Budget 2010-2011 - PowerPoint

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

                                             Kitchen Appliances /
    White Goods                                  Brown goods        Consumer Electronics
    * Refrigerators                  * Mixers                       * Mobile Phones
    * Washing Machines               * Grinders                     * Televisions
    * Air conditioners               * Microwave ovens              * MP3 players
    * Speakers and Audio Equipment   * Iron                         * DVD players
                                     * Electric fans
                                     * Cooking range
                                     * Chimneys
Market Overview                                                      Airconditioners

                                              1% 8%                  equiupments
                                        18%                          Components

• The Indian durable

                                   1%                                Computer and

  market, with a market
                                  2%                                 peripherals
                                                                     Electric fans

  size of US$27.38 billion                            18%
                                                                     Industrial Electrical and

  in 2008-09, has grown                 19%
                                                                     Mobile phones

  by 7.1 percent over the                                            Other domestic

  previous year.                                                     Others

                             Market Overview                                   %
                             Airconditioners                                  8%
                             Audio/Video equiupments                          12%
                             Components                                       7%
                             Computer and peripherals                         19%
                             Electric fans                                    1%
                             Industrial Electrical and Electronics            5%
                             Mobile phones                                    20%
                             Other domestic appliances                        4%
                             Others                                           3%
                             Refrigerators                                    2%
                             Sewing machines                                  1%
                             Telecommunications                               18%
                             Washing machines                                 1%
                             Watches and clocks                               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 is the largest contributor in this segment and the market has been
     (CTV)        estimated at 15.15 million units in 2009–2010.

                  LCDs are perceived as high-end products.
 Liquid crystal   The LCD market has been estimated at 0.8 million units, registering a growth of
 display (LCD)    over 130 per cent during 2008–09 over the previous year.

 Digital video
  disc (DVD)      Indian DVD market was estimated at 6.2 million units in 2009.

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

  Multimedia      Multimedia mobile phones have been growing at a fast rate, from 800,000 units
 mobile phones    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,
Key Players (1/2)
Company                                 Product category

Blue Star Ltd                           Air conditioners, refrigerators and specialty cooling products

Daikin Air Conditioning India Pvt Ltd   Air conditioners and cooling equipment

                                        Refrigerators, air conditioners, washing machines, microwave ovens, DVD players,
Godrej & Boyce Mfg Co Ltd               digital imaging products and audio visual products

Hitachi Home & Life Solutions(India)
Ltd                                     Air conditioners and refrigerators

                                        Televisions, audio visual solutions, computers, mobile phones, refrigerators, washing machines,
LG Electronics India Pvt Ltd            microwave ovens, vacuum cleaners and air conditioners

                                        LCDs, washing machines, DVD players, air conditioners, microwave ovens, mobile phones,
MIRC Electronics Ltd                    projectors and display products
  Key Players (2/2)

Company                             Product category

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

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

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

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

Whirlpool of India Ltd              Refrigerators, washing machines, microwave ovens, water purifiers and power backup
Industry infrastructure – special
economic zone (SEZs)
• The maximum number of                                                             Other

  approved SEZs are in the                                          21%

  electronics and information                                              4%       Textiles/appparels/
  technology services sector (348                                          4%

  of the 568 formally approved                       62%                  4%        Pharmaceuticals/ch
  SEZs).                                                              5%

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

                          Electronics goods export/import statistics *
                                          2007-08     2008-09 (P) 2008-09 (P) 2008-09 (P)
             2006–07       2007-08       (Apr-Feb)     (Apr-Feb)   (Apr-Feb)   (Apr-Feb)
           (US$ million) (US$ million) (US$ million) (US$ million) % Growth % share in total

Exports      2,690.50       2809.3         2509         3697.1           47.36    2.55

Imports      15,057.3      17320.4         15375.8      18505.8          20.36    7.41
*excluding computer software in physical form
Industry Statistics
Facts & Figures
•   Industry Size
•   Player-wise financial indicators
•   Colour Television
•   Room Air-conditioners
•   Refrigerators
•   Washing machines
Industry Size

(Rs billion)       2005-06 2006-07 2007-08 2008-09 2009-10
CTV                  75.1    95.6     96    110.3   118.8
Air Conditioners     25.9    33.1    42.1    46.9    55.6
Washing machines     13.3    16.4    19.7    20.8    27.2
Refrigerators        35.2    40.7    48.1    51.1    62.4
Total Value         149.5   185.8   205.9   229.1   264.0
Player-wise financial indicators
                                     % of Net             % of Net             % of Net            % of Net             % of Net
(Rs million)              Mar-06      Sales     Mar-07     Sales     Mar-08     Sales     Mar-09    Sales     Mar-10     Sales
Hitachi Home and Life Solutions (India) Ltd
Net Sales                 2575.2        100     3248.9      100      4499.9      100      4735.1     100      6426.3      100
Net profit/loss             148.6        5.8    193.3       5.9      422.5       9.4      210.7      4.4      461.4       7.2
IFB Industries Ltd
Net Sales                 2560.2        100     3247.5     100       4296.8         100   4511.9    100       5453.4      100
Net profit/loss            -138.0       -5.4    352.7      10.9      373.5          8.7   3150.7    69.8      537.6       9.9
Mirc Electronics Ltd
Net Sales                  12203        100     15139       100      15283.8        100 14325.9      100      15027.1     100
Net profit/loss             327.9        2.7    341.2       2.3       345.9         2.3   89.5       0.6       183.7      1.2
Samtel Color Ltd
Net Sales                 7774.3        100     9976.4      100                           9686.9     100      11237.3     100
Net profit/loss              8.3         0.1    -350.7      -3.5                          -994.1    -10.3      764.6      6.8
Voltas Ltd
Net Sales                 18531.4       100     24005.5     100      30558.1        100 40638.5      100      45569.8     100
Net profit/loss             704.9        3.8    1860.8      7.8      2083.7         6.8 2525.9       6.2      3442.2      7.6
Whirlpool of India Ltd
Net Sales                 12540.7       100     14805.8     100      15645.7        100 17249.4      100      22192.3     100
Net profit/loss            -381.0       -3.0     -53.1      -0.4      323.2         2.1  705.2       4.1      1450.2      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.

• 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
  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
  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
 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
• 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
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
Threat of substitutes
• Unbranded products and cheaper imports could enter the market
Butterfly – 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 – 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
Butterfly Appliances Europe Ltd
• Will operate as a Distribution centre in UK /
• Initially start selling through e-commerce.
• Selling to the local super markets / hyper
  markets and chain stores.
Butterfly at a glance

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