Havells Is A Mass Premium Brand: Havells Promoter Anil Rai Gupta
The genesis of this group was with your dad in New Delhi’s Bhagirath Palace in 1958, and he bought the Havells brand in 1971. How has the journey been since then?
I think the journey has been very satisfying. We’ve seen ups and downs along the way. Overall, I would say that it has been quite a forward looking journey. Though it was full of challenges. But ultimately, if you go back to the beginning, then you realise that it’s been a great journey. The fact that we were nobody is a true testament to the entrepreneurial journey that was started by my father. It’s also a testament to the fact that India provides opportunities to entrepreneurs where they can start from almost zero capital. They are able to build on the business and become a meaningful player in that business. I would say that we are the pioneers in the electrical industry. This is also something that could be possible in a country like India where the so-called big did not always become bigger. It about an opportunity that was given to a small man and he grabbed it by the horns. So that way, it has been a very satisfying journey.
You spent some 22 years with your father in the company after finishing your MBA. Then you inherited the company in November 2014. So how has the journey been since then?
I would say that because I had spent 22 years with my father, I had, to a great extent, imbibed his entrepreneurial qualities. I always say that I have been trained as an entrepreneur by a born entrepreneur. And I imbibed those qualities and thankfully we shared common ethos and also principles of doing business.
So I would say that it is more of the continuation of the same legacy. Obviously, the organisation needs to become different as it becomes larger and the market becomes different. So you start getting more and more investment into technology or into R&D just to take a different view of the organisation. But the beauty is that it is a continuing legacy, of principles and ethics of the organisation. I would like to think of it as one of the most seamless transitions in the corporate history of India.
Havells did its first big acquisition with Lloyds which marked its foray into big ticket items such as LED televisions, washing machines, refrigerators, etc. What else would you foray into now? And what has been the experience with these verticals?
One of the reasons for this acquisition was that it was a business or a culture that we understood well. It was a brand and distribution oriented business. So, like in electricals, while there is technology behind it, but brand and distribution are the two key factors. A person, a customer buys the product because he has trust in the brand. It is not a B2B kind of a brand, it is a B2C brand and the entire business model is dependent on the distribution channel, how well you distribute the products. That’s why we call ourselves an FMEG company, rather than an FMCG company, because it involves selling through hundreds of thousands of retailers all across the country. A customer will not buy (the products) unless he has trust in the brand. So this is something which you understood on the technology side. Although it is a different product category, there is some sort of relatability because the future looks very similar; the Internet of things is going to come (into our products), the automated home is going to come. So it’s a product which goes into an electrical socket of homes. All our products are going into the electrical sockets of a home or an electrical insulation. So that is a product which, you know, we felt we could understand.
Since the distribution channel was different from those for electrical products we went for this acquisition. The other thing is that the consumer durables present a huge opportunity — the electrical industry is a Rs 50,000-60,000 crore industry and consumer durables is another Rs 60,000 crore industry. So with this acquisition, Havells enters into a completely new market segment. So it is a related diversification because the channel is different. And it is a very different market and presents a very big opportunity. That’s how we look at this acquisition.
Which are the other domains that you would like to foray into going forward?
On the electrical side, there will be a continuous expansion of product categories, which will be going into electrical installations on the consumer durable side. Lloyd was a very AC-oriented business. However, if you look at the last 20 years or so, the other players like LG, Samsung, Haier, etc., have all used the same strategy of a single branding channel and have expanded their product range in the same channel, which is what Havells has done for long. We had an electrical channel and kept on adding everything in the same channel, like fans, lighting, etc. With this new channel, we have a huge opportunity to expand into more product categories. So, for example, in the last two years, we’ve started putting a lot of focus on LED panels, washing machines, and now on refrigerators. So these four major product categories give a complete package for consumer durable industry. Air-conditioning is still 75 per cent of the business. We are emphasising on LED (TVs), washing machines and will soon be focusing on refrigerators.
Six months after the acquisition of Lloyd, you set a target of Rs 20,000 crore in annual revenues in five years. Is that on track? And what is the latest target that you have set for yourself and the group?
I think we are right on track for that. Last year, we grew by more than 20 per cent and have reached Rs 10,000 crore. So we don’t see that Rs 20,000 crore vision as something which is not achievable. Both Lloyd’s business as well as Havells’ business are on the right growth track. We are expanding into newer product categories and channels. A lot of modern format retail is getting opened up and a lot of online channels are also getting opened up. Rural and semi-urban markets are opening up for us. I think there is a good traction for our product categories and hence we are quite positive about the target that we have set for ourselves.
You bought European lighting goods company Sylvania for 300 million euros in 2007, but you later sold it. That was a major decision. What impact did that decision have on the overall business?
When we took over Sylvania, selling it was not something that we had on our minds. We acquired the company in 2007, but the global financial crisis happened soon after that in 2008. And a lot of European companies, including Sylvania, were in trouble. We turned the company around in 2009-10 and became the first company in India to come out of the red after having done a large acquisition. Furthermore, we successfully turned it around in the fastest possible time and ran the company profitably until 2015 when we decided to sell it off for two reasons.
One, the European markets, which accounted for 60 per cent of the business, continued to remain very sluggish. The second thing was during this time the entire lighting industry was going through a technology change from conventional lighting to LED lighting. Now, we were also doing that both in India and in Sylvania. However, it required a lot of new investments to make the transition to LED in a (European) market that was not growing. So our thought process was that for the next few years, we should concentrate our energies and capital on the Indian market or the Indian subcontinent rather than spreading ourselves too thin on capital allocation in the European markets. So that was the time we started thinking about exiting from Sylvania, and using that cash (which would come into our balance sheet) because we were not a debt-ridden company. That’s how this diversification happened and we invested in Lloyd.
You know Havells is a premium brand. So do you think your future lies in Tier-2 and Tier-3 cities and probably even rural markets?
Of course, the biggest expense of the lifetime for anyone is a house. And when they build a house, they want to put in quality products. So Havells is a mass premium brand. It is not a premium brand. We call it mass premium because it is affordable. But it is of good quality which the customer is now looking for. It’s not a luxury product. We differentiate ourselves as a mass premium brand. Today, you know, when a person is building a house, the percentage of his wealth or salary that (he) is putting into it is even higher than what you find in the urban towns. They would not want to compromise on the quality of the switches or the MCBs or fans they’re installing in the house.
Was the takeover of the consumer durable business of Lloyd’s a turning point for you? If yes, how much will it contribute to the total business in the future?
I would not say it was a turning point but it is the right strategy for our growth requirement. Why I am not saying it is a turning point like Sylvania was at that point for Havells because Sylvania was one and a half times the size of our business. Today, Lloyd is 20 per cent of our business over a period of time. It will become maybe 25-30 per cent but not more because Havells’ growth aspirations are also very high.
Are you happy with the current tax structure or are you of the view that there should be some more rationalisation?
I think, generally speaking, 99 per cent of the work has been done and 1 per cent here or there is left. Maybe air conditioners which are in the 28 per cent tax bracket should be in the 18 per cent slab. But the government is very clear that they will be rationalising all the three tax slabs. I think what they have done within two years of GST implementation is commendable.
Do you think entrepreneurship can be learned or is it something that can be cultivated?
Entrepreneurship can be learned by working under either a trained entrepreneur or a born entrepreneur. Not everybody can be a born entrepreneur. In my organisation, I want every person to be an entrepreneur and it has to be tried. But entrepreneurship can be learnt on the job.
What is your vision for the company? And where do you want to take it in the next few years?
We want to be one of the most respected and the largest electrical consumer durable organisations in the country. I firmly believe that I have to give back to the land and the people who have given me so much.
