New Delhi: The $4.1 billion (Rs20,049 crore today) company behind an array of acoustic brands such as Harman Kardon, JBL, Mark Levinson and Infinity, Harman International Industries Inc., is tuning its strategy for the Indian market with an aim to grow its India revenues five-six times from the current $50 million.
Dinesh C. Paliwal, chairman and chief executive officer of the company, visiting India for a retail outlet inauguration in New Delhi, shared in an interview the group’s strategy to increase sales and research and development (R&D) focus in India. Edited excerpts:
Ambitious plans: Dinesh C. Paliwal says his firm will exit India if it fails to achieve at least the second highest market share in the country. Harikrishna Katragadda / Mint
Harman’s brands have been in India for some time now. What are your plans in the future?
The market in India is much larger than we are penetrating currently. We realize we are not doing business in India with full force, both in terms of marketing and sales. There is also a lot of R&D that needs to be done here. The first step we have taken is to register a company—Harman International India Ltd. Now we are putting in place a leadership team. One clear demonstration is that we have already hired Lakshminarayan (who uses only one name), an ex-hand of Bosch India, where he was responsible for various key positions as the managing director of India operations.
Click here to watch video
What will be your focus area in India? Do you think India can play a role in supporting your global operations?
We will be clearly focusing on R&D in India; there is an R&D lab in Bangalore with a team of 100 people, which has been operational for the last six months. Currently, most of our money on R&D is being spent in Europe. But, going forward, a substantial amount will be invested in India.
India will be serving as a global hub for certain technologies such as bluetooth (wireless) connectivity, three-dimensional navigation systems and the country will be driving the global market of infotainment devices, which include Internet, audio and video for the mid-end market. We are also moving expats from the US and Europe to India.
Is the current economic slowdown affecting your company? Especially given the downturn in sectors such as the automotive industry?
Absolutely. We have felt the slowdown pretty hard and the sector is in an unfortunate situation. It’s bad for us because of our dependence on other sectors as you mentioned. Seventy per cent of our total turnover comes from the automotive sector. But I would like to mention that our company is in a much better position as compared with competitors. We are a cash-rich and debt-free company. We spend 10% of total sales on R&D every year. I also think that when there is a downturn, it is the right time to invest in emerging market, and we are going to invest heavily in India and China.
What are your growth targets and expectations from India?
We are looking at a double-digit growth every year. Currently, we get around $50 million from India through our distributors and business from the original equipment manufacturers. In the next five years, we would want it to grow to $250-300 million. Turnover-wise, India may not be big but its contribution in terms of R&D will be much bigger. We are getting all the brands to India and the year 2009 will be a challenging year in terms of strategic planning. Coming to market share, if we are not No. 1 or No. 2, we will get out, as it is not profitable to be lower than that.
Why do you think India can grow and be an important market for your company despite the economic downturn around the world?
In India, the professional and consumer division is expected to grow bigger as our target group here is the set of 100 million people who have the money and are looking for brands. Also, there is a lot of scope to grow in the country as the professional sector lacks quality drastically. Also, there is enough scope to grow here as the Commonwealth Games are approaching, lot of rock concerts happen here and there are also so many places of worship that can be tapped. Bollywood also uses and requires world-class sound equipment.
Are you considering manufacturing in India?
Harman has 35 manufacturing facilities across the globe, predominantly in Europe and the US. But now we are truly globalizing the company and our mandate is to take our footprint worldwide. I am not restricted to have manufacturing operations in India, but (am) not sure. However, we may soon start doing some assembly in the country.
How strong is your team likely to be, going ahead?
Right now we employ 100 people. In the next five years, the number will be at least 10 times, that is around 1,000 heads. But the challenge is to find the right talent and train them.