Mumbai: The Shah family that controls Anchor, the market leader in electrical switches, has decided to sell its consumer electronics business Anchor Daewoo Ltd, which manufactures refrigerators, colour televisions and microwaves at Ranjangaon near Pune and Noida near Delhi. This follows the family selling 80% in flagship Anchor Electricals Pvt. Ltd to Matsushita Electric Works (MEW) a subsidiary of Japan’s Matsushita Electric Industrial Co. Ltd (MEI), which owns the National and Panasonic brands. “We’re looking to sell the unit which primarily manufactures refrigerators for Haier in India,” says Jadhavji L. Shah, vice-chairman of the Anchor group.
MEW’s investment of around Rs1,750 crore in Anchor Electricals was the largest investment by the former in any acquisition in Asia. The sum is also the single-largest Japanese foreign direct investment into India. MEI, the world’s largest consumer electronics maker, already has several joint ventures in India including in the consumer electronics space. By exiting the consumer electronics business, the Shahs would avoid conflict with the Matsushita group in India, as their businesses would not compete with each other.
Matsushita’s Indian businesses include some with the Salora group and others. Four ventures of the group (two manufacturing consumer electronics, one making batteries and the other battery components) are currently listed on the Bombay Stock Exchange.
“In addition, the group also has a marketing company called National Panasonic India,” says Sushil Jiwarajka, managing director, Salora International Ltd.
“We are talking to a couple of Indian players to sell the company, which has a manufacturing facility with a capacity of 600 fridges a day, 1,200 colour televisions per day and 300 microwaves per day,” says Hemang Shah, the family member who is in charge of Anchor Daewoo Ltd.
Currently, the facilities are largely used to manufacture around 300 fridges a day for Chinese consumer electronics company Haier under the latter’s brand and has an annual turnover of between Rs75 crore and Rs80 crore. Hemang claims the company has a cash break even and is not a loss making venture, despite the low capacity utilization.
Indian colour television market leader LG electronics and the Videocon group, too, have consumer electronics plants in Ranjangaon, a region eligible for backward area benefits from the Maharashtra state government. But when contacted, Videocon group chairman Venugopal N. Dhoot said they were not in the fray to buy the plant. Mirc Electronics Ltd, which markets its products under the Onida brand, too is learnt to have adequate manufacturing capacity. Hemang ruled out Haier India as a buyer of the facility.
Anchor Daewoo did not make much of a mark in the consumer electronics space, having failed to achieve a turnover in excess of Rs500 crore as planned. The venture used to market products under the Daewoo Anchor co-brand under a brand licencing agreement with Daewoo Eelectronics Co. Ltd of South Korea.
Anchor bought out Daewoo’s 76% stake in the venture almost four years ago and assumed management control of the venture, licencing rights for the Daewoo brand for the Indian market.
Unfortunately, it has not been able to make much headway in the Indian consumer electronics market as the distribution channels for electrical products and electronics are rather different, the former being largely business-to-business oriented while the later are more consumer oriented.
The move by the Anchor group to exit non-core manufacturing business comes even as it has decided to retain the consumer staples business under Anchor Health and Beauty Care Pvt. Ltd, which manufactures Anchor toothpaste among others.
However, the group is not exiting the field altogether. Even as it seeks buyers for its consumer electronics arm in order to avoid a conflict of interest with Matsushita, it still faces being in competition with the Japanese company.
That’s because Anchor is planning to initiate discussions with its 24% joint venture partner Ave SpA of Italy to allow it to continue to sell the Ave brand of switches despite Matsushita taking the majority stake in Anchor Electricals.
“We will speak to our partners on this now that the deal has been finalized,” said Mehul Shah, director, Anchor Electricals Pvt. Ltd. The Anchor Ave joint venture manufactures super premium Ave range of electrical accessories, access control systems, fire detection systems, home automation systems and the like.
Mehul says that the Rider brand of electronic controls will also not be impacted by the Matsushita buy as these rights are owned by Anchor. Moreover, Anchor has a joint venture with British General of the UK to manufacture and market British Standard Institute certified Woods switches and modular accessories. Mehul said that the Woods arrangement too will not be impacted by the group’s partnership with Matsushita.