Achal Bakeri, CMD, Symphony Ltd
“At Symphony, we innovate and constantly innovate to create better products for our consumers.”
Symphony Ltd is a world leader in evaporative air coolers. Established in 1988, the company focuses on innovative designs to create better and eco-friendly products for residential and commercial customers in 60 countries across the globe. The company sold 0.4 million units in India and 0.17 million units in rest of the world in 2011, leveraging from the acquisition of North America-based air cooler company Impco in 2008.
In an exclusive interaction with Anil Mascarenhas and Dolly Mirchandani of IIFL, Achal Bakeri says, “At Symphony, we innovate and constantly innovate to create better products for our consumers.”
What is the demand scenario for air coolers in India and abroad?
Air coolers are low energy products and environment-friendly. They are sold in the US and Europe as green products. Air coolers are no longer Indian products but available globally.
In the past, most factories in India did not have coolers. Workers in many factories used to work in extremely hot temperatures. Now, companies are realising the advantages of working in a cool and comfortable environment. Hence, they are investing money on coolers. Air coolers are gaining interest not just in India but also abroad. These products have to be developed and we are constantly innovating to make better and energy efficient products.
What is the mix between residential and commercial segment?
We manufacture and sell our products in both residential and commercial segments in 60 countries across the globe. The residential sector comprises almost 75% of our business, while the commercial and industrial contribute the rest.
The share of residential is more because we cater mostly to the Indian market. Also, bulk of our products is exported to the US, which is a big residential market.
Among the residential segment who are the big competitors?
The big players include Kenstar, a Videocon group company, Usha and Bajaj Electricals, to name a few.
In 1990s, many big companies like Crown, Onida and Khaitan had entered the air cooling business. However, most of these companies exited the business. In 2010, Maharaja Appliances entered the business. We are one of the largest air cooler companies in the world and have remained in this business for almost 24 years now.
More companies in India are engaged in the air conditioners business compared to air coolers. Why is this difference?
First let me tell you, air coolers are environment-friendly. Unlike air conditioners, which release CFC (chlouroflourocarbon) gas, air coolers do not emit hazardous greenhouse gases responsible for global warming and other environment-related problems. Secondly, air coolers consume only 5%-10% electricity compared to air conditioners. To give you some specifics, with power-saving technology, Symphony air coolers cool 750 sq. ft. while using just 0.18 units per hour compared to 1.8 units by an air conditioner. An air cooler can be comfortably used in open spaces (gardens, terraces and verandas) where an air conditioner will not be effective.
The air conditioners business expanded in India because of a few brands managed to push their products well. However, there is not much innovation in air conditioners business. Most of these products are a replica of the original creations. The percentage of coolers being sold in India is only 3%.
At Symphony, we innovate and constantly innovate. We focus on innovative design to create better and eco-friendly products. Many companies can’t dream of the products which we have innovated. We aim to design something new every year which would excite consumers.
I agree that currently the coolers market is smaller than air conditioners. More companies need to enter the air cooler business because any increase in the number of players would automatically expand the market—like it happened with ACs.
Comment on your dealer network.
In the last three years, we have grown our network from 3,000 to over 10,000 now. This season, we are planning to take it to 13,000 to 14,000 networks. The retail dealers’ network is highly fragmented in India. Recently, the company has tapped the modern retail network which now contributes around 6% of sales, while this year we are expecting it to grow to 7% to 8%.
If you see, Orient and Bajaj are from electrical business. They are big players and have a huge network, which is a dream for Symphony. Our cooling business network is limited but we have the “right” network. We focus on three main important elements which are innovation, distribution and marketing.
How do you manage the production of air coolers?
At Symphony, design-driven innovation and green engineering is a sustainable competitive advantage. We deliver market-leading products with engineering and design innovation, improved energy conservation, distinctive styling and customer-centric design. We supervise the production, which is now mostly done at our moulders’ units. We have specialists who supervise the assembling process of coolers. Earlier, assembling of components was done from only one place in Ahmedabad. Now, components are manufactured in eight to nine locations in India. We have outsourced some work but as mentioned earlier “design, development and marketing” is done by us.
What about your unit in Mexico?
Symphony acquired Impco Air Coolers, Mexico, founded by the inventor of evaporative air coolers. The company has a rich tradition dating back to 1939. Our subsidiary in Mexico is a fully vertically integrated manufacturing facility. We make air coolers in-house there. When we had bought the company, it had one-third of the margins of what we had in India. But today, with constant efforts, the margins for air coolers at our Mexico subsidiary are as good as in India.
What are some of the emerging trends of the market?
We believe, emerging trends are created by manufacturers and Symphony is at the “forefront” of the trend.
Take the case of the Tablet by Apple. Once people started liking it, Apple launched several versions and a host of other companies are into Tablets now.
Today, we have small homes and small spaces around the world. In the last two to three years, we have developed air coolers that are small and compact to meet the requirements of these modern homes.
We have also designed energy-efficient air coolers. These coolers consume less power. For instance, some of our products consume as little power as household bulbs. However, at present, the Bureau of Energy Efficiency has not defined any standards for air coolers.
How are you able to cope up with the rising inventory cost?
Yes, the cost of raw materials—such as mild steel, plastic, etc—have gone up. Also, transportation costs have increased. We reduce operational energy consumption and optimise component use in different product variants to strengthen the value proposition to customers. To give you an example, earlier, plastic chairs used to be bulky and not as classy as they are today. Now we have chairs made from the same material but they are light, more comfortable and good looking. Similarly, in air coolers we are constantly innovating to reduce the input material and yet have a product without any compromise on quality and comfort.
What were the factors that affected your business?
Our business is seasonal. It depends on how the season goes. This year, we had extended winter, while last year the summer was not good. In short, air coolers business has not been good primarily because of unfavourable weather conditions.
The last quarter ending 30 June 2012 may not be substantially better than the previous year because of the unfavourable weather.
Symphony’s margins have fallen in the last three years. What were the reasons?
In 2009, the excise duty had gone down and our merger with the Mexican company had impacted our margins. However, we strive to manage our additional expenses through innovations and keep the cost of manufacturing products low.
Are you looking at any geographical expansion?
Yes, we plan to enter more countries and also to increase our domestic distribution network.
Our presence in global markets helps us to de-risk the seasonal susceptibility.
There is a huge demand for coolers in the US, Mexico, Costa Rica, Peru and Brazil. In Western Europe, there is a great demand for these products especially in Russia, Ukraine and Azerbaijan. Coolers are ‘plug and play’ products in these countries. In western countries, houses are not designed for summer. Also, people in the West have lower tolerance to hot temperatures compared to Indians. Hence, there is an enormous scope to market coolers in western countries.
There is also a huge demand for coolers in Romania and Turkey. Also, all over the Middle East, Nigeria, Egypt and South Africa, these products are in high demand.
Congo is a big market for air coolers. There is also a rising demand for air coolers in Sri Lanka and Bangladesh.
We have introduced our products in these markets at various stages. In some countries our products have been just launched and are at the beginning stage, while in some our countries these products are used extensively.
What are your future plans?
We would like to grow more in each country where we are present and expand to new ones. We also want to develop the new industrial and commercial air cooler vertical in India as the concept itself is new to our country. So, what we did in home air coolers in the past two decades, we plan to do the same in the industrial and commercial air coolers space and create a completely new category here. Acquisitions in North America and Europe will be considered if it adds value to our company.
We would invest more in research and development (R&D). All the cost of R&D will be met through our internal accruals. We are a debt-free company. Our promoters hold 75% of the stake and we have no plans to reduce it unless we get a marquee investor who can add value. The company is a long-term good player. We plan to achieve a consolidated turnover of Rs. 500 crore by June 2014.
How has your experience been on the online platform?
Online buying is yet to pick up. However, certain websites and TV shows like Star CJ have helped us a lot in creating awareness about our products.
What are the other segments you are focusing on?
Symphony has also entered the much-coveted pages of the Guinness World Records by making the world’s largest functioning air cooler. We are a consumer-interfacing company. Customer feedback has influenced the introduction of a new product every six months including path breaking offerings like the Diet Cooler (the world’s first space saving cooler) and Ice Cube which is the world’s first air cooler with a fan and cooler. This product is ideal for small shops owing to their low noise and multiple applications.
In new areas, we are focusing more on the “religious” segment like cooling ashrams, large halls, etc. We had done two projects for Baba Ramdev and one for Swami Narayan. We had implemented India’s largest eco-friendly air cooling project (2 lakh sq ft) at Baba Ramdev’s Yog Bhavan in Haridwar. The cooling was done naturally, which fits well with the ethos of the religious segment.
We are also focusing on cooling large warehouses, green houses and chicken farms. Also, cooling wedding areas has proved to be a big segment. One cannot use air conditioners to cool large open spaces.
What is your message to shareholders?
Symphony has continuously evolved its product portfolio to infuse freshness among channel partners and customers. We have created a basket of over a dozen air coolers in the residential segment with wide variety, created niche segments (desert coolers, personal coolers and room coolers) and enhanced product features (power saver technology, space saver range, four-side cooling, humidity control and fully functional remote operability).
Symphony’s range of water heaters comprises storage and instant water heaters that are known for their sleek design, energy-efficiency, reliable performance and long life.
In April, we have been certified by the government of India for our quality management system for our design & development, manufacture and after sales service of air coolers and water heaters. The certification implies that what we do is genuine R&D. We have also been accorded star export house status by the government. The Institute of Chartered Accountants of India has identified our 2010-11 annual report as the best balance sheet. In India, where we have over 45% market share and with rising per-capita income, increased rural and lifestyle spending, and growth of organised retail, Symphony is poised to capitalise on brand premium, volume growth, value addition and cost efficiency. This will translate into superior returns for our shareholders and other stakeholders.
Turn your smartphone into a powerful mobile trading platform - Know more!!!
India Infoline Research Team / 10:30, Jul 13, 2015
Tourism Finance Corp (TFCIL), a niche financier of tourism related projects and activities, has witnessed a sharp moderation in loan growth from 32% in FY12 to just 1% in FY14