow, but we are sure it will become a leader in this product category in the coming years. UIL expects to grow with Daikin. We expect a turnover of Rs 25 crore in the current fiscal year and it will double in the next fiscal year.
Many of Usha's products are manufactured in China. Is it because it provides for economies of scale? Currently, Usha is importing fans from China. Are you planning to import other products too? Any plans to set up your own plant in China?
UIL is a marketing organisation and sourcing is a very important part of its overall strategy. UIL has gone for sourcing not only from China but from all parts of the world, including India. However, what we look for is a suitable good quality product at good price and more importantly, the choice of the best partner who will make a good product for UIL over a long period of time.
Usha imports selected products from China based only on the consideration that these products are available at an outstanding price and our Chinese partner is able to make them as per our specifications and as per what we want out of them in India.
Towards this, we selected to source plastic table, pedestal and wall fans, and selected small appliances such as kettle and toasters where the economies of scales in India are extremely adverse.
Are you planning to foray into other products in the home appliances category?
Usha is getting into a large number of new home appliances which will be introduced in the next three months' time.
They are a range of four emergency lights, wet grinders for South Indian market, food processor, stick blenders, specialised geysers for multi-storied buildings, pressure pump applications, steam irons, pop-up toaster, and kettles.
On the exports front, where is Usha International positioned and which are the markets you are currently exporting to?
Usha's export turnover last year was about Rs 84 crore. This was about 25 per cent higher than the previous year. We hope this will go up to Rs 100 crore this year. Exports basically consist of the following product categories: fans, auto components and diesel engines. A very large part of these product exports is concentrated in West Asian markets. Auto components are to Europe and South African market.
Usha International has a presence in diverse areas from fans and home appliances to engine pumps and auto components? Do you propose to consolidate your home appliance segment and divest the non-core areas?
Usha International is a trading company where our objective is to market all the consumer durables (home appliances barring consumer electronic and white goods).
Hence, the product offering is diverse from fan to sewing machine to auto parts to jet pumps and home appliances.
While the portfolio may look large, low and diverse market is organised with a clear focus on segmented product division under fans, sewing machine, small appliances, power product division, AC&R, and auto components.
There is a separate product division for institutional/Government business that cuts across all the product lines.
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