PRESS RELEASES

The spike in V-Guard's Business

Thunder and lightning signal the onset of the South-West Monsoon in South India. But for consumers, it is a matter of concern, as their prized home theatres, washing machines and refrigerators are exposed to voltage fluctuations and power outages. But manufacturers of voltage stabilizers, inverters and UPS systems, are laughing all the way to the bank.

And there is one name that has captured the imagination of the people of South India, especially Kerala: V-Guard, which makes stabilizers, among other things.

The brand started out as a humble venture in Kerala but soon extended its footprint across South India and beyond. With the expanding market, it started a production unit in Coimbatore and later established similar units in Uttarakhand and Himachal Pradesh.

Though it has a pan-India presence now, it was from very small beginnings that V-Guard started its corporate journey. With a seed capital of Rs. 1 lakh borrowed from his father, Kochouseph Chittilappilly started his grand venture. A rented tenement was their work site and the workforce comprised two employees.

The Company started making voltage stabilizers in 1977. It cannot be called manufacture in the strictest sense of the word. After all, how many voltage stabilizers can you make with that meagre seed capital - after paying wages, house rent and material costs?

However, there has been no looking back since then. Today, the company’s turnover has crossed Rs.1,000 crore. And, V-Guard has become a household name.

From a single product company, V-Guard has now diversified into various household products such as UPS systems, water heaters, motor pumps, solar water heaters and PVC insulated coil.

The 10-fold revenue growth from Rs. 100 crore in 2000 to Rs. 1,000 crore in FY 2012 was achieved through diversification and the addition of new verticals in the last few years.

Even from its home base, South India, the turnover was a meagre Rs. 10 crore in 2006. This year, the company’s revenue from Kerala has crossed Rs. 300 crore, while Karnataka and Tamil Nadu accounted for Rs. 150 crore.

The turnover from stabilizers has crossed Rs. 200 crore while the wires business touched Rs. 275 crore. “These are the major milestones that we have crossed during the last fiscal,” said Mithun K. Chittilappilly, Managing Director, V-Guard Industries Ltd.

“The next big landmark for us is definitely the US $1 billion-mark or around Rs. 5,000 crore,” he said, adding that if the company manages to grow at a CAGR of 35 per cent in the next five to six years, it could reach there. To substantiate this, he said the consumer durable and appliance sector in the country will grow at a very rapid pace.

Contradicting the belief that the market for stabilizers may shrink with improvement in the quality of power available, he said it was not true, “Except for Gujarat and Mumbai, most States are experiencing power shortage and power cuts leading to disruption in power supply and wild fluctuations.”

As unsteady power supply continues to dog the country, the demand for voltage stabilizers will sustain. Therefore, he expects that V-Guard’s flagship product will continue to have a major share of the country’s voltage stabilizer market.

“We are servicing a market because of the inefficiency of the State Electricity Boards. In fact, V-Guard is the major beneficiary of this inefficiency,” he quips.

Excerpts from the interview with Mithun K. Chittilappilly:

Do you think the demand for stabilizers will come down once the power situation improves?

In the last 10 years, there has not been much visible change in the country’s power scenario. This condition is expected to continue for the next 10-12 years. Given that situation, there is still demand for them in the short term. This will certainly boost our stabilizer sales.

The voltage stabilizer market in the country is estimated at Rs. 1,250 crores, out of which the company has garnered revenue of Rs. 200 crores in FY 2012. This year, the Company is hoping to achieve a 25 per cent growth.

Earlier, most of the sales for stabilizers came from the South Indian markets and there is now more scope to grow in other parts. We have opened a development centre in Gurgaon to design specific models for the North Indian markets. We have exclusive vendors from whom we outsource stabilizers.

Could you tell us about the business model that you evolved for outsourcing?

The period 1984-86 was a testing time for the company as labour activism was getting out of hand. The company had evolved a new business model in outsourcing through SHG (self-help group) initiatives to manufacture stabilizers and UPS in the wake of some trade union issues in the earlier days. Unemployed and economically backward women were selected with the support of churches and trained by company experts.

While today, V-Guard has moved into modern manufacturing process and models, it still runs 66 such charitable set-ups across South India engaging about 1,650 women. The company plans to start such outfits in other parts of the country from a pure employment generation point of view. One such unit is scheduled to come up in Orissa shortly.

With a network of over 9,500 retailers and 200 distributors/service centres in 18 States and Union Territories, the Company today delivers products and after-sales service to 50 million customers. It provides employment to more than 1,300 people directly and 5,500 people indirectly through its SHG initiatives.

What about technology and product innovation?

A significant investment is charted out every year for product improvement and innovation. We have a team of engineers in our R&D who concentrate on product development.

Tell us about your other products.

In PVC insulated wiring cables, our revenue was Rs. 290 crores, a growth of 30 per cent in FY 2012. There are two manufacturing plants in Coimbatore and Kasipur in Uttaranchal to make four lakh coils per month. We are in the process of investing about Rs. 15 crores in capacity addition to the tune of 1.5 lakh coils in Kasipur. The cost of production is 4 per cent less in Kasipur because of tax holidays.

The motor pump category contributed Rs. 140 crores, a 20 per cent growth. We are the market leaders in South India, accounting for about 75 per cent of the sales. We have our own unit in Coimbatore and 15 contract manufacturers spread over Coimbatore and Rajkot.

Electric water heaters contributed 8-9 per cent of the total revenue last year, with sales touching Rs. 85 crores. The Company, which has a manufacturing unit in Himachal Pradesh, has 10 per cent of the total market size of Rs. 800-900 crores.

Are you launching any new products?

There are plans to launch domestic switchgears which include ELCBs (Earth Leakage Circuit Breakers) sometime this year. This product would be tested in the Kerala market initially. Another foray is into the growing market for induction cookers. The Company has already launched the product in Kerala and will soon go to other South Indian markets shortly.

What are your future plans?

The short-term vision is to keep the momentum of growth as the Company is looking at 25-30 per cent growth rate in the current year. We have set a vision to become the No. 3 player in each category in the next five years’ time.