Grundig Buys Out Philips 14% Stake In Subsidiary

Grundig International, the wholly owned subsidiary of the $2.2 billion German household product manufacturer Grundig AG, has bought out the 14 per cent stake held by Philips in its Indian subsidiary, Grundig Electronics India, following the parting of ways with the Dutch major globally.

The deal, which came through in January 1998, resulted in a hike of Grundig's shareholding in Grundig Electronics India from 60 per cent to 74 per cent.

The balance 26 per cent is held by Solidaire, a Chennai-based black and white television manufacturer.

The change in the equity structure in Grundig Electronics India came in the wake of Grundig AG buying out a majority of the 32 per cent equity shareholding that Philips held in the parent company and which gave the Dutch multinational a management control of Grundig.

 

Following the acquisition, the seat of management of Grundig AG last year shifted from Eindhoven in The Netherlands to Germany. Philips currently holds a mere three per cent in Grundig AG.

With the severance of relationship with Philips, Grundig has chalked out an aggressive growth plan for India.

The company, which currently sells seven models of colour televisions in the country, in sizes ranging from 14 inches to 28 inches, plans to bring in 14 new models in the CTV segment by April-May.

This will be followed by audio and thereafter personal care products including hair dryers, shavers, toothbrushes, and others.

Grundig AG recently froze its growth plans for India which envisages a more than doubling of turnover from Rs 70 crore in 1997 to about Rs 160 crore in 1998.

About 75 per cent of this revenue is expected from growth in colour television sales where the company has shifted focus from the high-end 25 inches and above segment to the smaller-sized models.

"Our partnership with Philips till now had restrained us from being very aggressive in India, as we had a market-sharing arrangement under which we focussed more on the high-end products with Philips focussing on the mass-segment.

But with our parting of ways, we hope to get much more active in all the segments," said Werner Mirsberger, managing director, Grundig Electronics India. Grundig Electronics India expects to break-even during the next financial year with sales of about 60,000 CTVs, up from sales of about 29,000 units in the current year.

The German major has till date invested about $10 million in its Indian operations.

Grundig, which competes worldwide with Braun and Philips in the personal care

segment, hopes to replicate its global superior image in India as well.

It has also identified the country as the centre of its Asian operations, and intends to feed the various south and south-east Asian markets through exports from Grundig India.