On a sunny winter afternoon, I’m sitting in a sparsely done-up office in the ‘devil’s lair’. The‘devil’ for those of us growing up in the 1980s and 1990s was an iconic figure with green horns and a cape, which appeared in advertisements for Onida televisions. The commercial would end with the tagline: “Neighbour’s envy, Owner’s pride.”
As I’m mentally counting the number of actors who played the character, a question brings me back to the present. “Do you know about WeWork?” asks Vijay Mansukhani, managing director, MIRC Electronics Ltd—the makers of the Onida brand of electronic products. I barely finish saying that I’m aware of the co-working firm, when Mansukhani says he and the staff in the building, Onida House, should probably move into one of the WeWork co-working office spaces.
I’m aghast. Situated on one of the main roads in Andheri East, a suburb in Mumbai, Onida House is a landmark white two-storey building. It was MIRC’s first factory when it ventured into television manufacturing in collaboration with JVC of Japan, just before the 1982 Asian Games brought colour broadcasts to the masses. The legacy is hard to miss.
“We could sell Onida House and put back the proceeds into the business,” says the 69-year-old, explaining that the move makes perfect business sense and there is no place for sentiment in business. Mansukhani, a marine engineer by training, says that the focus is to take the business forward fast, double it in two-four years, and maintain profitability. His thoughts highlight the agile and nimble approach MIRC—the company he set up with chairman and managing director Gulu Mirchandani in 1981—has adopted towards its business. This approach has turned around the fortunes of the company—pulling it out of the red (see graphic). No wonder it is No. 377 on Fortune India’s Next 500 list for this year; it was No. 452 last year.
“The future is not what one would expect it to be... Today, things are changing radically. Any company is two years or three years away from closure unless they do the right things,” says Mansukhani. What this has meant is that MIRC had to let go of certain loss-making businesses, sell land parcels, and offer voluntary retirement to 180 employees.
He probably has a reason to feel so strongly about the business. MIRC is one of the oldest home-grown players in the consumer electronics space. Since its initial public offering in 1992, it consistently posted profits for the next 19 years. But it lost its lead in the past decade as it failed to keep pace with competitors—deep-pocketed foreign brands such as Sony, Samsung, and LG Electronics, among others. Losing market share reflected in its financials. To add to its problems, a major fire in 2012 at its factory at Roorkee (in Uttarakhand) impacted the business both operationally and financially. From FY12 onwards the company started posting losses.
“Nobody can be a king forever. Look at Nokia, BlackBerry, or Sony. That’s life in consumer electronics... The only ‘same’ now is constant innovation,” says 75-year-old Mirchandani, aBITS, Pilani alumnus. Though it started with TVs, MIRC diversified into a range of products including flat panel TVs, air conditioners,washing machines, microwave ovens, DVD and home theatre systems, mobile phones, projector systems, and LED lights.
Over the past two-three years, MIRC has undergone a restructuring to reclaim its lost share in the consumer electronics segment. It now focuses on four lines of consumer electronics:TVs, air conditioners, washing machines, and microwaves. Of the four, TVs and ACs account for 85% of annual revenue. This niche focus and exit from non-core activities has provided a significant boost to its profitability.
We have cut down on all those non-core, non-profitable businesses such as mobile phones and LED lights, etc. We will focus on getting 30% gross margins. Money is a scarce commodity, so we are looking at growing our bottom line.G Sundar, CEO, Onida
“We have cut down on all those non-core,non-profitable businesses such as mobile phones and LED lights, etc.,” says G. Sundar, chief executive officer, adding that the company’s gross margins are on a par with the industry now. “We will focus on getting 30% gross margins. Money is a scarce commodity, so we are looking at growing our bottom line and be profitable,” says Sundar, 58, sitting in his large sunlit first-floor office.
Sundar, a chartered accountant accountant by training, joined MIRC in 1985 and was the chief financial officer till 1998. But then he got a call from Mirchandani. “Tu CEO kyu nahi ban jata? [Why don’t you become the CEO?],” Mirchandani asked. Sundar agreed on the terms that he would increase sales substantially. Over the next one year, Onida sold 450,000 TV sets—almost double the figure in the previous year.
Much in line with his financial chops, Sundar’s focus had been cutting debt. Interest costs bite into the company’s cash flow, he says.Hence, MIRC reduced its debt from ₹187 crore in FY16 to ₹66 crore in FY18. A partial sale of non-core assets—mostly warehouses and land parcels—and warrant conversion over the next six-eight months will help the company raise ₹140-160 crore and make it debt-free. For the year ended March 31, 2018, it posted a profit of ₹23.49 crore compared with a loss of`₹23.73 crore in the year-ago period. Its total income grew to ₹760.77 crore from ₹688.12 crore in this period, according to data from Capitaline. The company intends to increase its market share to 10-12% in each product category over the next three years. Currently,it has a market share of 7-8% in ACs, 4-5% in TVs, 5-6% in washing machines, and 8% in microwaves. It expects to post revenue of ₹2,000 crore in the next four-five years.
There’s good reason to be upbeat. The Indian consumer durables market is on an upswing. Pegged at around ₹72,000 crore, it grew at 7.5-8.5% in FY18, according to the Consumer Electronics and Appliances Manufacturers, an apex industry body. It expects this market to grow in double digits in FY19. Experts say MIRC could ride this upswing. And MIRC is geared to deal with more demand, says Sundar, explaining that while the company cut costs to become profitable its infrastructure is set for “a ₹2,000 crore turnover company”. “I don’t have to make any major investments. Our plant has capacity to do more than a million units [TV panels]. I’m currently doing something like 300,000 panels,” he says.
The company has identified contract manufacturing for third parties to leverage its infrastructure and give a boost to its revenues. Last year, it started manufacturing television panels for itself and third parties at its factory in the Wada area, in Maharashtra’s Palghar district. Its first large client is Reliance Industries (RIL). It is in talks with at least four multinational corporations looking at India as a regional hub to manufacture television panels. It is expecting revenues of ₹50 crore from this business in FY19. The turnover will touch`150 crore in FY20, MIRC believes. It is also in talks with global brands,whose names it refuses to divulge, to enter into strategic alliances.“We could look at setting up a company in which we will hold a 25%stake. Let the partner make all investments; Onida will do the distribution, warehousing, after sales service... This is the next step. Right now, we are manufacturing for them,” says Mansukhani.
Experts believe MIRC has identified the right opportunity in the contract manufacturing space. “Most MNCs are looking at India as a regional hub for manufacturing. The government’s focus on ‘Make in India’ augurs well for MIRC with its facilities, manpower and other resources in place. The company has been working with Reliance [RIL] and other brands on contract manufacturing. With its size and scale, we believe MIRC is favourably placed to cash in the incremental market share with re-vival in consumer sentiment and the economy,”said Arafat Saiyed and Rupesh Sankhe, analysts with Reliance Securities, in a research note dated November.
While Onida may have lost market share, it believes that most families are aware of the brand.During a meeting with a public sector bank official recently, Sundar got to know that the gentle-man’s family has been using an Onida washing machine for close to a decade. It is probably for this reason that Onida has identified two sets of customers it will focus on—the middle-aged and young millennials, the drivers of consumption.
MIRC says its focus is on providing good products with special features—not typically found in other brands—which will eventually be its biggest differentiator. To be sure, there is a lot of focus on product innovation which is driven by its deep market understanding and consumer preferences. Recently, it launched the Onida KY Super Thunder TV, which delivers 3,600 watts of sound, as consumer feedback had showed that Indians prefer clear and loud sound on their televisions. Its semi-automatic washing machine, for example, comes with a fitted brush in the centre of the tub which helps in cleaning cuffs and collars. Now it has IoT (Internet of Things)-lever-aged ACs which use voice commands.
Kshitij Kaji and Praveen Sahay, analysts with Edelweiss Investment Research, point out that MIRC’s focus is going to be on good products,targeting the rural segment, and brand and team building. “To create technologically advanced products which are high on quality, the software is key and MIRC has a team of 100 people in R&D (50 in mechanical and 50 in electronics). It has also hired senior-level people from Whirlpool and Videocon. MIRC wants to target the rural segment where there is limited competition and current revenue share is only 20%,” they noted.
In the meantime, MIRC is not averse to brand extensions and could launch new products such as refrigerators. But it will have to make a space for itself among formidable MNC players, with higher brand recall. It’s nearly impossible to not wonder if the Onida devil will be back soon on screens. Mansukhani says it may.For the moment, the devil is sitting pretty on posters for Onida products.
(The story was originally published in the April issue of the magazine.)
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