Havells has been Atmanirbhar for many years: Anil Rai Gupta

If we want to develop industry in India, we need to give a little bit more time for all kinds of components to be manufactured in India, says Chairman & MD, Havells India.

Today we will talk about the India Revival Mission and the Atmanirbhar Bharat Mission. The government has been pretty vocal about going local. Prime Minister Modi has made his push on the Atmanirbhar Bharat (self-reliant India) theme as well. Do you think it is time we stop being dependent on China for white goods as well?
Absolutely high time. Talking about Havells, I would say this industry has seen Atmanirbharta for many years. We had realised earlier that we cannot depend upon China for a long period of time if we want to give quality products and good service to the consumers. Much before Atmanirbhar Bharat and Make in India campaigns started, we have been investing heavily into world class and world scale manufacturing for about 15 to 20 years ago for all products which were traditionally imported from China. This included miniature circuit breakers, switch gears and lighting.

We were the first ones to set up a lighting manufacturing facility in India while China was supplying 60% of the lighting to the world. So, there was a long term view of economics as well as a feeling that if China can do it, why can’t India? So, we started investing heavily and almost 95% of what we sell is manufactured in our own factories in India and these are globally quality competitive as well.

I think it is a little bit of a misconception that we are too dependent upon China. The figures may say so but we do not need to be. India started the Make in India programme six years back. Very recently, the Prime Minister has been talking about Atmanirbhar Bharat. As manufacturers, we really need to step up our will and determination so that we can manufacture products at globally competitive prices and quality.

Self reliance is one step. One has to really go a step further. Do you really think the electronic white goods industry in India can compete at a global level because with China, it is not just about the scale or the size it is also about quality?
You are right. China has all kinds of manufacturers. Along with high quality manufacturers supplying to the western part of the world, there are low quality, low cost manufacturers as well. If you put in good quality inputs -- be it raw materials, machines or technology -- there is no reason why you cannot bring out a quality product. So you cannot be stingy about putting in capital or technology. You need to invest in R&D, in machines, in scale and that is what China has done over the last 30 years.

Many of the industries have started doing so in India. In fact you will be happy to know that most of the consumer durables are actually manufactured in India. Yes, there is some dependence on China but over a period of time, even in the air conditioners which you talked about last two or three years, there has been a tremendous shift to manufacturing in India.

When we acquired Lloyd two years ago, the entire sales were happening from imports from China. Today 100% of what we sell in India is completely manufactured in India and these are globally quality competitive products. We are now open to export to the world and we are getting traction from the rest of the countries because people do not want to depend on one country. They are looking out for competitive manufacturers and India has a huge opportunity to become more global.

Do you think a manufacturing shift from China to India may unfavourably impact the production cost and pricing power? Correct me if I am wrong here.
Initially, there could be some short-term disturbances, some increase in cost and that is why a little bit of a pragmatic approach is required. As long as we are not dependent on foreign capital or are providing employment in India -- a little bit of dependence on any country whether it is China or any other country is okay -- this is a global world.

Yes, we are becoming more local but it is a global world and you should keep buying products from where you get the best quality and price. And if we want to develop industry in India, we need to give a little bit more time for all kinds of components to be manufactured in India. It is not a long-term process. It is a little bit of a medium-term process and the government is really looking at it and hopefully things will get much better soon.

For the greater part, we have the capability to manufacture the finished products in India for the Indian as well as the global consumers.

Let us talk about the segments that you operate in -- the lighting and fixtures sector. That is one of the key components of the LED chips which is currently imported from China. What is the strategy to now source these domestically in order to become more self reliant?
India is not a big manufacturer of LED chips. India manufactures lighting fittings, lighting products and final finished products, especially in the last three or four years and mostly larger companies have invested in manufacturing.

Right now, we do not have plants to manufacture LED chips in India. But as I said, the world is open for India and over the next one-three years, there will be more investments coming into India to make LED chips. So this concept of dependence on China is a misconception. Whether it is LED chips or compressors or motors for any products, India has the options. We can continue to buy from China if required but there are many options available all across the world. But going forward, in two or three years we will have options within the country as well.

Lloyds has a high dependence on imports for most of its products -- 19% of your revenue. Do you plan to curtail imports from China? What is the outlook for the Lloyds business?
We acquired Lloyds in 2017. As you rightly said it had high dependence on imports, 70-75% of the revenues comes from air conditioners. Everything was imported from China. From last year, ever since we invested Rs 400 crore to set up a world class facility, we do not have to depend upon China.

Everything is manufactured in India and for the rest of the products like washing machines and refrigerators, there is practically no dependence on China. So it has completely turned around in the last two and a half years from being completely dependent on China to being completely manufactured in India.

Are there alternatives for components available in the domestic market? By how much would this increase your raw material cost? Also, now Havells has about 90% of in-house manufacturing compared to its peers. Do you see yourself getting more into manufacturing going forward?
The way we think about it is that whatever we sell, we should have a complete control on the supply chain. Whether we manufacture in-house or we get it manufactured through outsourced suppliers, for better control on technology cost and quality, we have always invested in manufacturing.

As compared to our peers, we have invested heavily on manufacturing and though we have turned out to be a more brand and distribution oriented company, it is completely backed by R&D and manufacturing. So, we are already into manufacturing and that has been the core philosophy of Havells for decades.

A lot will also depend on demand revival. What are the feelers that you are getting on ground about an overall demand resurgence post the lockdown getting lifted when it comes to consumer goods?
First of all, I will not be talking specifically about the company because we are going to announce the results shortly. But generally speaking, the consumers have come back and are buying products. The consumer products are seeing demand revival. The building installation products are also seeing a demand revival.

Somewhere there is a little bit of slowdown in the industrial sales which we were already experiencing even in the pre-Covid era. It is taking a little bit more time for all industries to be coming on stream, all construction sites to be coming on stream. Over the short to medium term, if things continue like this, we should definitely see a recovery very soon.

Talking about recovery, all the indicators in the data points indicate that rural India is bouncing back faster as opposed to the urban segments of the country. Do you think when it comes to consumer goods as well, the demand revival is going to be perhaps lead by tier II and III cities?
Relatively so because the larger cities -- the metropolitan towns -- are still facing some issues of either lockdowns or construction sites not coming back fully on stream. So there is a better revival in the tier II, tier III cities. Rural is quite new for us. Earlier they used to be fed from semi-urban towns. But now we have a direct presence in the rural areas.So both in semi-urban towns, tier II and tier III cities, tier IV and tier V cities as well as some rural areas we are definitely seeing a relatively better outcome as compared to larger metropolitan cities.