Into The Big League

The acquisition of Lloyd's consumer durables business gives Havells an entry into this high-growth segment. But the company has a challenging task ahead if it has to compete with MNCs and other home-grown biggies.

- Sumant Banerji

IN 2010, a group of distributors and dealers asked Anil Rai Gupta, the Chairman and Managing Director of Havells India, if he had any plan to manufacture air-conditioners (ACs). Havells had by then transformed itself from a pure industrial to a consumer business and established itself in the premium ceiling fan category. It was these fan buyers who were enquiring about ACs. The dealers decided to put the thought into Gupta’s mind.

The company, which has a long history of making acquisitions to enter new areas, was not averse to the idea. Gupta hired a team for a feasibility study. The segment, it found, was under-penetrated; just 2 percent households owned an AC. Opportunities were huge. However, after six months of studying the market, the company concluded that it did not have the technological know-how or distribution prowess to get into the business. The aggression of the Korean companies —Samsung and LG — was another worry.

“There was some apprehension that if they could change the TV industry in a way that companies such as BPL and Videocon were out of the picture, would they do the same in ACs?,” says Gupta. “The threat of the Koreans was clear. We decided against making an organic entry. We thought if we got an opportunity to make an entry through an acquisition, we would do that,” he says.

Last month, the company did just that — by acquiring the consumer durables business of Lloyd for ₹1,600 crore. The addition of Lloyd’s portfolio of ACS, LED televisions and washing machines to Havells’ domestic appliances such as fans, water heaters and lights, makes the latter a full-fledged consumer durables player. This also pits it, for the first time, against global heavyweights such as LG and Samsung, as well as domestic leaders such as Voltas. Will Havells be able to hold on to its own? Or has it bitten more than it can chew?