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| Global electrical equipment giants shift focus to India |
| Abhineet Kumar / Mumbai Jul 24, 2010, 01:22 IST |
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Global electric equipment companies with deep pockets are targeting Indian makers to increase their foothold in the domestic market, which is growing at 20 per cent annually while there is stagnation in the developed countries.
Yesterday, French giant Legrand acquired the switchgear division of Noida-based Indo Asian Fusegear for Rs 600 crore. Earlier, in March, another French energy major, Schneider Electric, acquired two units of Mumbai-based Zicom Electronic Security Systems, for Rs 224.7 crore. Japan’s Matsushita Electric acquired an 80 per cent stake in Mumbai-based Anchor Electricals for about Rs 2,000 crore three years before.
In India, one reason the demand for electrical products is rising is the growing demand for real estate space. Also, “Indian consumers are becoming conscious about sophistication and aesthetics of the products, so the companies will need to spend more on product de level,” said Murli Venkatraman, president, Indian Electricals and Electronics Manufacturers Association.
Adding: “Indian players find it difficult to sustain the onslaught of cheap products from China and are also not able to match the high-end sophisticated products of international players,” he said. So, they are becoming an easy target for acquisition by international players.
The latest acquisition of the switchgear division of Indo Asian Fusegear by Legrand brought the company Rs 600 crore. The net profit of Indo Asian Fusegear for the financial year ending March 31 was Rs 2.85 crore.
“With such a low level of profit, the company would have never been able to take the product to the next level of growth,” said an analyst with a foreign brokerage, who did not wish to be named. “The Indian companies are succumbing to the pressure of research and development for the new level of products.”
“With this acquisition, the market share of Legrand has grown to 23 per cent from 11 per cent earlier,” said Rajeev Dalal, partner, transaction and advisory services, at Ernst & Young. He estimates the switchgear and wire accessories market to be Rs 2,000 crore in the country. Ernst &Young was the advisor to Legrand for the acquisition. The management of Legrand declined to comment.
“Multinationals still have a very limited market share and the organic route is fairly long-drawn and uncertain. Large industrial and retail growth, coupled with sustained predictable high growth rate in India, is the single biggest driver for this,” said Ashim Bhuwania, director, Ambit Corporate Finance, who advised Indo Asian Fusegear for the deal. The management of Indo Asian was not available for comment.
The game for these MNCs, say industry watchers, is to offer ‘a comprehensive, one-stop solution’ to customers, both retail and industrial. From Schneider to Siemens and Panasonic-Anchor, everybody is positioing themselves as ‘a one company, hundred product offerings and solutions’.
That’s where the integration, from wires and cables to switchgears and motherboards and modular switches and accessories, come into play.
Brand building, too, is getting highly specialised, as the segments are seeing direct consumer interest. Add to that the aspirational aspects attached to housing. Anchor-Panasonic, for example, has initiated an aggressive ‘FMCG styled’ advertising campaign for its Viola switches.
Also read:
JULY 23: Legrand buys Indo Asian's switchgear biz for Rs 600 cr
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