Havells Strategy

Presented By

Abhishek Bhartiya – 04 B.Aditya Mohan – 24 Kavita Rai – 44 Nishtha Sharma – 59

26/8/2009

Amarjeet Singh – 08 Gargi Banerjee – 34 Namrata Srivastava – 55 Wasim Shaikh – 131

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Introduction VISION To be a globally recognized corporation that provides best electrical & lighting solutions, delivered by best-inclass people.

MISSION To achieve our vision through fairness, business ethics, global reach, technological expertise, building long term relationships with all our associates, customers, partners, and employees.

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Company Overview • Havells India Ltd. is a billion-dollar-plus organization. • It is one of the India’s largest electrical and power distribution equipment manufacturer company. • Havells India is in four segments namely: Switchgears, Cable & Wires, Lighting and Fixtures and Electrical Consumer Durables. • It is amongst the top three players in most of its products and is fast increasing its market share through aggressive brand building. • In 2006, the Company acquired European Electrical Equipment manufacturer Sylvania’s lighting business in Europe.

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Company Overview • SLI Sylvania, which is headquartered in Frankfurt, is a leading global designer and provider of the lighting systems for lamps and fixtures. • International operations contribute 68 percent of Company’s revenues. It has a strong dealer network of 4000 dealers and 94 branches which offer wide range of products. • It’s majority stakes are family owned, following is the shareholder’s pattern of Havells. Shareholding Pattern (%) 17

Promoters

2 7 14

Warburg Pincus Public 60

Mutual Funds FIIs

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Havells Core Business Area Circuit Protection Devices Building

Industrial

Motors

Power Cables & Wires

Business Space – Power Meters

End to End solution provider for Power Distribution Equipment Industry

Fans

Lighting Consumer, Commercial, CFLs

Power Capacitors

Sub Space – Electrical Power Sub - sub Space – Power Distribution & Electrical equipment manufacturers

Wiring Accessories Modular Switches

Others Bath Fittings & Accessories and Hospitals

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Competition Switchgear Segment: 22% Building Products Competitor's Position • Havells. • Legrand. • Indo Asian. • Schneider.

Industrial Products Competitor’s Position • L & T. • Siemens. • Schneider. • Havells.

Cables and Wire Segment: 18% Cables Competitor’s Position • PolyCab • Havells • Golster

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Wires Competitor’s Position • Finolex • Havells • Anchor 6

Competition Electrical Consumer Durable Segment: 13% CFLs: •Phillips. •Havells. •Osram. •Surya Roshni

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Fans: •Crompton •Orient • Usha • Bajaj • Havells

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Lighting Fixtures: •Phillips •Bajaj •Crompton •Havells

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Diversification timeline 1976 : Rewirable switches and changeover switches

1979 : HBC fuses at Delhi

1980 : Energy meters 1983: Acquired towers and transformer ltd

1987 : MCB’s JV with GEYER Germany

1990 : Manufacturing plant for changeover switches 26/8/2009

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Diversification timeline 1992: Technical JV with Schiele Industrieworke, Germany, for ELCBs. 1996 : Acquired a Manufacturing plant for power cables and wires. JV with Electrium for MCCBs and with Crabtree for MPS 1997: Acquired Electric control and switchboards noida, for customized package solutions

1998: Introduced high-end Ferraris electronic meter in JV with DZG, Germany 2000:Acquired controlling stakes in Duke Arnics Electronics meters, and in industry major Standard Electricals. 26/8/2009

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Diversification timeline 2001: Acquired MCCBs business of Crabtree and merged ECS ltd in the company. 2002 :Attained IEC & CSA certification. Standard electrical became 100% subsidiary of company. 2004 :Manufacturing plant for CFL’s and Ceiling fans Noida 2005 :Manufacturing plant for fans in Uttaranchal 2006 :CFL plant at Haridwar 2007: Acquired Lightning business of Sylvania group. QRG group entered healthcare business acquiring majority stakes(70%) in Central Hospital and Research centre Faridabad 2008: Ventured into Motor business 2009 : Set up of fully automatic switchgear manufacturing plant at Baddi. Consolidation of CFL manufacturing plant at Neemrana for domestic and export purposes. 26/8/2009

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Installed and unused Finished Products as on Mar 2007 (Rs Cr) Product Name Production

Unit

Installed

METERS: 17.32% of the capacity utilized.

Capacity Quantity Cables & Wires 331,650 Electrical Goods 16,520,641 Domestic Switchgears 21,466,738 Industrial Switchgear 2,517,679 EWA 15,331,635 Bath ware 560,903 Meters 145,522 Miscellaneous 26/8/2009

Kilometers

700,000

Numbers

32,400,000

Numbers

39,600,000

Numbers

2,600,000

Numbers

20,000,000

Numbers

750,000

Numbers

840,000

NA Strategic Management

CABLE AND WIRES: 47.32%% of the capacity utilized.

Capacity unutilized in all but industrial switchgear

NA Source: money control.com 2007

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Last Ten Years For Havells…. Thinking Big or Losing Focus? • Sales turnover increased by 9934.52%, from around Rs. 50 Cr. In 1997 to Rs. 5000 Cr. In 2008. • PAT 2.3 Cr in 1997 to 160.3 Cr in 2007. • Ventured in Consumer electrical. • Investment into hospitals. • Ventured into bathroom fittings in lieu of diversifying product portfolio. 26/8/2009

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Diversification

“Havells is not shy of investing in unrelated field. The acquisition marks the beginning of our entry into the healthcare segment. We have spent over Rs 20 cr for the acquisition and are investing an equal amount in expanding the existing facilities in the hospital. In the next phase, we are likely to go for more such facilities” -- Qimat Rai Gupta Source: www.bnet.com

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Strategies Mergers And Acquisitions • Towers and Transformers Ltd in 1983. • 1996 Joint Venture with Crabtree Modular Plate Switches, Duke Arnics, DZG Germany. • LEARNING FROM MISTAKES : Lost bid for Electrium to Siemens by 8 million pounds. Learned how to mobilize funding and to deal with complex issues of merger and acquisitions. • GRAND TAKEOVER March 2007:• SLI SYLVINIA: 235.5 million Euros led by Barclays Capital finances • Entry into Europe, Latin America and Asia Pacific.

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Factors for success 1. International approvals: such as CSA, KEMA, CB, CE, ASTA, SEMKO, SIRIUM (Malaysia), AENOR (Spain), etc. for its various products. 1. Entry into international markets. 2. Strategic Alliances and Continuous enrichment of existing business 3. The production of Fans in tax free zones of Uttaranchal 4. Integrating into stores.

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How Strategic the acquisition was? • Can keep existing manufacturing facilities in Europe, but will create additional capacities in low cost India • Havells substitute Chinese export to Sylvania • Havells will leverage Sylvania distribution in Europe, USA and Latin • America for margin rich switch gear products • Sylvania R & D practices can transform Havells • Havells can use Sylvania multi brand strategy for different markets

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Straight from the horses mouth "Sylvania's acquisition is a first step towards attaining leading position in the global lighting industry with a strong presence in the developed markets of Europe and high growth Latin American markets. This acquisition will provide us a platform with strong brands and established distribution channels on which Havells can build on. Further, the management team responsible for SLI Sylvania's turnaround will continue to remain with the business and grow the combined organization"

Mr. Paul Griswold, CEO SLI Sylvinia 26/8/2009

"The management team is extremely excited about the Transaction and believes that SLI Sylvania is well-poised to effectively exploit the opportunities ahead with significant synergies to be realized by the combined organization" Strategic Management

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Branding and Promotions Aggressive brand building initiative by patronizing cricket, high brand visibility on mass media. • 70cr Spends in 2007-08(100% Inc over previous yr), Rs100cr spends in 2008-09 • Sponsorship of Cricket T-20 W-Cup, India – England Series India – Australia Series, IPL (Indian Premier League) • Sponsorship of Paanchvi Pass, hosted by Shahrukh Khan on Star Plus • 7 new TV Commercials being aired across Product Categories

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Integrating • One Stop Shop for Havells Products • 15 Galaxies opened in different cities. • Target to reach 100 by year end. • The sales turnover of dealers, who have opened galaxy’s has shown significant growth

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Porter’s Five Forces Model Threat of New Entrants LOW

Supplier Bargaining Power LOW

Rivalry /Competition Among existing firms MEDIUM

Buyers Bargaining Power MEDIUM - HIGH

Threat of Substitute Products LOW

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SWOT Analysis Strengths

Weakness

• International approvals • World class infrastructure • Leveraging upon Sylvinia network (10000 distributor). • Global presence (Latin America, UK, Europe) • Largest manufacturing capacity . • R & D facilities.

• High debt ratio. • Globally small Market share • Slowdown of real estates • Slowdown in global markets will effect more adversely now after Sylvania acquisition.

SWOT

Opportunities

Threats

• Global opportunities. • Acquisition of Chinese firms for low cost manufacturing. • Vertical integration into Havells retail outlets. • Leveraging upon motor business in India.

• Unorganized market. • Unrelated diversification • Global slowdown effected business adversely as is largely dependent on Sylvania. • Delays in execution of power projects

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Future… • Plans for acquisition of Chinese firms. • Opened a representative office in Shanghai in a bid to penetrate into the fast growing Chinese electrical equipment market. • Tremendous focus on global market. • Low market share globally, thus miles to go ahead.

But the Question………………… Is the mighty falling into an unfocussed business or is sensibly venturing into unrelated diversification? Is still unanswered…….. 26/8/2009

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References • fairwealth securities • techno research report • havells india site • economic times • money control.com • ibef.org • bnet.com

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Thank You

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