Big Get Chocolate

WITH ANIL RAI GUPTA He took over as the chairman of Havells India in 2014 after the death of his father Qimat Rai Gupta, a major consumer electronics major in switchgear, fans and cable manufacturing. Anil, an MBA from Wake Forest University in the US, expanded his business into solar products and home automation, acquired the Lloyd brand in 2017, and entered the air-conditioners, LED TV machine businesses and washing machines making Havells a complete consumer durable firm. After the pandemic hit, he focused on economic consolidation and discipline.

Results: Havells India has posted over 1,000 crore in net profit two years back-to-back. Net sales increased 68% to ₹16,910 crore in five years, while profit rose 36% to ₹1,072 crore. Gupta is now considering moving into cabinet manufacturing as Lloyd’s portfolio expands to include giants LG and Samsung.

Recent effects of the Covid-induced slowdown, Inc. India is witnessing a new hunger for dominance in companies that already have a formidable presence in their respective sectors, and have planned expansion, consolidation and financial strategies.

Then the great become great. Some make a mark on the global rocks, which is forming a world order of sin. For example, after the merger of HDFC Bank and HDFC, the merged HDFC Bank will become the world’s seventh-largest lender.

Hero Honda is the largest two-wheeler manufacturer by volume. Bharti Airtel is the second-largest company after China Mobile in terms of subscriber base in India and Africa, while Reliance Jio is third in the global list. Trust Industries has the world’s largest single-site refining facility. UltraTech is now the company’s fifth largest producer. Tata Steel is 10th largest and JSW Steel 15th in the global list. Trust Modo has consolidated its position in the last four-five years as the largest retailer in India, and is the only one to be ranked among the top 100 globally. Hindustan Unilever contributes the largest sales volume in Unilever, the world’s leading FMCG company. TCS and Infosys are also among the top IT services companies, globally.

Also read: Where are the riches?

The rise in size and scale is on the back of great economic activity. Nifty 500 companies clocked a record profit of 11.1 lakh crore in FY23, a year-on-year increase of 8.8%. The growth of the trust sector has helped the rise substantially.

“The exposure of Indian companies in the global market in the last two decades has helped them to challenge the big and best dreams across the globe,” says Deven Choksey, MD, KR Choksey Shares and Securities. “Rising consumption in the country. Leaders across sectors will have to ramp up production. Indian companies are committed to sustainability and innovation. It’s a welcome change,” he said.

It is not easy to laugh

The journey was not easy. Among the manufacturers are Apollo and MRF, which feature a row of marbles mined, and have built their businesses brick by brick. Both companies have done well in the last decade despite pressures and cost reductions and spikes in rubber prices and import duties. They focused on core competencies and expanded on potential markets, in addition to finding new export opportunities, according to analysts. Apollo’s revenue grew at a CAGR of 10.6% in five years, while net profit jumped 132% in three years. MRF revenue posted a CAGR growth of 9% despite the plunge in lockdown, though profit was down 46%.

“The problem of the previous year’s semiconductor shortage has more or less disappeared. The production level of the automotive industry has reflected this. The electric vehicle is now playing a new trend,” said KM Mammen, president and MD, MRF, in the company’s latest annual news.

Also read: Global BILLIONAIRES

The majors in the auto industry continued their dominance with Tata Motors leading the pack. The Tata Group firm, struggling with losses, is making up for the gap in its emerging EV business with discontinued products. It is now the biggest player in the segment, while Maruti Suzuki and Mahindra are yet to make the final EV debut.

Tata Motors (India) sold 40,965 passenger vehicles in FY23, including 50,043 EVs, against 2,10,500 units in FY19. Net sales stood at ₹3,45,967 crore in FY23, compared with ₹3,01,938 crore in FY22. The company, however, posted a net profit of ₹2,414 crore in FY23. It had posted a loss of ₹28,933 crore in FY19. In fact, in the last three financial years (FY20-22), it posted losses of over ₹10,000 crore each year.

EVs will be the focus of Tata Motors in the coming years, says N. Chandrasekaran, president, Tata Sons. It already has three EV models – Tiago, Tigor and Nexon and plans to launch four more by 2025, Chandrasekaran said at the recent annual general meeting.

Tata Motors’ EV arm recently signed a licensing agreement to source electrified architecture from Jaguar Land Rover (JLR) for the development of its Avinya car series. According to analysts, the company’s quick decision-making process has helped it gain an extra advantage in the EV market.

India’s largest car maker Maruti Suzuki accounts for about 60% of global production for Suzuki Motor Corp. (SMC). Maruti collected its highest ever sales at 19,66,164 units in FY23, despite the semiconductor shortage that was severely affecting the global auto industry. The previous best share was 18,62,449 in FY19.

Also read: NBFC Waves & Red Flags

Steel is another sector that has seen the biggies add heft to their operations and bottom lines. About 20 years ago, Indian steelmakers were tiny compared to their Chinese, Japanese and European counterparts. Although Tata Steel failed to become a European giant in its ambition, it has created capacity in India through grassroots projects and exploration — it now has 20 million barrels of domestic capacity. The largest steelmaker in the domestic market, JSW Steel has also invested heavily in building about 27MT of capacity in the country.

Tata Steel’s consolidated net sales rose 74% to ₹2,43,353 crore in FY21-23, while JSW Steel reported a 126% increase to ₹1,65,960 crore during the period. The Tata Group firm has made a slew of acquisitions, including Bhushan Steel, steel business Usha Martin, and Neelachal Ispat Nigam in the last three to four years to increase capacity. JSW Steel, on the other hand, bought the power of Bhushan and Steel and Monnet Ispat.

JSW Steel, which once faced a loan default in the 90s, is now wary of liabilities as it plans capital expansion. The company, which had a debt of 66,797 crore in June, plans to spend ₹37,300 crore to increase its capacity to 37MT by March 2025. Tata Steel, meanwhile, is looking to double its domestic capacity to 40MT by 2030. Lakshmi Mittal- ArcelorMittal, the world’s largest steelmaker, and its joint venture partner Nippon Ferro are also investing in expanding the steel machining capacity in Hazira to 15MT from 9MT. Analysts say that investment is crucial to maintaining a lead in the sector.

Also read: JSW is a man of iron

UltraTech has lined up new investments in cement to establish its footprint. The Aditya Birla Group plans to invest ₹13,000 crore in the third phase of its 21.9MT capacity expansion. The company, which currently has about 137.85MT, is eyeing 200 MTPA, chairman Kumar Mangalam Birla said at the company’s AGM in August.

UltraTech, which has invested over seven thousand crore over the last seven years, has seen a 50.1% increase in net sales in FY21-23. Net profit rose 12.7% over the period. But the cement landscape has already changed, through the Adani Group’s acquisition of Holcim’s stake in ACC and Ambuja cements for over 51,000 crore in 2022. The group is now planning to double its capacity to 140MT by 2028. Incidentally, Switzerland-based Holcim was UntraTech’s biggest rival.

“The top players in every segment have been through economic turmoil and sectoral immersion. They know the market deeply and invest in innovations to stay ahead of the curve. For them, adding size and scale is a natural progression,” says Anuj Agarwal, chief financial officer at asset management firm TruBoard Partners.

Pain takes Center Time

Indian businesses are taking the leap, consumers have a key role to play in their growth strategy as well. It’s no wonder that cash-rich conglomerates are rushing to woo consumers with new business deals. While India’s largest private sector company, Mukesh Ambani-led RIL, has moved into telecoms and financial services and is looking to enter solar energy and machine storage, the Tata Group has built FMCG, airline and electronics businesses with recent capital and acquisitions. The Aditya Birla company is focused on drones, expanding across the country.

Expansion appears to be the main path to growth in most companies, especially consumer-centric businesses such as fast-moving consumer goods (FMCG), retail, telecom and pharma. New entrants are providing competition in these segments. A legacy of conflicting investment through expansion, better capital management and acquisitions. For example, Bharti Airtel maintained its leadership with a base of 540 million across 16 countries. And second is Reliance Jio in India, which had 417 million customers in August, compared to Airtel’s 376 million.

Also read: Hitting The FMCG Jackpot

The Sunil Mittal-led company closed FY19 with a 62.7% year-on-year drop in consolidated net profit at ₹410 crore, blamed on a long-running battle with Reliance Jio, which launched in 2016. But he struggled with the infrastructure upgrade. Faster 4G, 5G Launches It is also beneficial for the company to improve its business going forward. Sales also went up 59% to ₹1,39,145 crore between FY21 and FY23.

The retail sector has also seen a complete overhaul with the collapse of Future Retail (which operated Big Bazaar) and the rise of Reliance Retail. In the last seven to eight years, Ambani’s retail chain has increased its geographical presence to 18,650 stores in September, compared to 3,837 stores in March 2018. The predatory giant posted a profit of ₹9,181 crore on revenue of ₹2,60,364 crore in FY23.

The entry of the rich is concentrated in new sectors of disrupted markets. Panic was seen when the Aditya Birla Group announced its ₹10,000-crore investment plan for the paint business. But market leader Asian Paints, which is also one of the top 10 paint manufacturers globally, remained deterred. The company, which had released modular kitchens and bathroom fixtures through acquisitions about 10 years ago, entered the home improvement and decoration segment. It took product innovation and competitive pricing to protect its turf.

The flipside of the rise of large companies is that the respective parties will find it difficult to create new companies that have low capital. The big ones will quickly take the best practices and products of the new entrants and apply/distribute them across the markets. But he dares through breakthrough ideas to always remain a giant challenge.

Also read: Sunil Mittal: riding the waves

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