BPL reinvents itself after new lease of life

Instead of the earlier focus on setting up factories and retail network, the company is now keen to keep costs low by outsourcing manufacturing and sales

In early 2015, Flipkart was at the receiving end of an unwanted backlash. Several consumer electronic manufacturers, including Voltas and LG, had warned customers against buying their products from the e-commerce portal, saying the after-sales service would not be provided to online purchases.

Flipkart had seen a boom in sales of consumer durables and the threat by LG and Voltas meant a serious loss of business. Amit Bansal, who heads large appliances business at Flipkart, says this prompted the company to seek out brands that it could partner with for its online platform. As chasing the big companies was proving difficult, Flipkart decided on the next best option: revive the once-glorious Indian brands that had gone out of business.

For Bansal, whose parents used a BPL television and refrigerator, the local brand was the obvious choice. The fact that BPL still figured in the top three most-recalled brands in an India Today survey only made the decision easier.

BPL was India’s largest electronic manufacturer in the 1990s. It had a backward integrated model. So every part that went into a TV, refrigerator or washing machine, including the packaging board, was produced in its factories. There were other advantages too. BPL had its own dealers and service network all across India, including in the far-flung regions. As this was a time when Indian products enjoyed an edge over Chinese goods globally, BPL also set up production units overseas. It had a factory in Slovenia to sell products in Germany and the UK.

However, BPL exited the business in 2005 after the collapse of its joint venture with Japan’s Sanyo and as Korean players such as LG and Samsung started to gain market share in India. The exit came even as millions of BPL products were still being used by people globally. Even today, BPL estimates over 18 million of its products are in use.

When Bansal reached out to Ajit Nambiar, the chairman and managing director of BPL, he was surprised at first. A few meetings later, though, Nambiar was convinced there was a market for BPL products. With an initial investment of Rs 30 crores, the company started to work on designing LED television sets. The manufacturing was outsourced to third party vendors and marketing and selling to Flipkart (it earns a commission on every sale).

In August, Flipkart issued a full page ad in local newspapers to announce that BPL products would be available on its website. The response was euphoric. “Our website crashed in a few hours,” says Manmohan Ganesh, general manager, BPL.

RECLAIMING PAST GLORY

• BPL was India's largest consumer durable firm in the 1990s
• It exited the business in 2005 after the collapse of its JV with Sanyo
• It is also present in telecom and medical equipment manufacturing
• Flipkart reached out to BPL to revive the brand last year
• BPL invested Rs 30 crore to design TV sets
• Looks at Rs 1,000 crore revenue from consumer electronics in four years
• Focus will be on online sales to keep overhead costs low

“We were not really geared up for what it could lead to. We got enquiries from customers, dealers started to contact us,” says the soft-spoken Nambiar.

Since its re-entry, BPL has been selling around 10,000 TV sets a month on Flipkart, with bulk of the demand coming from Bengaluru, Chennai, Delhi and tier III towns across India.  The after sales and installation service is provided by Jeeves, a company started by a few former BPL executives and which is now owned by Flipkart. Jeeves provides customer support facility in over 250 towns across India.

Given the huge response to its TV sets, BPL is now looking to mark a full-fledged return to the white goods market before Diwali. The goal is to reach Rs 1,000 crore in revenue in four years.  For Flipkart, says Bansal, BPL currently accounts for 10 per cent of its large appliances business. With refrigerators and washing machines set to be added to the list before Diwali, BPL’s contribution is expected to increase further.

Rethinking business
Founded by Ajit’s father, T P Gopalan Nambiar, BPL during its heydays was a consumer electronics behemoth with its finger in every pie: batteries, telephone equipment, packaging, electronic durables and medical equipment. The company (then BPL-Sanyo) recorded a revenue of Rs 4,300 crore in the late 1990’s. Then, the disintegration began. The company reported a loss of Rs 8.44 crore on a revenue of Rs 40.36 crore in 2015-16.

Nambiar is now attempting to reinvent the business. Unlike in the past, he is now more focused on keeping costs low, and leveraging technology wherever possible. For the consumer electronics business, he is convinced online is the future for BPL; setting up physical stores or entering into partnerships with dealers is not part of the plan even in the future.

Apart from reclaiming the market in consumer electronics, he aims to make BPL a market leader in other segments as well.  “We will build scale which hopefully will bring us back at numbers where we were,” says Nambiar. “We are looking at  Rs 1,000 crore over the next few years in medical, the same is the target for electronics.”

BPL’s medical technology business— it makes X ray machines and diabetic scanners—contributes around Rs 150 crore currently. In addition, the company is also betting big on  the home automation space, or creating technology for smart homes, where residents can switch on and off gas stoves, draw curtains or turn on air conditioners using their smartphones. For this, Nambiar has partnered with a number of builders of luxury projects. He hopes the government’s Make in India initiative. would provide a further boost to his manufacturing plans.

“Your business plan is dependent on consistent policies. Otherwise, we have a strong brand and the right partners,” says Nambiar.

Yet, his optimism is tempered with caution. “We are back in business. We have sorted the issues that initially cropped up in the TV business, but this time I would be more cautious than in the past. I would like to build market share and then look at investing in factories. Even there, you have global players like Foxconn in India.”