Company & Industry Report

8/9/2019 Company & Industry Report

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Company Report &

Industry Analysis

I n s t i t u t e o f M a n a g e m e n t , N i r m a U n i v e r s i t yD a t e o f S u b m i s s i o n : 0 3 / 0 4 / 2 0 1 5

Jayant Kushwaha

Roll No: 141119

Division: ABatch: MBA (FT)

2014-16


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Jayant Kushwaha (141119)

Company Report & Industry Analysis

1

IFB Industries Ltd.

IFB Industries Limited originally known as Indian Fine Blanks Limited started their operations

in India during 1974 in collaboration with Hienrich Schmid AG of Switzerland. The product

range includes Fine Blanked components, tools and related machine tools like Straighteners,

Decoilers, Strip loaders and others.

The Engineering divisions are located at Kolkata & Bangalore. The Bangalore unit, apart from

Fine Blanked components, manufactures motors for White goods as well as Automotive

applications.

IFB is into Electronics/Home Appliance industry, Agro Industry, Automotive Industry and

also Travels and Tourism industry where it has recently made an inception.

Introduction

IFB Industries Ltd is an India-based company. The company is engaged in manufacturing and

marketing engineering products. They operate in three segments, namely engineering,

home appliance and others. The engineering divisions are located at Kolkata and Bangalore.

The company's product range includes fine blanked components, tools and related

machines tools, such straighteners, decoilers, strip loaders and others. They also provide

household appliances, including washing machines, dryers, microwave ovens, and

dishwashers. In addition, they manufacture motors for white goods and automotive

applications. IFB Industries Ltd was incorporated in the year 1974 as Indian Fine Blanks Ltd

in collaboration with Hienrich Schmid AG of Switzerland. The company was established with

the objective of manufacturing fine blanking tools press tools and fine blanked components

used in a wide range of precision engineering industries. In the year 1985, the company took

4.84 acres of land on lease at Gangarampur in West Bengal for the manufacture of high

technology machines as well as for future expansion-cum-diversification programmes. In the

year 1988, the company set up a new division, namely Project and Construction division to

take up projects abroad as well as in India. In addition, the company in association with P. A.

Rentrop Hubert and Wagner GmbH & Co KG West Germany set up a joint venture company

called RHW India Pvt Ltd in India for the manufacture of automatic seat adjustment

mechanism. In the year 1989, the company entered into collaboration with Bosch-Siemens

Hausgerate GmbH, Germany for production of fully automatic washing machines and for the

manufacture of the state-of-the-art domestic appliances. The company changed their name

from Indian Fine Blank Ltd to IFB Industries Ltd with effect from July 19, 1989. The company

set up a company called European Fine Blanking Ltd at Wrexham in North Wales, UK with

their European partners for the manufacture of fine blanking tools and components for the

UK and other European markets. In the same year, RHW India Pvt Ltd became subsidiary of

the company and the name was changed to RHW India Ltd. RHW India Ltd entered in a jointventure agreement with Electrolux Autoliv AB (Sweden) for setting up a joint venture


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company for the manufacture sale and export of automotive safety belts and accessories. In

the year 2000, the company launched their new fully automatic washing machine Senator in

the Kerala market. During the year 2002-03, the company launched a highly sophisticated

washing machine 'IFB Digital' with advanced features in line with the latest international

models. In addition, they introduced a new range of Microwave Ovens. The company added250 Nos of retail outlets in different parts of the country. During the year 2003-04, the

company launched the new model washing machines 'Elena' and new model dryer 'Easy

Drier'. In addition, the engineering factories at Kolkata & Bangalore have been certified as

QS9000 by DNV. During the year 2005-06, the company launched the new economy model

washing machine 'DIVA' and high-end model DIGITAL 7 kg. During the year 2006-07, the

company introduced two new models of microwave ovens and started souring of industrial

dishwasher. During the year 2007-08, they introduced Top loaders and one new model

microwave oven.

The Home Appliances Division was started in 1991 with the vision to revolutionise the way

Indians live. Over two decades, we have grown in strength to become a word synonymous

with home solutions. Through a constant evolution of the very best Washing Machines,

100% Clothes Dryers, Dishwashers, Microwave Ovens, Air Conditioners, Refrigerators,

Cooker Hoods and Modular Kitchens, we have helped usher in a lifestyle of convenience and

freedom. Today, millions of Indian households use IFB products, making us one of the most

trusted home appliances brands in the country. Our service network of 250 franchises and

2,200 service engineers ensures we deliver exceptional service across the country.

Vision

To be customer’s first choice

Mission

1. To maximise shareholders value & growth by manufacturing & marketing top

quality products.

2. To be the best in the eyes of our customers, employees, business partners &

shareholders.

3. To be in every home valued at ₹15 lacs+ and achieve the target of ₹4,000

crores turnover by 2016-17.

For our customers: To offer them the best product to buy, an innovative product

that constantly outperforms peers & outstanding service that makes every

customer smile.

For our employees: to provide them an environment in which every individual

learns, grows and prospers.


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For our Business Partners: To enable them to consider IFB’s products & services

as their first choice.

For our Investors: The company should be acknowledged as the one with the

highest degree of corporate transparency that delivers on the promises given toits shareholders.

Values

1. Never let profit centric conflicts get in the way of doing what is right for the

customers.

2. Gove customers a good fair deal. Great customer relationships take time. Do not try

to maximize short term profits at the expense of building those relationships.

3. Always look for ways to make it easier to do business with us.

4. Communicate daily with your customers. If they (customers) are talking to you, they

can’t be talking tp a competitor.

5. Don’t forget to say thank you.

6. Leaner is better

7. Eliminate bureaucracy

8. Cut waste relentlessly

9. Operations should be fast and simple.

10. Value each other’s time

11. Invest in infrastructure.

IFB Quality Policy

To supply products that will exceed customer's expectation due to excellence through

perfection in quality and service.

To maintain an environment for teamwork and continuous improvement, leading to total

quality in all activities of the organisation.

Quality Assurance

The Bangalore and Kolkata works are certified for ISO 9001 & QS 9000 by TUV SDI.

Bangalore unit has been certified for TS 16949 by TUV SDI.

Modern Quality Control facilities are available which includes FERRANTI 3 Co-ordinate

Measuring Machine, ZWICK Micro Hardness Tester & Micro height Tester, MetalographyMicroscope & others.


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Research & Development

IFB has a research and development centre equipped with high-end software’s like Solid

modelling, CATIA, FEA and Mold Flow for the design and analysis of various products.

Besides it also has highly skilled and experienced tool designers designing fine blanking partsand tools to international standards.

Customers

The company’s customers include Maruti Udyog, Ford India, Fiat India, Toyota Kirloskar

Motors, Lucas TVS, Brakes India, Autoliv India, Rane TRW, IFB Automotive, Germany’s

Takata Petri, BorgWarner, Avtec and Bosch chasis.

The company’s international business division has become a recognized Export House

dealing in not only IFB's own products but also third-party exports.

Subsidiaries

IFB, in collaboration with Germany’s RHW and Sweden’s Electrolux, has two joint venture

subsidiaries -- RHW India and RHW Autoliv India -- to manufacture automotive seat recliners

or seating systems and safety equipments.

Strengthening its reach in tier 2 and tier 3 towns

IFB is strengthening its distribution network in tier 2 and tier 3 towns and focusing on

marketing programmes for semi-urban and rural markets. The company has a 24-hour tele-

helpline service for queries. It delivers to over 1,600 locations in India.

Latest Development

The Committee of Directors of IFB Industries had recently allotted 68,00,000 equity shares

of Rs 10 (at par) to IFB Automotive, a promoter group company. The promoters brought in

above fund in line with the direction of Board for Industrial and Financial Reconstruction

(BIFR) in the sanctioned scheme.


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Consumer Durables Industry

Consumer durables refer to those goods that do not quickly wear out and yields utility over

a long period of time. Indian consumer durables industry has become one of the fastest

growing sectors in India, primarily driven by growing Indian economy. With the

uninterrupted inflow of disposable incomes and the development of product technology,

the demand for the diverse consumer durable goods are growing. Indian consumer market

is extremely competitive and fragmented and mainly dominated by international players

(MNCs), representing around 65 percent share due to their superior product as well as

technological advancement. Further, LG and Samsung together account for over 40 percent

of the consumer durables market in India. Consumer durables products are divided into the

three categories such as white goods, brown goods and consumer electronics with key

products such as televisions, refrigerators, air conditioners and washing machines. Present

market size of the industry stands at around $10 billion. 100 percent foreign direct

investment (FDI) in electronics hardware-manufacturing sector is allowed under the

automatic route.

Overview

India is expected to become the fifth largest consumer durables market in the world by

2025. Also, the consumer electronics market is expected to increase to US$ 400 billion,

while production could reach US$ 104 billion by 2016.

The expected market size of consumer durables in India by 2015 is US$ 12.5 billion. Urban

markets account for about 65 per cent of total revenues in the consumer durables sector in

the country. The rural and semi-urban markets are likely to contribute a majority of

consumer sales as the rural consumer durables market is growing at the compound annual

growth rate (CAGR) of 25 per cent.


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The Government of India has increased liberalisation which has favoured foreign direct

investments (FDI). Also, policies such as National Electronics Mission and digitisation of

television and setting up of Electronic Hardware Technology Parks (EHTPs) is expected to

boost the growth of this sector. This growth will be further supplemented by the reduction

in Central Excise Duty from 12 per cent to 10 per cent.

The consumer durables market is anticipated to expand at a CAGR of 14.8 per cent to US$

12.5 billion in FY15. Also, the demand from rural and semi-urban areas is projected to

expand at a CAGR of 25 per cent to US$ 6.4 billion in FY15, with rural and semi-urban

markets likely contributing majorly to consumer durables sales.

Key Categories

The Indian Consumer Durables industry can be segmented into 3 groups namely white

goods, brown goods & consumer electronics.

ConsumerDurables

WhiteGoods

BrownGoods

ConsumerElectronics

White Goods

•Refrigerators

•Air Conditioners

•WashingMachines

•Watches & Clocks

•CleaningEquipements

•Other DomesticAppliances

Brown Goods

•Microwave Ovens

•Cooking Products

•Chimneys

•Mixers &Grinders

•Electronic Fans

• Irons

ConsumerElectronics

•TVs (CRT, LCDs &LEDs)

•Mobile Phones

•Audio & VideoSystems

•Digital Cameras

•DVDs & Camcorders

•Personal Computers


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Trends favouring growth of Consumer Durables Industry

Revival in economic growth to provide impetus to sector

Consumer durables industry is highly correlated to economic scenario as the industry

demand is largely depended upon disposable income. After registering an average growth

rate of 8 percent during FY08-FY12, Indian economic growth had slowed down to below 5

percent over the last two financial years. The factors like high interest rate and stubborn

inflation, low investments and slow execution of infrastructure projects have impacted

country's economy growth. However, Indian economy has shown signs of nascent

recovery and grew by 5.5 percent during the first half (April-September) of FY15 ascompared to 4.9 percent in the same period in FY14. Improved sentiments, the renewed

policy thrust by new government and a pickup in consumer demand are likely to provide

impetus to sector in the coming future. With the gradually growing domestic economy,

per capita income of people in India grew by a CAGR of 10 percent to $1570 in 2013 from

$740 in 2005. Household income in the top 20 boom cities in India is expected to grow at

around 10 percent annually over the next ten years, which is likely to increase consumer

spending on durables products.

(Source: World Bank data)


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Increasing share of organised retail

The demand of consumer durables products are growing at brisk pace in urban as well as

rural markets and one of the key enablers of this growth has been the increasing

penetration of organised retail. Though, there are established distribution networks in

both rural and urban India, the presence of well-known brands and organized sector is

increasing. Unorganized retailers dominated consumer durables segment and the

penetration of modern retail is around 12 percent in consumer durables segment. This

scenario is, however, changing as huge growth potential is attracting large corporate

organisations to expand their retail operations into this territory. Furthermore, shopping

malls are becoming more common in domestic cities, and according to plans announced by

key developers of the country, large number of new malls is expected over the next few

years.

Going forward, the market share of organized retail is expected to rise at fast pace.

Modern retail stores across the country include Reliance Digital, Ezone and Croma are

increasing their presence in the country. These three big retails have presently over 200

stores with around 80-90 percent located in cities with population over that 1 million.

Further, orgainised retailers are also using E-commerce to expand their business. With the

increase in organized shopping malls, Indian customers will have a far larger number of

attractive, comfortable, brand-conscious outlets in which to shop. This will have a positive

impact on the consumer durables industry, as organised retailing would not only

streamline the supply chain, but also facilitate increased demand, especially for high-end

and branded products.

Rural Markets offer a big opportunity

Although, over 60 percent of the country's population resides in rural India, it represents

only 35 percent of the total domestic sale. India is still an urban centric market with around

two-thirds of the total domestic demand of the consumer appliances triggered by the top

40 cities of the country. However, the ratio of demand is transforming on the back of

growing demand in rural markets. Growing rural income with higher non-farm income,

increasing availability of power, rising product awareness through advertising and

customized products for rural consumers are the major factors for such a tremendous

change in the purchasing power of the rural customers. Lower penetration of durables in

rural market is also generating huge demand for first time buyers in that market which is a

big opportunity of durables manufactures. Rural Consumer durables market is growing by

average annual growth rate of around 30 percent and thus the manufactures are also

increasing their distribution networks to rural towns so that they can tap these markets as

well. Furthermore, various companies are coming up with customized products which suits

for rural demand. Rural consumer durables market is expected to post much faster growth

than the urban markets in future and its share is expected to reach near 45 percent in nearfuture.


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Government's favourable initiatives

In order to boost the domestic consumer durables sector, the government of India (GoI)

has taken various initiatives like easing duty rate and providing more benefits under the

EPCG, EHTP schemes. Excise duty for manufactures reduced to 12 percent and basiccustoms duty on important products as well as key raw materials eased to 10 percent.

Further, excise duty has been reduced to 6 percent on LED lamps and LEDs required for

manufacture of such lamps. 100 percent FDI is permitted in electronics hardware-

manufacturing through automatic route. Under Electronic Hardware Technological Park

(EHTP) scheme, the government increased the number of incentives such as duty waivers

and tax incentives to companies which replace certain imports with local manufacturing.

Furthermore, Export Promotion Capital Goods (EPCG) allows import of capital goods on

paying 3 percent customs duty.

Issues and Concerns

Increasing Competition: The consumer durable market has been transformed by the entry

of over a dozen new brands and thus the competition among players has

intensified. Growing competition among players has forced them to spend more on

advertisement and also lessen their pricing power, thereby lowering industry margins.

Need of large investment in technology: Consumer durables products are required to

undergo persistent changes to meet the varying demand of consumers due to the

continuous change in the psychographic and demographic profile of the customer. Thus,

the firms would continue to rely heavily on advancement in technology. Furthermore,

major raw materials such as metals are exhibiting increasing trend over the past few years

posing margin pressures.

Poor rural distribution: As around 65 percent of India's population still lives in rural areas,

availability of products to rural village located in remote area is difficult due to inadequate

infrastructure and poor road connectivity.

Inadequate power supply: India is still power deficit county and has been witnessing peakhour power deficit at around 3-5 percent with the southern India remaining the most

affected region registering a peak power deficit of 8-10 percent. Therefore, the sector's

growth is impacted by the inadequate infrastructure of the country as regular power

supply is imperative for any consumer electronics products, which depends majorly on

power.


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Consumer Electronics market in India

Overview

Indian Consumer Electronics market has been witnessing sustained double digit growth ratein the past few years. Increasing product awareness, affordable pricing, innovative products

and the high disposable incomes have aided in the strong growth in the consumer

electronics market in India. Rapidly shrinking replacement cycle for consumer durables is

observed as sustaining demand in urban India. The existing low penetration rates and the

increasing usage of consumer durables have catapulted rural India to the high demand

generating segment. The consumer electronics market in India is characterized by

technological advancements, innovative product introductions, price fluctuations and

intense competition.

Penetration levels

– CTV’s (Color televisions)

Indian television market is highly under penetrated compared to China, developed

countries and world average.


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Set top boxes

The set-top box (STB) market is growing rapidly, due to the expansion of DTH

and introduction of digitalisation of Cable TV networks in metros & tier II cities.

The DTH market was worth USD 2.2 billion in FY13; the subscriber base

reached 51 million from 23 million during 2010-13, subscriber base is expected

to reach 200 million by 2018, thereby making India one of the world’s largest

DTH markets. Evaluating the present market scenario, around 80% of the totalcable TV subscribers are still on analog based networks, which is expected to

be covered under the 3rd and 4th phase of digitalization.


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SWOT analysis of the Consumer electronics sector in India:-

Strengths Weaknesses Opportunities Threats

Presence ofestablished

distribution networks

in both urban and

rural areas.

Demand is seasonaland high during

festive season.

In India, penetrationlevel of white goods is

lower as compared to

other developing

countries.

High import duties onraw materials.

Presence of well-

known brands.

Demand is dependent

on good monsoons.

Unexploited rural

market.

Cheap imports from

ASEAN at 0% or

concessional import

Duty & imports from

China

Home appliances

Overview

Demand in urban markets is likely to increase for products such as LED TVs, laptops, split

ACs and, beauty and wellness products. In rural markets, durables like refrigerators as well

as other home appliances are likely to witness growing demand in the coming years. The

rural market has recently experienced around 30 per cent growth rate in demand for

electronics and home appliances. Urban growth is likely to be driven by new

technology/innovative products, lifestyle products and replacement demand.

Penetration levels

Refrigerator has the highest penetration in India of 31%.


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Air Conditioners

The Indian AC market accounted for sales of 3.6 million units in 2013. AC’s are perceived as

high-end products; current penetration stands at 6.8 per cent including Window and Split

AC. The segment had a 13.0 per cent share (2013) in the consumer appliances market. High

income growth and rising demand for split ACs are the key growth drivers. The room air-

conditioning market represents approximately 50% of the total market, with the other 50%

comprised of central and specialist air-conditioning systems. The room AC market can again

be divided into two sub-segments. On the one hand the residential segment which now

constitutes a majority 60% market share and on the other hand the commercial segment

which represents a smaller 40%.

Market sizes and growth rates

– Washing machines

Washing machines are the second largest contributor to the consumer appliances market(after refrigerators); in FY 2013 total sales was around 7.5 million units. Fully automatic

washing machines are garnering an increasing share of the market due to reduction in prices

and higher disposable incomes. LG Electronics continued to be the leading player in home

laundry appliances in India with a share of 25% in 2013, followed closely by Samsung

Electronics (23.2%). The major chunk of this growth is expected to be driven by newer

households purchasing washing machines, as well as a greater number of households

replacing their semi-automatic washing machines with fully automatic washing machines. 6-

9.9 Kg is the most popular category in India with 72.2% share in the total sales.


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Microwave ovens

Due to the convenience of mobility and ease of operation, freestanding microwaves

continue to dominate the Indian market in 2013, accounting for almost all volume sales. LG

Electronics continued to be the market leader in 2013 with a volume share of 32%. Samsung

Electronics ranked second with a 22% share followed by Whirlpool with just over 11% and

Bajaj Electricals with 10%.


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Refrigerators

Refrigerator sales stood at ~14.0 million units in 2013. This segment makes up 18.0 per cent

of the consumer appliances market. The market share of direct cool and frost free segment

is 76.3 per cent and 23.7 per cent respectively. Key growth drivers are lower prices and

rising demand for frost-free refrigerators. Fridges with a capacity range of 142-340 litres

dominated fridge sales over the review period, representing 74% of total volume sales. In

fact, the 165-litre fridge was the standard in almost all households until the arrival of

competition and the need to differentiate, coupled with economic development, which led

to the development of higher capacities. Over the review period, fridges with 341-540-litre

capacities continued to gain momentum to account for 20% of total fridge volume sales in

2013. Market share of LG is 24.50% and Samsung is 20.60% in 2013.

SWOT analysis of the Consumer home appliances sector in India

Strengths Weaknesses Opportunities Threats

In recent years,

organized sector

has increased its

share in the market

vis a vis the

unorganized sector.

Poor government

spending on

infrastructure.

Rapid urbanization cheaper imports

from China &

Concessional duty

imports under FTA

from ASEAN

Countries are

forcing threat tolocal manufacturing

Easy availability of

finance.

Low purchasing

power of

consumers.

Increase in income

levels, i.e. increase

in purchasing

power of

consumers

Poor infrastructure;

Non-Availability of

regular power

supply, which is

imperative for

consumer

electronics product

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