Q&A: Olivier Blum, MD-India, Schneider Electric

'Of the new economies, China & India are critical for us'

Schneider Electric, the $20-billion French engineering major, has identified India’s perennial power shortage as a major business opportunity. It has made a series of acquisitions here, the largest and latest being its buying a 74 per cent stake in Luminous Power Technologies. Olivier Blum, country president and managing director-India, shares Schneider’s strategy in an interview with Sudheer Pal Singh. Edited excerpts:

Schneider has made eight acquisitions over the past decade in the Indian energy market. What is the strategy and where does the current deal with Luminous fit in?
We want to be a global specialist in energy management. We want to make energy safe, reliable and efficient. In India, the demand and supply gap in energy is bigger. And, the economy is growing extremely fast. India is going to be the largest population (in the world) by 2030. We feel this energy dilemma is not going to be resolved overnight through creating more energy infrastructure on the generation side. The strategy at Schneider is to bring solutions to help people to make the most of the energy available for residential, commercial and industrial consumers. This can be done through energy-efficient products or home automation systems or a back-up system. And, when we feel there is a gap in tapping these segments, we try to fill it up through partnership or acquisition.

Why Luminous?
We have understood the Indian market and understand we need to be very cost-effective, to have strong access to the consumer and need to be a very powerful brand, which Luminous is. This was a good strategic step for us to reinforce our presence in the home market. For acquisitions, we look at where we get best synergies, technology and access. In our preliminary discussions with Rakesh Malhotra, we found we share a common vision with Luminous.

What makes the current deal with Luminous different from the other six you made in the past two years in India?
This is the largest of the six deals we have made in India since mid-2009. It brings Schneider in the next league in terms of positioning in the market. Schneider in India has been a business-to-business company and Luminous is more of a business-to-consumer company. In that aspect, it is a radical change for the company. This deal gives us a much wider access to technology and the market.

Why did Schneider opt for a joint venture structure for this deal? Why not a buyout?
Schneider has a culture of partnership. We thought the existing promoter of the company can bring a lot to the success of this JV. We found a JV was the best way to leverage on the capabilities of the two companies, given their knowledge of the Indian market. They will keep 26 per cent stake. We have appointed a new managing director on our side. We will continue to manage operations and they will continue to be involved as a close advisor.

How would this deal boost your investment plans in India?
I would not be able to share any figures. But if you look at the past two years, we have grown fast and do not see any reason why we should not continue as fast in the coming years. Currently, 3.5 per cent of our global turnover comes from India. We have done a lot of acquisitions which have helped to accelerate growth, but even if we do less acquisitions, we should be able to get a bigger part of the opportunities, given our much stronger set-up in India. We have 31 factories and over 900 engineers in India. Now we are much more adapted to manufacture here. Inside the new economies, two countries are critical for us – China and India.

Has Schneider been in talks with L&T to buy its electrical and electronics business unit?
These is purely market speculation and I would not comment.