India needs to expand manufacturing, service industry: Panasonic Joint MD

Panasonic Life Solutions India (formerly Anchor Electricals) expects to grow 16-17% annually over the next 2-3 years despite the challenging economic conditions and slowdown in consumer spending. The manufacturer of electrical construction materials  aims to be a $1-billion company by FY25, joint managing director Dinesh Aggarwal tells Vikas Srivastava in an interview. Edited excerpts:

How has been 2019 in terms of sales, both in volume and value terms for Panasonic Life Solutions India, especially in the light of consumption slowdown in the country?
In the first 10 years since our acquisition of Anchor we have grown 14% CAGR. In the past 2-3 years, we have been growing 16-17%, this has happened despite recession. In FY19, we clocked Rs 3,410 crore in revenues, which is expected to rise to Rs 4,000 crore in FY20. Wiring, switches and accessories are our largest business and constitute 45% of our business turnover. We have grown in the other products segments as well, such as fans, switch-gears and lighting business.

Lighting contributes between Rs600-650 crore to our revenues, fans roughly around Rs400 crore, wires and cables contribute Rs 800 crore, and switch gears around Rs300 crore. In addition to that, the solar business which we started last year will close at Rs110 crore due to negative impact of safeguard duty and BIS intervention. But next year, we expect around Rs200-crore business from solar. We also added conduit pipes as a business which we expect to close at Rs200 crore in FY20.

We expect to continue to grow 16-17% annually, however, internally we are targeting a 20% growth for the next 2-3 years. Our objective is to reach a $1 billion or Rs7,000-crore turnover by FY25.

What makes you so hopeful of achieving the growth targets?
In switches — our largest business, we have focused more on the economy switches, that is where the volumes have grown tremendously, from the low-cost housing to Pradhan Mantri Gram Awas Yojana. We have been reacting to the change in the market. Even in this category, there is a premium end of the market that is growing. So, we launched product for this category as well which grew over 30%. In other businesses — lighting, wires and cables and fans, our growth essentially will come as we climb up the market share. So, even if the market is stagnant, we will grow our business for two reasons. First, we have strengthened and restructured our distribution infrastructure, like FMCG companies do, for products like lighting and switching segment, to reach even the smallest towns that we cannot reach directly. Second, we have strengthened our projects team. A team that goes to architects, project consultants, developers and contractors, so that we can generate business directly from there. Similarly, we have strengthened our government team. So our confidence comes from all the ground work that we have done.

How much has IoT, artificial intelligence and automation become part of Panasonic products?  By when can we expect them to be available online?
We have a complete suit of IoT products developed by our R&D team in Bengaluru. The first range of products developed is the IoT range for home automation. Currently, we have smart sockets, smart switches, gas sensors and motion sensors as a part of this portfolio. Using this, we can automate any house without any wiring. All that is required is a gateway. If there is Alexa or Google Home, the Gateway will not be required. So using a voice command or a mobile device, one can control the entire home. At present, we are selling only the smart sockets on Amazon, but from next year we will sell all the other products on Amazon. We will also sell a home automation kits.

Which are the new products that you plan to bring to India from your parent in Japan?
Having established our distribution and sales infrastructure in India, we have been in discussion with our parent to bring more products into India. Some of the product categories that we have already added are the housing products. We already launched the modular kitchen in Bengaluru last year, and in the past six months we have expanded to various cities in South and West. Early next year, we will go to North as well. These are luxury premium kitchens in Rs5-10 lakh. There are other products as well for which we are doing a market study, such as electronic toilet seats, heated showers, revolving wardrobes and shoe racks. These are all products which are already selling in Japan and Southeast Asia, but we are waiting for the right time to bring them to India as we are not sure of the acceptance as yet. Even as these products have tremendous market value, they are positioned at the premium end of the market.

What are your thoughts on consumer sentiment and outlook on consumer spending in 2020?
India needs to expand its manufacturing and the service industry. These two industries need a better political and social stability and of course, an easier borrowing from financial institutions and banking system. If the political issues going on across the country die down and it becomes more peaceful, with a supportive Opposition, and a clean-up of banking system, it will definitely help in boosting consumer sentiment. Since for the first time banks NPAs have dropped in this quarter. Banks will be more willing to lend and businesses will start churning good results. Also, it is time when India should look at taking away part of manufacturing business from China with US-China trade differences going on.

Indian manufacturing industry is inherently more capable as it has huge talent pool of engineers, which means, India can design and make modifications to design, and then manufacture the products, unlike China, which essentially is a mass manufacturer. So, if India moves quickly it can take advantage of becoming the design and manufacturing base for European and American companies. The reason why they are going slow is the sentiment in the country and money problems.