New Delhi: The Paris-based maker of electrical equipment, Schneider Electric SA, is looking to tap the growing Rs5,000 crore luminaire segment in India with its maiden venture into the LED (light emitting diode) lamps market. The launch by Schneider Electric India (SEI) will also mark the 174-year-old company’s global entry into luminaires.
“One of the reasons why it would be launched here first is because it has been imagined, designed, engineered and produced here in India,” said Jean-Pascal Tricoire, president and chief executive officer, Schneider Electric, who was in Delhi for the launch.
SEI is tapping the rural market first, undeterred by the initial high cost of the product and the less-than-modest success of the category in urban markets. Branded In-Diya, it will retail at prices ranging from Rs550 to Rs4,500.
Bright idea: Schneider Electric CEO Jean-Pascal Tricoire. Ramesh Pathania/Mint
Tricoire says the first thing people want when they have access to energy is lighting. “We decided to go with disruptive innovation and to use latest available technology because at the end of the day, the ratio between the function you get and cost it represents is better than the previous solutions and we have got many people working on it. This function is new, this solution is innovative, but it’s also not expensive with respect to what it brings to the people,” he said.
Tricoire’s argument has its sceptics.
“It’s an expensive technology, especially if you want to start at the bottom of the pyramid,” said S. Venkataramani, vice-president, board of administration, of the Vienna-based International Commission on Illumination and former head of Lighting Business at Philips India.
Typically, the luminaire segment in India is a crowded market with 20-25 companies in the organized sector. Net margins are tight, with the larger players making 5-7%.
The company is betting on volume growth and economies of scale to bring down costs. It will also be looking to tie-up with microfinance institutions and utility services such as electricity boards.
“One of the ways we are looking to popularise the product is by offering an external chargeable battery which can power the LED lamp for up to eight hours in the event of a power cut,” said Tricoire. The charging station will be managed by a local entrepreneur who will rent out batteries for Rs5 per charge per day, according to the company. The LED lamp can also run on solar power, the company said.
According to Venkataramani, affordability will present a challenge when it comes to scaling up the business.
“Even in Europe and the far east, where LED has been in vogue for some years now, usage is primarily in the non-residential segment,” he said.
SEI, which posted a revenue of Rs4,000 crore in 2009—divided equally between domestic sales and exports—has also set itself a target of Rs8,000 crore in local sales by 2013. And while it made two acquisitions last year—Conzerv Systems and Meher Capacitors—Tricoire said the focus will be on organic growth.
“While I’m not ruling out acquisitions, I would say we always prefer to develop organically, ourselves. So, we’re going to grow like we’ve always done in India—by recruiting, training people to our business which is energy management, bring in innovation in the Indian market, (and) ensuring a very strong logistics and supply chain to be able to service our customers in time.”