Havells bets on Sylvania to light up brand image

LONDON: Electrical equipment major Havells India plans to bring brands from its international subsidiary Havells Sylvania to India early next year, with five swish new showrooms in major cities and a big advertising blitz, at a market entry cost of e20 million.

“Sylvania will become the face of the Havells group for lighting products in India. The brand existed through a licensing agreement many years ago, and there’s still consumer recall,” says Anil Gupta , joint managing director of Havells, sitting with group patriarch Qimat Rai Gupta in the company’s brand new EMEA headquarters in the City of London.

In India, Sylvania will focus on retail oriented brand play, and promote its other brands, Concord and Lumiance, with the architectural segment. In Europe, Sylvania’s portfolio of brands, especially Concord, has provided high-end lighting solutions to places like the Louvre in Paris, Tate Modern and Barbican Centre in London. Havells own lighting products will continue to be sold under its current brand.

The India launch is part of a new-found focus on emerging markets at the $1-billion-plus Havells group. It has set up operations in Malaysia, and will soon hit Indonesia, Chile and Peru. Currently, East Euro PE contributes 10% to Sylvania’s sales, and the plan is to grow this to 25% in three years. Next year, the focus is on Africa, mainly Nigeria, Ghana, Kenya and Tanzania. The company has also opened an office in China, but Mr Gupta says that for organic growth in China, he will need a local acquisition opportunity.

Behind all this flurry of expansion is a bitter lesson that many Indian corporates have had to learn — going global isn’t just about making a fancy acquisition and leaving it alone. The Guptas wanted to go global in 2006 and bought Sylvania from a consortium of PE companies.

Operating in Europe and Latin America, Sylvania went into a tailspin post-recession in 2008, mainly in Europe. “When we bought the company, we insisted on retaining the top management based in New York, as bankers and investors were not very confident we could manage it. There was no integration till the crisis. That was a big mistake,” says Mr Gupta, admitting that the group’s lack of prior international experience was a factor.

Sales in the European and Latin American markets dropped by almost 20%, and in FY10, the group reported a combined loss of `240 crore. Although the Indian operation reported a net profit of `230 crore, Sylvania closed the year with a net loss of `470 crore. “We took a knock in the markets after 2008 as investors thought Sylvania would be a drag on the parent, and weren’t sure that an Indian company could achieve a turnaround,” says Mr Gupta.

In 2008, the Guptas decided to manage the business hands on, sack the New York-based top management, and infuse its European white elephant with large doses of desi-style speed and hustle.

Two years later, after pumping in e40 million, shutting three plants in the UK, Costa Rica and Brazil, cutting 1,400 jobs, revamping operations, and scrapping things like annual budgets and business plans, Mr Gupta says sales are on an upswing, and Sylvania will break even in 2011.

The finishing touch to the restructuring is the move to London as a European HQ, from a somewhat small village outside Frankfurt , to be closer to a financial and talent centre. “We had very good managers in Sylvania, but they were not thinking like entrepreneurs. That’s changed, I think,” says Mr Gupta. Sylvania employees say that this is the first time in years they’ve got an owner committed to growth, instead of being owned by PE funds.

Havells Sylvania contributes almost 50% to the company’s sales and going forward Mr Gupta hopes that it will contribute up to 30% to profits. Most of the growth is expected to come from emerging markets, and leveraging the strengths of both Havells and Sylvania.