1. LIGHTING
44 SEL May-June 2012
HE BLUEPRINT FOR
achieving the next leap of
growth at Havells India Ltd
(HIL) is ready. Having revived the recently
acquired lighting company Sylvania, by
stopping its incessant bleeding due to
recessionary conditions and a managerial
short circuit, Havells has figured out how
to produce truly superior returns from the
buyout firm.
Post acquisition Havells has become a
`5,777-crore Indian MNC, and receives 54%
of its business from the lighting subsidiary's
operations in Europe, Latin America
and Asia. In fact prior to acquisition, the
huge overseas lighting
operation was crying
for rationalisation and
cost efficiency. No
wonder the past five
years have seen Havells
management focussing
on stabilising Sylvania.
And having done so
rather successfully, it
is now reversing its
manufacturing and
outsourcing mix to
40:60 in order to slash
costs of its high-end
products. As would be
expected, it has turned
the spotlight on China,
the 21st
century globalst
century globalst
factory that produces
around 70% of the
world's lighting output,
and where its peers
Philips and Osram
already have presence
through local joint
ventures.
"We are a global
company that will
take advantage of low
cost manufacturing hubs anywhere in the
world. China's work culture and its per
person productivity is higher than that of
any other country. Besides, a joint venture
helps us to enjoy the local government's
incentives in taxation and financing,
which further drives down costs for the
Europe and Latin America bound Sylvania
products," says Havells' president Sunil
Sikka (sunil.sikka@havells.com).sunil.sikka@havells.com).sunil.sikka@havells.com
Sikka informs that it is strategic for HIL
to have a manufacturing base in China that
it can control. And for this it has partnered
with Shanghai Yaming Lighting Co (SYLC),
with whom it already shares a decade
old sourcing relationship. HIL andHIL andHIL SYLC
have signed a 50:50 joint venture and set
up Jiangsu Havells Sylvania Lighting Co,
which will establish a manufacturing unit
with an investment of `527 crore ($ 100
million)million)million in the next three years.
Apart from leveraging HIL's long
standing relationship with SYLC, this
joint venture will also benefit from the
latter's technical muscle. Sikka adds, "Our
partner's technology input will help us in
producing Sylvania's patented designs in
China. SYLC is a 90-year-old enterprise that
has a goodwill in its country for producing
CE, UL, SASO, ENEC and RoHS-certified
lighting products and exporting them to
40 countries." The JV unit is scheduled toJV unit is scheduled toJV
begin production this July.
Sikka clarifies that the joint venture will
not produce energy-efficient LED lighting.
"We have kept certain initiatives exclusively
for Europe. Sylvania is one of the few
companies in the world which are in the GU-
10 and MR-16 retrofit LED manufacturing
club. Therefore, we would like to keep
these innovations closely guarded, as they
are at the risk of duplication and could
be lost to competitors. Our China factory
will produce only HID lamps, CMH, CDMT
CFLs, and lighting fixtures."
But China is not just going to be a
sourcing base for Sylvania. In line with
HIL's strategy to manoeuvre the brand
towards robust markets for ensuring its
sustainable growth, the company is eyeing
the buoyant Chinese project market as
well. "As an exporter, it's difficult to sell
products and penetrate deep into the
Chinese market. The JV will open doors toJV will open doors toJV
the local government's projects and tender
business for Sylvania."
Sylvania is not a China centric story
warns Sikka, it will also capture the growth
momentum in India. "We had planned to
launch the Sylvania range in India around
Diwali 2010. But as the European company
slipped into the red, our priority changed
T
A Ferocious
Resolve
After stopping Sylvania from
haemorrhaging, its Indian owners are
manoeuvring it towards growth markets
A Hawkish Course
Havells’ growth trajectory is littered with acquisitions & mergers
1983
Havells
incorporated
Acquired 60% stake in
Standard Electricals,
acquired 60% stake in
Hyderabad’s Duke Arnics
1992
Collaborated with Schiele
Industriewerke Germany
for ELCBs
1994
Launched IEC design
contractors, relays &
motor starters in India
1996
JV with Hanson
Electrical for exclusively
market MCBs globally
1997
Set up Havell’s Dorman
Smith as 25% shareholder
with Electrium Ltd, UK
1998
JV with DZG Germany;
launched Crabtree switches
2000
After stopping Sylvania from
haemorrhaging, its Indian owners are
manoeuvring it towards growth markets

2. SEL May-June 2012 45
LIGHTING
Strategic Moves for Sylvania
n Identifies Latin America, Europe
& China as volume markets
n Signs JV with ChineseJV with ChineseJV SYLC;
invests `527 crore
n Building mfg base in China
n Reversing manufacturing &
outsourcing mix to 40:60
n China unit to roll out HID lamps,
CMH, CDMT CFLs & fixtures
n Neemrana plant to produce Sylvania
for Indian premium segment
n To target premium segment in India,
Havells to operate at lower end
to restructuring it and ensuring that it stood
on its own feet. Now that the operations
have become profitable again, we will
soon begin introducing Sylvania branded
products in the local market."
Interestingly, even though global
lighting business now dwarfs the other
segments of the company, in India HIL
wants to continue being an electrical
and power distribution equipment giant.
Lighting today contributes just 15% to its
`3,063-crore domestic turnover and
according to Sikka, "We still do not
consider ourselves a lighting company."
No wonder Havells is adopting a
calibrated stance while bringing Sylvania
to Indian shores. "Sylvania will only tap the
country's `300-400 crore high-end lighting
fixtures market, where its parent company is
not present. This market is currently being
fed by European products that require a
lead time of 90 to 180 days. We will capitalise
on this time disadvantage once our fixtures
start rolling out from the automated lines
of our Neemrana factory in Rajasthan this
May. Sylvania's products will compete with
Philips, Wipro and Crompton Greaves in
design, manufacturing and light output ratio
parameters."
This caution is not surprising. After
the Laxman Sylvania partnership came
apart in the early 90s, the Sylvania
licence floated around among a few non-
descript companies for a few years before
disappearing completely. In the process the
trade network and professionals developed
a certain scepticism towards the brand,
which needs to be carefully removed.
Also, many a blatant transplantations of
global brands on Indian shores have failed
miserably, as marketers did not understand
the preferences and concerns of domestic
users and channel partners. For instance,
cereals champion Kellogg’s, which tried to
convert Indians to the western concept of
eating cornflakes for breakfast, flopped. In
1997, Fiat failed to woo Indian middle class
consumers by positioning its Uno as reliable
and sturdy, when cars were more a status
symbol than a utility option. It had tasted
success in Brazil and felt it would do so in
India as well. Tupperware's ergonomically
sound, neat space-saving rectangular spice
box bombed in India. Consumers here
could accept a plastic alternative but not an
altered shape, and Tupperware now sells a
round version manufactured domestically.
No less important is the fact that
Havells’ massive distribution network
consists primarily of electrical traders
who are as different from lighting retailers
as chalk from cheese. Will they take to
premium lighting easily or is a new network
needed, that's the catch.
Well, Havells is too seasoned a player
to overlook these challenges. Hopefully it
will not get blind-sighted by the global
leader status its lighting acquisition has
brought it. n
Mrinmoy Bhattacharjee
2001
Bought rest 40%
of Standard
Entered lighting business
2003 2005
Set up fan factory in
Uttarakhand, R&D at Noida
2006
Crabtree India
merged with HIL
2007
Acquired lighting business
of Sylvania, crossed $ 1
billion in turnover
2008 2009 2010 2011
Changed corporate
brand identity; adopted
RoHS for CFLs
Launched India’s first
HPF CFLs & setup CFL
plant at Neemrana
Entered electric water heater
business; launched Havells in
US & Mexico
JV with SYLC, to produce HID
lamps, CFLs & fixtures for global
Sylvania and Chinese markets
Osram
34,875
In Perspective
Lighting business 2010-11, gross sales in `crore
GE Lighting
14,740*
Philips
56,363
* estimate
WorldWorld India
Bajaj
Electricals
635
s
CG
650
Surya Roshni
750
India
Surya Roshni
Philips India
2,460*
Bajaj
Electrical
635
HavellsHavells
IndiaIndia
457
2861
HavellsHavells
SylvaniaSylvania