COMPREHENSIVE PACK

HOUSEHOLD APPLIANCES

1
• Overall Market size, growth and Penetration :3
• CTVs :5
• Refrigerators : 12
•Washing Machines : 18
• RACs : 25
• Critical Success Factors : 31
• Company Analysis
• TTK Prestige : 33
• Symphony : 45
 House hold appliances industry size was about Rs. 794 bn in
2018-19 and CTVs had the highest penetration.

HOUSEHOLD APPLIANCES: MARKET SIZE, GROWTH AND PENETRATION

Source: Industry, Crisil Research

3
 OVERALL PENETRATION

CTVs Refrigerators

Washing Machines RACs

4 Source: Industry, Crisil Research

 CTVs

5
 Share of CRT TV in the television segment has come down
drastically while that of Panel TVs has gone up.

CTVS : SEGMENTAL MIX

91 97

9 3
2016-17

Source: crisil research, industry

6
 The price gap between CRT TV and panel TV have narrowed
down.

PRICE GAP: PANEL TV AND CRT

Source: Crisil research

7
 In the panel TV segment, LED TVs wiped out LCD TVs

LED VS LCD TVs

•LED TVs weigh less while being more
robust (due to their architecture)
•LED TVs have longer life
•LED TVs use (40%) lesser power and
no mercury is used in the lights,
making them environment friendly.
•LED TVs have picture quality
•Prices of LED TVs are nearly the same
as that of LCD TVs.
•LED TVs are slimmer as compared to
LCDs.
Source: Crisil research
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 Customer preferences are moving towards large sized TVs.

PANEL TV PRODUCT MIX (IN TERMS OF SIZE)

Source: Industry, crisil research

9
 CTV segment expected to grow at a CAGR of 5-6% between
2017-18 to 2022-23.

CTVS : VOLUME GROWTH

Source: Industry, crisil research

10
 Sony, LG and Samsung are the top 3 players accounting for
around 75% share in panel TV segment.

MARKET SHARE: PANEL TVs

Source: crisil research

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 Refrigerators

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 The segmental change in the refrigerators has not been very
fast.

REFRIGERATORS : SEGMENTAL MIX •To function efficiently, frost

free refrigerators need
uninterrupted power which is
not available in many areas of
the country
•This, restricts demand for the
segment in areas lacking
continuous power supply.
• Therefore, while FF
refrigerators are largely
preferred in the urban areas
with continuous power, the
DC segment caters to rural and
semi urban areas with frequent
power outages.

Source: Crisil research

13
 Price differential between Frost-free and Direct Cool has
increased in the last 5 years.

REFRIGERATORS : AVERAGE REALIZATIONS

Source: Industry, Crisil research

14
 In both the refrigerator segments, consumer preference is
moving towards medium capacity models.

REFRIGERATORS : SIZE WISE MIX

Direct Cool Size Mix Frost Free Size Mixc

15
Source: Industry, Crisil research
 Refrigerators expected to grow at a CAGR of 8.5% to 9.5%
between FY 17 to FY 23.

REFRIGERATORS : SALES VOLUME GROWTH

16
Source: Industry
 LG and Samsung hold close to 50% of the refrigerator’s market
share.

REFRIGERATORS : MARKET SHARES

Source: CMIE
17
 WASHING MACHINES

18
 Semi-automatic Washing Machines constitute the major share of
the segment.

WASHING MACHINES : SEGMENTAL MIX

Source: crisil research, industry

19
 Price gap remains high between Fully-automatic and semi-automatic
washing machines.

WASHING MACHINES : AVERAGE PRICE

Source: Crisil research

20
 Fully automatic washing machine is not making faster inroads because of
high price differential and less incremental value addition compared to
semi-automatic washing machine.

A family currently spend an hour a day to do hand-washing of the clothes

of the family. It has got two options –
•to go for a semi-automatic washing machine which cost Rs. 9000 and
will reduce the time to 15 minutes
•to go for a fully-automatic washing machine which cost Rs. 20,000
and will reduce the time to 5 minutes.
Which one the family is more likely to buy?

Also fully-automatic washing machine require the availability of running water

21
 Consumer preference trending towards medium and high
capacity products

WASHING MACHINES : SIZE MIX

Source: Industry, Crisil Research

22
 Washing Machines expected to grow at a CAGR of 10 to
11% between FY 18 to FY 23.

WASHING MACHINES : SALES VOLUME GROWTH

Source: Crisil research, Industry

23
 The washing machine industry is highly concentrated, with two
Korean brands - LG and Samsung constitute 60% market share.

WASHING MACHINES : MARKET SHARE

Source: Crisil research, Industry

24
 ROOM AIR CONDITIONERS
(RAC)s

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 Share of split ACs has increased from 67%in 2013-14 to 77% in
2017-18.

RACs: SEGMENTAL MIX

Reasons for increase in Split

AC
•Launch of lower
capacity split ACs
•Lower noise levels
•Easy installation
•Better aesthetic appeal

Source: Crisil research, Industry

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 1 Ton and 1.5 Ton RACs occupy 92% of the RAC market.

RACs: SIZE MIX

Reason for movement

towards lower capacity

models

• Sharp increase in prices

compared to other categories

•Smaller size of rooms

Source: Crisil research, Industry

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 Southern region has large proportion of split ACs compared to
any other region in India.

RACs: REGIONAL SPLIT

Source: Crisil research, Industry

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 RACs expected to grow at a CAGR of around 12-13% between
FY 18 and FY 23.

RACs: SALES VOLUME

Source: Crisil research, Industry

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 The top three players accounted for around 50% per cent of the
market in 2017-18.

RACs: MARKET SHARE

•Voltas emerged as the leader

overtaking LG and Samsung.

•Several factors such as a

strong product line-up with 63

variants of split ACs,

improved distribution

footprint in key markets and

strong after sales service.

Source: Crisil research, Industry

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 Critical Success Factors

31
CRITICAL SUCCESS FACTORS

• Strong presence across different segments

• Ability to spend heavily on advertisements and promotions

• Technological capabilities to bring in new products quickly

• Strong distribution network

• Cost competitiveness

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 TTK PRESTIGE

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• Incorporated in 1928, TTK Prestige in mid 2000s was a part of ageing, risk
averse business house in India.
• The company was looking at a bleak future as most of it’s revenues were
coming from “Pressure Cooker” which was getting undifferentiated and
commoditized with competition from local players.
• The company was also stuck with the uncomfortable tag of “South Indian”
company with very little business and brand recognition in other parts of the
country.
• But the turnaround began in late 2000s
• If you had invested Rs. 150 in the company’s stock in 2006, it would have
become Rs. 6771 on 26 th June 2019 (an increase of over 4500%)

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 • CHALLENGES IN EARLY 2000s

SHUTTING DOWN US BUSINESS

• Since late 1990s, TTK was exporting Pressure Cookers to US under the brand name
Manttra through 27 partners (Dealers).
•After 9/11 tragedy, economic slow-down hit US in which 16 of 27 TTK’s partners
went bankrupt and the company had to shut down the US business.
COMPETITION FROM UNORGANIZED SECTOR
• Excise duty and sales tax added up to over 50 percent, making branded products
such as Prestige and Hawkins too costly.
• Local players were eating into the market share as many of them evade the taxes
and duties.
PRODUCT FAILURES
• The company launched Smart cooker with advanced aspects which flopped in the
market due to defective parts.
• The company had to recall all the pieces.
• By 2002, the company’s losses were half of it’s net worth, it’s debt four times the
equity and it was in a segment that had stagnated.
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 • TURNAROUND SINCE MID 2000s

PRODUCT DEVELOPMENT

• Mr. TT Jagannathan, CEO of TTK group is a hands-on manager -travels 15 days

in a month to meet dealers, customers and spend time in shops. He also spends
lot of time at his home kitchen.
• Insight from a visit to Kumbakonam school led to the development of mixers,
toasters, kettles, stoves etc.
• Insight from microwave led to the development of microwave pressure cooker
which is a huge hit in Japan.
• Microwave pressure cooker was a flop in India. The company learnt the lesson
that people don’t want to cook in Plastics in India.
 • TURNAROUND SINCE MID 2000s

PRODUCT DEVELOPMENT
•From a product line consisting mainly of pressure cookers, TTK Prestige has
been trying to transform itself into a ‘kitchen solutions' provider, with great
success.
•In 2017, it has also entered “Cleaning Solutions” segment with electric and non-
electric based products. (currently growing at 60 to 80% CAGR)
•TTK also launched water purifiers.
•The company gets 60% of it’s revenues from the products launched in the last 3
years.
 • TURNAROUND SINCE MID 2000s

REVENUE BREAK-UP

Only 1/3rd of the revenues come

from Pressure cookers.
 • TURNAROUND SINCE MID 2000s

Ujjwala Yojana – An important growth driver

•Rural market constitute only 5% of company’s revenues

•Ujjwala Yojana, is poised to immensely benefit the company.

•It has opened up 5 crore kitchens, creating demand for pressure cookers,

cookware, appliances and gas stoves.

 • TURNAROUND SINCE MID 2000s

NATIONAL EXPANSION
• TTK Prestige had an image problem, though. It was seen as a “South Indian”
brand.
• The company realized that it did not have the right products, brand recall and
distribution network in North.
• It did 3 things to change the situation:
 Developed right products like “Inner-lid Pressure Cookers” which are
preferred in North.
 Ran a very successful advertisement campaign “Biwi se kare pyaar”. Signed
up Abhishek Bachan and Aishwarya Rai for promoting the brand.
 Set-up new facilities in North, West and East and strengthened the dealer
network.
• Currently, non-south markets contribute more than 50% of the company
revenues.
 • TURNAROUND SINCE MID 2000s

INCREASED MARKETING SPEND

• Company was traditionally a

non-believer in advertising.

• But realized it’s usefulness

especially in geographical and

new products expansion.

• Increased it’s spend on

Source: MOSL, Company
adversiting.
 • TURNAROUND SINCE MID 2000s

GOT INTO RETAILING BY OPENING “PRESTIGE XCLUSIVE STORES”

• This was not meant to be an additional revenue stream or a step to fill the gaps
in the network.
•The move was prompted by the distributors’ lack of belief in the TTK’s new
products especially appliances.
• The traditional utensil shops never stocked appliances. So the company went
straight to the customers and tried to sell their products. The results were
encouraging.
•After seeing their customers step into a Prestige showroom, Utensil Shops
wanted to stock the appliances too.
•Not only did it generate credibility, it got Prestige closer to the customer.
 • TURNAROUND SINCE MID 2000s

EXPANSION OF XCLUSIVE STORES ONLINE SALES

• Online sales now bring 9%

to revenues.
• TTK introduced 24 new
SKUs in Q2 FY19 while it
will add ~30 SKUs in H2
FY19.

Around 17% of revenues come from

XCLUSIVE STORES

Source: MOSL, Company Source: Anand Rathi, Research

OVERALL IMPACT

• In the last 10 years, the company’s revenue has grown at CAGR of 20 per
cent and profit growth has been at 28 percent CAGR.
 Symphony had moved from being a penny stock in 2005 to a company
that delivered one of the highest stock market returns in India.

SHARE PRICE

April 7, 2005 June 27,

2019
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 OVERVIEW

• Symphony operates in the Air Cooler segment which is 65% unorganized.

• In 2001, the company’s net-worth got completely eroded and became a BIFR
company.
• But the turnaround process began after that and the company delivered one of
the highest stock market returns in the last decade.
• The company has an ROCE of over 100%
• The company delivered a stock market return of over 1000 times in 14years.

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 Idea
• In 1987 Bakeri’s family moved
into a new house in Ahmedabad,
parts of which couldn’t be air
conditioned as it had high
ceilings and long passages.
• Their architects suggested that
they install air cooling.
• Till then they had never used an
air cooler.
• The performance was great but
the product was an eyesore and
they had to camouflage it.
• That gave an idea: Why can’t they
make a better air cooler?
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Entry into the Air cooler Segment
• In 1988, the company introduced
their first air cooler and made
sure it looked exactly like a
window air conditioner.
• Its looks and cooling
performance caught the
imagination of the market
• An air conditioner was priced at
Rs 35,000 and Symphony’s air
cooler was Rs 4,300, while a
normal air cooler was just Rs
2,000.
• So, despite being twice as
expensive, it caught on. In fact, it
was a runaway success.
 Initial Successes

• Because it was so successful, in 1989 the company expanded distribution to

Gujarat and neighboring states.

• By 1990 they had expanded to all over the country.

• They also went on the national television network.

• This was the first time an air cooler was advertised on TV in India.

• And so, in just two years after launch, Symphony had become a national

brand and had a sort of national distribution that covered the whole country.

• In 1994, the company went for an IPO.

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 Expansion of Product Range

• After IPO, they were under pressure from the financial analysts to extend the
product range.
• Financial analysts also argued that the company cannot rely on a single product
(Air cooler) which is also seasonal.
• Also their competitors like Crompton Greaves, Usha and Polar were multi-
product companies.
• So the company got into products that were either counter-seasonal, like winter
products, or products that sold around the year- Geysers, room heaters, water
purifiers, air conditioners, washing machines, exhaust fans. etc.
• In each of these they attempted to do what they had done in air coolers. Namely,
take each of these products, a commodity product where there has been no
innovation for a long time, and add value through innovation in design, features
and performance and elevate a commodity product into a lifestyle product.
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 Failure of New Products

• None of the new products succeeded.

• New products failed for different reasons – in geysers they had quality
issues, in washing machines they had to face tough international and
domestic competitors.
• A lot of money went into development and marketing these products. As
none of the products succeeded, there was financial strain.
• The other thing that happened was that they took their eye off the ball in the
air cooler business, so the innovation that they could have done there, the
range expansion they could have done didn’t happen.
• So air cooler sales went down and the other ones didn’t succeed.
• As a result, by 2001 they had completely eroded our net worth and became a
BIFR [Board for Industrial and Financial Reconstruction] company.
• 50 Many financial experts advised the company to exist the business.
 Journey towards a Single Product Company

• After 2001, the company changed it’s strategy from “Many Products –Single

Market” to “Single Product-Many markets”.

• They exited all products except air-coolers.

• Revival in air-coolers was driven by 3 areas:

(1) Constant innovation in products

(2) Focus on superior quality & high brand recall and

(3) Strong distribution with focus on “One product and many markets

strategy

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 Unlike Televisions, ACs, Air Coolers are dominated by domestic
players.

MARKET SHARE OF DOMESTIC

PLAYERS

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 • Constant Innovation

• Air-cooler is a commoditized product and 65% of the market is unorganized.

• Hence, constant innovation is necessary for differentiation.
• The company claims that any SKU is sold only for 2 seasons during its life, post which it
is either discontinued or upgraded. It has the highest number of Air-cooler SKUs.

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 Some recent Product Development Examples

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 • SYMPHONY VS UNBRANDED COOLERS

UNBRANDED COOLERS

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HIGHEST BRAND RECALL

• Highest brand recall

also help the

company to sell at

the lowest dealer

margin

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 The company has grown it’s Distributor/Dealer network at a CAGR
of 12%/24% respectively between 2010-17.

STRONG DISTRIBUTION

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 The biggest achievement of the company is to convert a highly
seasonal business into round-the-year business.

OVERCOMING SEASONALITY

Symphony has 90%

market share in off-
seasonal sales while
it’s overall market
share is 45%

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 The company has 50% value market share and 42% volume market
share respectively.

BRANDED MARKET SHARE BY VALUE

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 ACQUISITION OF MEXICAN COMPANY “IMPCO”

• IMPCO was started by Adam Goettl, the man who had the first air cooler
patent in 1930.
• Over the years it passed through several owners before it wound up with a US
private equity firm in 1999.
• In 2009, the company was in a very bad shape when Symphony acquired it.
• Symphony cleared all the debts of IMPCO and turned it around leveraging it’s
BIFR experience.
• This acquisition helped Symphony to enter in the Industrial Cooler market.
• The company carried out the world’s largest Centralized Air Cooling Project
at Hajji complex in Saudi Arabia and the largest project in India at Patanjali
Yog Bhawan, Haridwar.
• IMPCO became operationally profitable in 3 to 4 years and started making net
profits in 2017.
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 ACQUISITION OF “CT AUSTRALIA”

• Symphony acquired Climate Technologies (CT) which had superior Ducted

Evaporative Technology
Performance of Ducted Evaporative Coolers vs Others

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Source: HDFC Securities
 ACQUISITION OF “CT AUSTRALIA”

• Symphony would be acquiring 95% equity stake of Climate Technologies (CT)

• CT manufactures and sells evaporative air coolers, ducted gas heaters, and
other cooling products in Australia and USA.
• CT has iconic brands such as 'Bonaire' and 'Celair'.
• It commands 30% and 25% market share of the domestic Australian evaporative
air coolers and ducted gas heaters market.
• This acquisition will help Symphony provides an opportunity of de-risking
business as a result of exactly opposite winter and summer seasons in India and
Australia.
• It provides Symphony entry into Australia and US markets (88%/12% of mix).
• CT has a complimentary product mix with Symphony with 54%/40%/6% mix
between air coolers/ heating products/ air conditioners.
• Subsidiary was profitable in FY 2019.
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 ACQUISITION OF “MKE CHINA”

• In 2015, Symphony acquired Chinese Air cooler company MKE for just Rs. 1.5
crores.
• MKE produces energy-saving and environment-friendly evaporative air coolers
under brand Keruilai.
• The acquisition helped Symphony to increase exports of its air coolers,
especially to ASEAN markets via China which has FTAs in these markets.
• MKE exported to Latin America, where Symphony never exported.
• MKE's Test Center is in accordance with US and Australian quality standards
making it the only facility of its kind in Asia.
• There is also brand recognition as Keruilai becomes the only Chinese air cooler
brand enjoying international recognition.
• The subsidiary broke even in 3 rd quarter of FY 2019.
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 OUTSOURCING

• The company over the years have moved towards completely “Asset-light”
model.
• They only do Product Development and the manufacturing is completely
outsourced.
• This helped them to maintain an ROCE of more than 100%

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 Due to acquisitions and exports, 36% of revenues and 16% of EBIT
come from Rest of World (ROW).

EBIT Mix : 2018

INTERNATIONAL BUSINESS
Revenue Mix : 2018

EBIT Mix : 2019

Revenue Mix : 2019

Source: HDFC Securities

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 LAST 10 YEAR’S GROWTH

• Over the last 10 years, the company achieved the following growth (CAGR):
• Revenue: 35%
• Ebitda: 49%
• PAT: 54%

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