Indian Consumer Durables

Indian Consumer Durables

• • • • •

Contents

Advantage India Market Overview Industry Infrastructure Investments Opportunities

Advantage India

• • • •

Growing young population

Indian population in the age group of 15 to 59 forms the real consumer base for durable companies. This population is estimated to grow to 800 million by 2016.

Evolving lifestyle

Earlier, replacement cycle for television was nearly nine years, and for domestic appliances, it was 12 years. This has now reduced to approximately four to five years. Moreover, the faster rate of technology obsolescence has reduced technology cost, thereby motivating Indian consumers to opt for an earlier replacement.

Growing household income

As per a recent study, household income in the top 20 boom cities in India is projected to grow at 10 per cent annually over the next eight years, which is likely to increase consumer spending on durables.

Easy consumer credit

With the emergence of concepts such as quick and easy loan, zero equated monthly installment (EMI) charges, loan through credit card, loan over phone, it has become easy for Indian consumers to afford more expensive consumer goods.

Market Overview

• • The market is primarily categorized into consumer electronics and consumer appliances.

The compound annual growth rate (CAGR) for the industry has been recorded at 20.3 percent between 2004 and 2009.

White Goods

* Refrigerators * Washing Machines * Air conditioners * Speakers and Audio Equipment

Kitchen Appliances / Brown goods

* Mixers * Grinders * Microwave ovens * Iron * Electric fans * Cooking range * Chimneys

Consumer Electronics

* Mobile Phones * Televisions * MP3 players * DVD players

Market Overview

•

The Indian durable market, with a market size of US$27.38 billion in 2008-09, has grown by 7.1 percent over the previous year.

1% 2% 3% 4% 18% 19% 8% 5% 1% 12% 18% 7% Airconditioners Audio/Video equiupments Components Computer and peripherals Electric fans Industrial Electrical and Electronics Mobile phones Other domestic appliances Others

Market Overview Airconditioners Audio/Video equiupments

Components Computer and peripherals Electric fans Industrial Electrical and Electronics Mobile phones Other domestic appliances Others

Refrigerators

Sewing machines Telecommunications

Washing machines

Watches and clocks Refrigerators

%

8% 12% 7% 19% 1% 5% 20% 4% 3% 2% 1% 18% 1% 1%

Consumer Electronics

• Production in the consumer electronics industry has been estimated at US$ 6.7 billion in 2009-10.

• The segment registered a growth of 18 percent in 2009-10 from US$ 5.5 billion in the previous year.

• The consumer electronics segment contributes about 27 percent to the total hardware production in the country.

Consumer Electronics - Products

Colour TV (CTV) Liquid crystal display (LCD) Digital video disc (DVD) Direct-to home (DTH) Multimedia mobile phones

CTV is the largest contributor in this segment and the market has been estimated at 15.15 million units in 2009–2010.

LCDs are perceived as high-end products.

The LCD market has been estimated at 0.8 million units, registering a growth of over 130 per cent during 2008–09 over the previous year.

Indian DVD market was estimated at 6.2 million units in 2009.

Due to the expansion of DTH and introduction of conditional access system (CAS) in the metros, the set top box (STB) market is growing rapidly.

Multimedia mobile phones have been growing at a fast rate, from 800,000 units in 2008-09 to 1.8 million units in 2009-10

Consumer Appliances

• The consumer appliances market is estimated at US$4.34 billion, with imports valued at US$ 1.22 billion. • Air conditioners (including industrial and office conditioners) constituted 38 per cent of the consumer appliances market, followed by refrigerators at 14 per cent, electric fans at 7.5 per cent, washing appliances at 7 per cent and sewing machines at 5 per cent. • Most imports are in the finished goods categories such as watches, electric coffee makers, food grinders, electric heaters, etc.

Key Players (1/2)

Company Product category

Blue Star Ltd Air conditioners, refrigerators and specialty cooling products Daikin Air Conditioning India Pvt Ltd Godrej & Boyce Mfg Co Ltd Hitachi Home & Life Solutions(India) Ltd Air conditioners and cooling equipment Refrigerators, air conditioners, washing machines, microwave ovens, DVD players, digital imaging products and audio visual products LG Electronics India Pvt Ltd MIRC Electronics Ltd Air conditioners and refrigerators Televisions, audio visual solutions, computers, mobile phones, refrigerators, washing machines, microwave ovens, vacuum cleaners and air conditioners LCDs, washing machines, DVD players, air conditioners, microwave ovens, mobile phones, projectors and display products

Key Players (2/2)

Company

Philips Electronics India Ltd Samsung India Electronics Pvt Ltd Sony India Pvt Ltd Videocon Industries Ltd Whirlpool of India Ltd

Product category

Televisions, home theatre, DVD players, audio products, personal care products, house hold products, computers and phones.

Televisions, home theatres, DVD players, mobile phones, digital camera and camcorders, refrigerators, air conditioners, washing machines, microwave ovens and computers.

Televisions, projectors, DVD players, audio systems, home theatre, digital camera and camcorders, computers, mobile phones, in-car entertainment, video gaming products and recording media.

Televisions, DVD players, microwave ovens, refrigerators, washing machines, air conditioners and power backup solutions.

Refrigerators, washing machines, microwave ovens, water purifiers and power backup

•

Industry infrastructure –

economic zone (SEZs) special

The maximum number of approved SEZs are in the electronics and information technology services sector (348 of the 568 formally approved SEZs).

62% 21% 5% 4% 4% 4% • • • • • The SEZ Act of 2005 was enacted to promote investments and offers the following incentives Tax concessions and tax holiday to units Exemption from central and state government duties and levies (customs, stamp duty, sales tax, etc.) Single window clearance mechanism Permit both foreign and domestic investment up to 100 per cent without any regulatory approval Other Multiproduct Textiles/appparels/ wool Pharmaceuticals/ch emicals Biotech IT/ITES/electronic hardware/semi conductor

SEZ

Other Multiproduct Textiles/appparels/wool Pharmaceuticals/chemicals Biotech IT/ITES/electronic hardware/semi conductor

%

21% 4% 4% 4% 5% 62%

• • •

EXIM scenario

India is a net importer of electronics and appliances. More that 70 per cent of Indian electronics market depends on import of both finished goods and components.

India imported worth US$ 18.5 billion and exported worth US$ 3.69 billion of electronics goods between April 2008 and February 2009 (P).

Exports Imports 2006–07 (US$ million)

Electronics goods export/import statistics *

2007-08 (US$ million) 2007-08 (Apr-Feb) (US$ million) 2008-09 (P) (Apr-Feb) (US$ million) 2008-09 (P) (Apr-Feb) % Growth 2008-09 (P) (Apr-Feb) % share in total 2,690.50

15,057.3

2809.3

17320.4

2509 15375.8

*excluding computer software in physical form 3697.1

18505.8

47.36

20.36

2.55

7.41

Industry Statistics

Facts & Figures

• • • • • • Sections: Industry Size Player-wise financial indicators Colour Television Room Air-conditioners Refrigerators Washing machines

Industry Size

(Rs billion)

CTV Air Conditioners Washing machines Refrigerators

Total Value 2005-06 2006-07 2007-08 2008-09 2009-10

75.1

95.6

96 110.3

118.8

25.9

13.3

33.1

16.4

42.1

19.7

46.9

20.8

55.6

27.2

35.2

149.5

40.7

185.8

48.1

205.9

51.1

229.1

62.4

264.0

Player-wise financial indicators

(Rs million) Hitachi Home and Life Solutions (India) Ltd Net Sales

2575.2

100

Net profit/loss IFB Industries Ltd Mar-06

148.6

% of Net Sales

5.8

Net Sales Net profit/loss Mirc Electronics Ltd Net Sales Net profit/loss Samtel Color Ltd Net Sales Net profit/loss Voltas Ltd Net Sales Net profit/loss

2560.2

-138.0

12203 327.9

7774.3

8.3

18531.4

704.9

100 -5.4

100 2.7

100 0.1

100 3.8

Whirlpool of India Ltd Net Sales Net profit/loss

12540.7

-381.0

100 -3.0

Mar-07

3248.9

193.3

3247.5

352.7

15139 341.2

9976.4

-350.7

24005.5

1860.8

14805.8

-53.1

% of Net Sales Mar-08

100 5.9

100 10.9

100 2.3

100 -3.5

100 7.8

100 -0.4

4499.9

422.5

4296.8

373.5

15283.8

345.9

30558.1

2083.7

15645.7

323.2

% of Net Sales Mar-09

100 9.4

100 8.7

2.3

6.8

2.1

4735.1

210.7

4511.9

3150.7

100 14325.9

89.5

9686.9

-994.1

100 40638.5

2525.9

100 17249.4

705.2

% of Net Sales Mar-10

100 4.4

100 69.8

100 0.6

100 -10.3

100 6.2

100 4.1

6426.3

461.4

5453.4

537.6

15027.1

183.7

11237.3

764.6

45569.8

3442.2

22192.3

1450.2

% of Net Sales

100 7.2

100 9.9

100 1.2

100 6.8

100 7.6

100 6.5

Investments

. . .(1/3)

The high potential of the Indian market has encouraged the durables industry players to expand their presence in several ways.

• • • Expanding production base in India.

Introducing new products in India from the global product basket. Providing support to global projects from India.

• LG Electronics plans to spend US$ 83.3 million on R&D activities worldwide, which includes developing a design and research facility at its Greater Noida unit in India.

Investments

. . . (2/3)

• Samsung India is planning to set up a manufacturing facility for home appliances adjacent to its existing facility at Sriperumbudur, with an estimated investment of US$ 70 million over 2010–11.

• The next phase of investment plan would be to set up a manufacturing facility for home appliances such as refrigerators and air conditioners.

• Godrej is planning to invest US$ 25 million to set up a television manufacturing facility in Himachal Pradesh by mid-2010 to meet the supply of its recently launched television brand Eon.

• The company also plans to invest US$ 14.6 million to double the production capacity of air conditioners at its Uttarakhand plant.

• Panasonic is planning to invest US$ 300 million to set up a greenfield facility for manufacturing appliances including washing machines, refrigerators and air conditioners.

Investments

. . . (3/3)

• Hitachi has recently commissioned its new air conditioner manufacturing facility in Gujarat.

• This facility, with an investment of US$ 10.5 million, is the largest AC manufacturing plant in India under a single shed.

• Daikin Air Conditioning India Pvt Ltd is coming up with an air conditioning equipment manufacturing plant in Rajasthan, with an investment of US$ 31 million in its first phase.

• The plant will have a production capacity of 20,000 units of variable refrigeration volume (VRV) and 1,800 chillers annually.

Attractive states for investment

Key parameters used for determining attractiveness of states: • • • • Incentives for manufacturing sector Consolidation of factors, including skilled workforce Proximity to demand centres Proximity to ports for raw material imports Maharashtra, Uttar Pradesh and Tamil Nadu are attractive locations for investment consumer durables manufacturing.

Opportunities

• The consumer durables market in India is entering a new phase driven by a young population, with access to higher disposable income and easy finance options.

• There is an opportunity for integrated product development in India, as the country is now regarded as a preferred designing base for semiconductor and chip manufacturing companies.

• The growing purchasing power of the rural community has encouraged companies to introduce quality products targeting this low-income consumer segment (‘bottom of the pyramid’).

• •

Key Takeaways

Household appliances industry to record strong revival in demand

We expect the household appliances industry to witness a strong growth in demand, largely driven by favourable demographics like age, rising disposable incomes, low penetration (especially in rural areas), and competitive prices. The sector is forecast to grow at 18 per cent CAGR in value terms, and 14 percent CAGR in volume terms over the next 5 years.

Consumer preferences shifting towards higher-value products across appliances

Consumers are increasingly opting for higher value products (technologically superior, with higher realisations in most cases) across appliances; this shift has been particularly marked in the colour televisions and air conditioner segment.

In the colour television segment, we expect sales of higher-end LCDs, LEDs, and FCTVs to grow at a CAGR of 20 percent in volume terms from 2009-10 to 2014-15, faster that the overall CTV market growth. Demand for the low priced CCTV segment is forecast to dwindle substantially over this same period. Similarly, in the air conditioner segment, split air conditioners are expected to grow at 20 percent CAGR in volume terms, while window air conditioners will grow at a slower pace of 12 per cent CAGR over the same period.

Key Takeaways

•

Washing machines and refrigerators to maintain momentum

In the washing machine segment, demand for fully automatic (FA) machines would outpace demand for semi automatic (SA) machines. This is because FA machines are easier to operate and various brands are available at affordable prices. Incremental demand for FA machines would largely be driven by urban areas, while demand for SA machines would mainly arise from rural and semi urban locales, as these regions often lack continuous supply of water which is essential for functioning of FA machines.

In refrigerators, we expect the direct cool (DC) segment to record a faster growth as compared to the frost free (DC) segment. This is because FF refrigerators require steady supply of water and power, which is not readily available in rural and semi-urban regions. In volume terms, DC and FF segments are forecast to grow at a CAGR of 17 percent and 10 per cent, respectively, over the next 5 years.

Key Takeaways

•

Shift in segmental mix to offset increase in input costs

Over the next 2 years, we expect input costs to rise across appliances. Due to intensifying competition, players will not able to pass on the entire increase in costs to the consumers. However, a shift in consumer preferences towards segments off higher realisations would enable companies to offset the increase in input costs. Therefore, CRISIL Research expects the margins earned on CTVs, refrigerators and washing machines to remain stable over the next 2 years.

Several key trends are driving growth in the sector

• • • •

Income growth and availability of financing

Disposable income levels are going up and consumer financing has become easier

Increased affordability of products

Advanced technology and increasing competition is narrowing the price gap and the once expensive appliances are becoming cheaper.

Increasing share of organised retail

Urban markets are growing at between 7 percent and 10 percent annually, and rural markets at 25 percent with organised retail expected to garner about 15 percent share by 2015 from the current 5 percent.

Entry of heavyweight retail players increasing competition

Competitive evolution of organised retail with entry of heavyweights such as Croma, e-Zone and Reliance Digital, which is stimulating demand through exposure.

Success in the industry would depend on addressing

•

key factors

Market positioning and branding Addressing key customer requirements that act as demand drivers by proactive marketing and establishing strong brand association • Product Technology Providing technologies that benefit the customer through low power consumption, low service requirement, low cost of operation, etc.

• Distribution and service network From saturated urban regions to low-penetration rural areas and tier-II/III towns, distribution networks and brand recognition will continue to play significant roles • Attractive locations With raw materials forming a significant chunk of costs, production facilities located near ports to import cheaper raw materials could provide an advantage

Overall, the sector is a dynamic one, with significant growth opportunities

• • Threat of new entrants Most current players are global players • New entrants will need to invest in brand, technology, distribution Supplier Power Indigenous supply base limited —most raw materials are imported • • • Competitive Rivalry Number of well-established players; several new players entering Good technological capability Many untapped potential markets • Customer Power Multitude of brands across price points —wide variety of choice for customers • Threat of substitutes Unbranded products and cheaper imports could enter the market

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Butterfly

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Company Profile

We are engaged for the past 4decades in the manufacturing and marketing of home appliances like LPG Stoves, Mixer Grinders and Table Top Wet Grinders, Pressure Cookers, Non-Stick Cookware & Vacuum Flask.

First company in India launched Stainless Steel Pressure cookers and Stainless steel Vacuum flasks First kitchen appliances company in India to be accredited with ISO 9000 certification Our products are exported to countries like United States of America, United Arab Republic, Mauritius, Sri Lanka and South Africa. “Butterfly” brand in which our products are marketed, has become a household name in India. Our products conform to many international standards like: British Standards, CE, UL etc..

Butterfly

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Company Profile

• •

Gandhimathi Appliances Ltd., (GMAL), is a member of the Butterfly Group of Companies. Our Company is listed with Madras, Mumbai and Ahmedabad Stock Exchanges. Now spreading its wings into the European market.

Butterfly Appliances Europe Ltd

• • •

Will operate as a Distribution centre in UK / Europe.

Initially start selling through e-commerce.

Selling to the local super markets / hyper markets and chain stores.

Butterfly at a glance

» BUTTERFLY COMPANY PROFILE.exe

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