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Havells looks to triple revenue to Rs20,000 crore in 5 years

LiveMint logoLiveMint 07-09-2017 Amrit Raj

New Delhi: Six months after it acquired the consumer durables business of Lloyd Electrical and Engineering Ltd, Havells India Ltd company has set itself an ambitious target of more than tripling its revenue to Rs20,000 crore in five years, chairman and managing director Anil Rai Gupta said.

Gupta, who inherited the company from his father Qeemat Rai Gupta in 2014, is in the process of restructuring his firm in order to achieve the new revenue targets approved by its board last month.

“We are the largest manufacturer of electrical products in the country... largest in terms of market cap; (and our profit) margins and ROCE (return on capital employed) are better due to local manufacturing. That is a clear indication of how we have grown over the years,” Gupta said in an interview at the company’s Noida headquarters.

“We touched about Rs6,000 crore last year and the idea was to triple our business in the next five years through organic and inorganic means. So, the idea was to..., from March 17 to 2022, let us target something like Rs20,000 crore,” he said.

Organic growth is expected to account for most of this, with acquisitions over the next five years expected to add Rs2,000 crore to the total revenue, according to the company’s blueprint.

If indeed Havells manages to achieve this target, it will be a huge achievement for a company that started as Guptaji and Co. at New Delhi’s Bhagirath Palace in 1958 and acquired the Havells brand in 1971. Sure, it did face headwinds at the turn of this century when some multinational companies sought to buy it, but Havells proved to be a tough nut to crack.

“We realized that unless we do R&D (research and development) and local manufacturing, we won’t be able to survive against both MNCs (multinational companies) and the Chinese,” Gupta recalled. “Whatever we earned, we started to put them into these two things.”

“We also focused a lot on the brands. From an industrial sort of a brand, which was more focused on engineers, architects, etc., and a B-grade brand as compared to Siemens India and L&Ts (Larsen and Toubro) of the world, we moved to a mass premium brand over the last 15 years,” he said.

Gupta has divided the business into six units—switchgear, cables and wireless, electrical consumer goods and lighting, industrial switchgear, and Standard as an standalone brand. Each will be run independently by a business head—a first for the company in its 30-year history—who will report to an executive committee comprising directors.

Gupta has hired Saurabh Goel from Bharti Airtel as executive vice-president; Sachin Gupta from the Times Group as senior vice-president and chief information officer; Cecil Prem Treasure from Jubilant Life Sciences as head of HR; and Vivek Yadav from Schneider Electric as vice-president for domestic switchgear business.

A few other senior hires are in the works, Gupta said.

The Havells stock closed 0.09% up at Rs492.70 on 7 September. The stock hit its peak of 525.40 on 11 May 2017. In the year to 7 September it has gained 43.73%. The benchmark Sensex, which closed at 31,662.74 on 7 September gained 18.91% in the same period.

Ravi Swaminathan and Vijayaraghavan Swaminathan, analysts at brokerage Spark Capital, have a positive view on the long-term prospects of the business, largely because Havells has benefited from a shift from an unorganized to organized sector and across its portfolio. That coupled with strong brand recall, and widening distribution network are translating into market share gains.

“Overall growth recovery for Havells is reliant on recovery in the housing market. Any recovery in new housing construction over the medium term (3-4 years) should improve demand for Havells products,” they said. “We would like to monitor Havells’ strategy in Lloyd consumer business -how fast they are able to scale up in the white goods business given distribution networks are different,” they added.

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