Consumer durables firm Voltas is now expanding aggressively into the non-AC (air-conditioning) segment with the launch of a new factory in Gujarat for appliances under ‘Voltas Beko’ brand as a joint venture with Turkey's Arçelik. In an interaction with Moneycontrol, Pradeep Bakshi, MD and CEO - Voltas, talks about the strategy and future plans.
Q: Voltas has talked about manufacturing white goods in India. But, considering that a large number of appliances are imported in India, are there any bottlenecks?
A: There are bottlenecks overall as far as consumer durables manufacturing in India is concerned. Take a product like AC. Here, there is no brand manufacturing air compressors for ACs in India.
Even when it comes to refrigerators, there are a few controllers and compressors being manufactured in India. Similarly, when it comes front-load washing machines, India is still trying to develop technology and quite a bit of it is coming in as imported capacity.
Our first ‘Make in India’ factory in Sanand, Gujarat will be helpful in developing capacities. We will first begin manufacturing direct-cool refrigerators and semi-automatic washing machines.
Q: The company has been predominantly known as an AC brand in India. Will Voltas Beko help change this perception?
A: In about five years, it is our endeavour to have an equal share of non-AC consumer durable products and AC. There is a possibility that share of non-AC products could even go higher by that time. This is because the volumes of the other appliances are much higher in India.
AC volumes are around six million in India. Refrigerator volumes are 12-13 million, washing machines are 6.5-7 million while microwaves and dishwashers would be around 2 million. If you add these non-AC categories, it is three times the volumes of ACs.
However, the shift will take time because we have been in existence as an AC brand for more than six decades. We took the top spot in ACs in 2011 and have topped the list since then. Our market share is about 24-27 percent and widening gap between us and second rank who has less than 15 percent share.
Q: What was the reason to enter a category like air-coolers which is dominated by unorganised players?
A: Voltas realised that there is a big gap in the market in the air-cooler category. Between the fan category and ACs, there is a big void which we decided to fill. There are too many unbranded cooler brands.
We wanted to plug this gap. Within the first two to three years of entering the business, Voltas is between the second and third position in the air-cooler segment in India. We want to be the market leader in air-cooler category in 2025.
Q: Coming to the Gujarat plant that you have set up for Voltas Beko, what is the investment plan?
A: Both Voltas and Arçelik have decided to invest USD180 million (approximately Rs 1,200 crore). This is the investment plan for the next three to four years. Till now, almost Rs 700 crore has been invested. However, as we expand the capacities aggressively we will infuse more funds.
Q: As a large player in the white goods market, do you expect Budget 2020 to help in your growth plans?
A: Our industry bodies like RAMA (Refrigerators and Air Conditioning Manufacturers Association) have presented their views on the high 28 percent goods and services tax (GST) on ACs. Air-conditioners are no longer a luxury product and has become a necessity. Hence, the government needs to look at the GST rates
Among the other changes, we welcome the ‘Make in India’ initiative. But we need to bear in mind that India is at a nascent stage when it comes to technology development. India still has no local manufacturers for key components like air compressors. It will take a while for India to become manufacturing location for these products.