Company Overview
Johnson Controls-Hitachi Air conditioning is a joint venture Company between Johnson
Controls Inc., USA and Hitachi Appliances Inc., Japan (Now, Hitachi Global Life Solutions
Inc., Japan), which was formed on 1st October, 2015. This joint venture has combined the
rich heritage and innovative technology of Hitachi with the industry-leading expertise and
global network of Johnson Controls. Johnson Controls-Hitachi Air conditioning India
Limited is a subsidiary of this JV. The Company provides a diversified range of customized
and innovative Air conditioning products. Hitachi is an established, premium brand in HVAC
Segment in India. As a part of its growth strategy, post the global joint venture, the
Company has been taking several initiatives to fortify its leadership in the Air
conditioning market. The Companys product offerings include Room Air conditioners,
Commercial Air conditioners & Refrigerators.
The Company possesses a wide distribution network with 4 regional offices, 18 branch
offices and more than 10,000 sales points. After sales services network comprises of more
than 1,500 authorized service providing partners including standalone service partners as
well as Sales & Service dealers providing after sales service to customers across
length and breadth of India.
Industry Structure and Developments
With changing climate situations, the penetration of Air conditioners in India is
increasing every year. The size of Indian AC industry is estimated to be Rs 200-220
billion and it is expected to grow at a rate of more than 13% during next two financial
years.
Indian Air conditioning market is highly skewed towards Room Air conditioners (RAC),
with RAC contributing as much as 84% of the market. In RAC, Inverter Split AC category
contributes to around 77%. Post pandemic, online sales of RAC have started growing, but
majority of sales continue to be driven heavily through offline retail showrooms and
distribution channels.
During second wave of pandemic starting April 2021, Room Air conditioner market
experienced decline in demand of Air conditioners. Subsequent disruptions in global supply
chain, rising ocean freight and costlier crude leading to increase in logistics cost
resulted in lower margin than expected. However, in terms of revenue, Company managed to
perform better than last year in every quarter and consequently achieved growth over last
year.
Business Overview Room Air Conditioners
Indian climatic situations are changing drastically and summer season in India can be
challenging as it is quite harsh and unbearable in some parts of the country. Thanks to
technology and glocalization, over the past few years consumers awareness has increased
about Inverter technology, energy efficiency and environment friendly gases. Improved
lifestyle, higher disposal income, year-round usage pattern, increasing urbanization, ease
of finance options, warranty assurance etc. has led to higher traction of superior
technology of Inverter models. Company has always focussed on developing energy efficient
inverter models which are backed with consumer-friendly features and today we offer a
strong product line up of inverter technology driven Room Air conditioner models.
For summer 2021, Company had made a robust plan with a bunch of product offerings
loaded with advanced features, innovative technology and was ready to reach out to the
customers through its strong & nationwide sales channel with necessary marketing
strategies & plans. Unfortunately, second wave of pandemic situation occurred during
the peak consumer buying months starting from end March 2021 & continued until middle
of Jun & grossly impacted the sales of Air conditioners. During first quarter, usually
customer buying of Room Air conditioner is as high as 50% of the full year. However, it
got reduced significantly due to second 0 wave of Covid-19 pandemic. Companys Room Air
conditioners volume declined by almost 60% over FY 2018-19 which is non pandemic year
while it increased in Qtr-1 over the last year (FY 2020-21). Company continued to grow
each quarter & registered 36% growth over Last year.
Company has launched new products viz. Kiyora - 5 star Inverter series and Shizen - 3
star inverter series in 2021 and further strengthened its line-up in 2022 by introducing
them with green refrigerant gases & hence most of the models are now upgraded with
R32, an ozone friendly refrigerant, in order to shift towards conservation of the
environment. Apart from the elegant aesthetics of iconic wave design and fusion line, the
product line up is loaded with features and innovative technology such as Ambience Light,
which enables recognizing the temperature inside the room with just one glance at the AC.
Other features are:
(a) airCloud Home - a Wi-Fi enabled Split AC model with voice command & mobile app
- to operate the AC from anywhere anytime
(b) FrostWash technology, which freezes and cleans the evaporator coil with just a
press of a button. This technology is being promoted for the 5 star inverter Split AC
models
(c) Heat Pump Inverter model works between -20oC to +52oC. [This dual model - both Hot
and Cool mode - primarily caters to the North India market]
(d) Inverter compressor technology introduced for Window AC category called Shizuka
Inverter Window AC. It has been upgraded with twin rotary compressor coupled with noise
free start up to offer silent operation of 44dB and the window ac is paired with Hitachis
own expandable technology to offer enhanced comfort.
With the change in the star rating criteria from July 2022, Company has upgraded and
launched its future ready models from the current line up to qualify for the new star
rating.
For the growth of the RAC business, Company has strengthened its sales channel &
registered more than 45% growth in Inverter Split Air conditioners & more than 17%
growth in Fixed speed Split AC category. The Company has also worked on strengthening
existing channels, expanding nationwide service network, bringing efficiencies to supply
chain, enriching product portfolio which helped increasing its presence in Tier 2 & 3
cities as well.
Creating a comfort for our esteemed customers who are willing to have early adaptation
of our advanced features and combining it with improved aesthetics of our new indoor unit,
we continued with our Mantra of "New begins with You" and thereby positioning
our brand as an aspirational brand during the year.
We are confident that various attributes of air viz., Silent air, Surround air, Odour
Free air, Clean air and Fresh air grouped as air Technology coupled with improved
aesthetics of our new indoor unit with its design philosophy inspired from nature and
Japanese roots shall elevate our brand image and it will be able to create a connect with
youth.
Commercial Air Conditioners:
Variable Refrigerant Flow (VRF)
Glocalization and governments push for energy efficient Air conditioning system has
given boost to innovation in the field of Air conditioning. Among various Air conditioning
systems, VRF - (Variable Refrigerant Flow) technology-based Air conditioning system is
gaining immense popularity in India. This is becoming more popular due to its flexibility
of usage and energy efficient cooling merits. VRF systems are preferred at offices,
hotels, high- end residential apartments, villas, retail stores, supermarkets, hospitals,
banks, educational institutes etc.
With increased adoption of VRF system in the construction sector in the commercial
& residential segments as mentioned above, the awareness is growing about its
advantages such as energy- efficient HVAC solution as it uses diversity principle of heat
load variation pattern in the given context. Besides the energy efficiency part, it also
offers flexibility of connecting various types of Indoor units (ductless & ducted type
indoor units ranging from 0.8 HP to 20 HP) and VRF can also connect with Air Handling
Units (AHU) for specific applications making it more diverse & unique Air conditioning
system.
Company has introduced Global design platform - VRF Sigma series for Indian market.
This Sigma series has been very well accepted in Indian market. With the introduction of
Sigma VRF, Hitachi has become the only Japanese brand having biggest single module upto 24
HP and combination upto 96 HP. VRF Sigma series adopted all inverter compressor design
with newly designed high efficiency DC inverter compressor having precise frequency
control in the range of 0.1Hz increments with 110 steps. Besides precision compressor
control, a Sigma-shape heat exchanger, dual fan for increasing air volume rate, new
bell-mouth fan housing design - all electrical & electronic components are well
integrated with precise microprocessor and together act as energy enhancers & allow
Sigma range to achieve best in class efficiency even at partial load conditions and works
up to 52oC ambient temperature.
SET FREE mini, launched in 2020, is the compact power packed VRF system and a perfect
solution for the small spaces and premium homes. With SET FREE mini, customers have an
added advantage of choosing from a basket of eight different types of Indoor units and
five different types of controllers. Outdoor unit capacity ranges from 3 HP to 7 HP and
Its compact size offers space saving advantage against traditional one to one split AC
catering to the similar requirement. Over and above, this new range of SET FREE mini ODU
also has a feature to connect IDUs of upto 130 percent and more of ODU capacity on case to
case basis using load diversity of usage pattern.
Being a customer-centric Company and an innovation seeker, the Company launched
SideSmart™ in 2021 with a leading-edge design and technology. An exclusive solution,
offering cutting edge performance equaling large top-flow units, with slim modular units
which can fit anywhere. With SideSmart™, Hitachi has introduced Worlds first Side
Flow with capacity up to 18 HP. This is worlds first Side Flow with modularity design.
With its easy to maintain and award-winning design engineering & aesthetics, the slim
outdoor unit can easily fit inside dense spaces such as balcony which offers more space
utility to customers.
Hitachi, the inventor of worlds first 4 way cassette reinforces its leadership
position in Air conditioning technology, with introduction of Silent IconicTM
design panel. With the new 4-Way Cassette Indoor Unit, Silent-Iconic™ delivers
Harmony in commercial and residential spaces by delivering high-performance Air
conditioning, combined with award-winning aesthetics. The product has been recognised for
its design excellence across the globe and has received international product design
awards including the iF Design Award 2020 in the Product category, the Good Design Award
2020, and the Red Dot Best of the Best Product Design 2021. Silent-Iconic™ is
inspired by Hitachis Duality Design philosophy and by blending Function & Form
together into balance, it delivers the best of both to users. Following the duality design
philosophy, Silent-Iconic™ is designed to be visually silent and blend in with
architectural spaces, while delivering high- performance cooling and heating needs. Its
unique feature of dropdown grille up to 4m, makes it more convenient for maintenance.
The VRF system can be centrally controlled through an innovative IoT VRF management
mobile app - airCloud Pro. An intuitive mobile app that anyone can use, airCloud Pro makes
managing Air Conditioning systems simpler than ever before and minimizes human
interaction. This technology allows customers to remotely control the VRF system(s) from a
single mobile app, saving energy, easy control, monitoring, fault tracking & offers
comfort at fingertips of such a large system.
With launch of its latest ODU series, Hitachi has become leader with a technological
edge over its competitors having widest and latest product range in VRF segment. The
Company was able to grow more than 68% over the last year with its primary growth driver
being new product line up and new segments growth. The new product line up that was
introduced in the last two years such as 1 way cassette, SideSmartTM, SET FREE mini and
airCloud Pro and the new segment growth during and post covid such as supermarkets,
premium light commercial and residential spaces, budgetary hospitals, covid centers,
pharma, etc. helped the Company to achieve growth above the market growth in VRF category.
Light Commercial Air Conditioners
Apart from VRF, Company offers large range of Packaged Air conditioners with green
refrigerant & multi circuit option for better partial load operation and redundancy.
In package AC segment, Company is having good presence with strong channel network.
Company also offers one to one cassette ACs including inverter models for showrooms,
restaurants, residences etc. Company saw a huge growth in the light commercial segment
with Cassette AC volume growing by 56% and PAC volume by more than 53% (Tonnage basis)
over the last year.
Post Covid period, Company is expecting further increase in demand on account of
improvement in living standards along with recovery of the organized commercial sector
characterized by the rising number of hypermarkets, supermarket, and offices etc., and
Company is expecting the growth of overall commercial chain, which in turn is expected to
boost the sale of HVAC packaged units and Cassette ACs in the coming period.
International Sales
Company exports to South Asian Countries (Nepal, Bhutan, Bangladesh, Sri Lanka and
Maldives), South East Asian Countries like Indonesia and Vietnam, Middle East countries
like UAE, Qatar, Oman, Bahrain, Iraq, Kuwait and Saudi Arabia primarily through its
Associate Companies.
Last year, the Company started its direct business operations in the SAARC countries
(Nepal, Bhutan, Bangladesh, Sri Lanka and Maldives) and the Company is working on an
aggressive expansion plan with the help of new channel partners in these territories. The
Company has tied up with a local manufacturer who will assemble Hitachi brand Split Air
conditioning units from CKD Units received from Company for selling in Bangladesh. Due to
pandemic, export business got severely impacted as global economic scenarios changed
dynamics of business operations. Sri Lanka business was particularly affected as the
country continues to deal with economic crisis and impositions of local sanctions.
Home Appliances
In the Home Appliance segment, Company deals in premium range of Refrigerators.
Current line-up of Hitachi refrigerator is backed with superior technology and elegant
aesthetics. Refrigerator range is designed considering the food consumption habits of
Indian consumers. Companys advance dual fan cooling technology provides independent
cooling of Refrigerator & Freezer (R&F) compartment separately and offers fast
cooling and energy saving in the new series. Refrigerator range also comes with unique
features like Easy-View refrigerant compartment and flexible storage with selectable
zones, which are designed to provide extra convenience to its customers.
Company is offering a variety of premium range of Frost free and Bottom freezer
refrigerators as per the Indian customer requirements. Today Hitachi has a complete
Frost-free range with 7 series and 21 SKUs- starting from 385 Ltrs gross to 700 Ltrs gross
capacity in 2-door, 3-door, and 4-door in top freezer, bottom freezer and side by side
segments.
Service
Good Customer Care has always remained a key focus of the Company. The Company aims to
offer best in class products along with utmost priority to customer care and after sales
service. Customer Satisfaction has always been a crucial part of Companys strategy. For
enhancing After Sales Services experience of our Customers, weve embarked upon several
initiatives in this financial year. With an objective to serve our customers better and
for faster response, weve widened our Network and added another 25 authorized service
partners during this financial year, thereby expanding our Service reach. Another area,
where we have focused, is in technology led digitalization of some key service
business-processes like implementation and adoption of technicians app, which is helping
with faster resolution of customers complaints, digital non-voice option for customers to
register and view status of their service request; WhatsApp integration for customer
convenience; online renewal / purchase of Annual Maintenance (AMC); Digital payments and
e-AMC documentation.
Recently, we have also introduced Hitachi Extended Warranty program for our customers
through which the customers have an opportunity to extend their standard warranty up to 5
years and enjoy trouble free operations.
Industry Outlook
Air conditioning industry is poised to grow on account of low penetration level and
increasing disposable income, growing demand for residential real estate, growing focus on
higher energy efficiency, stable and reliable supply of electricity etc. Although second
wave of pandemic has slowed down its growth story a bit, but it is expected to come back
on expected growth track very soon.
Pandemic impacted Commercial Air conditioner segment heavily as all major industries
like commercial real estate, educational institutes, hospitality, retail stores, shopping
malls etc, were closed or partially operational. Air conditioning Projects were put on
hold or cancelled. Global economic scenario and change in policies has also impacted the
demand of Commercial Air conditioners. We expect positive outlook for Commercial Air
conditioning from growing demand for robust medical and health care facilities,
pharmacies, cold rooms, warehouses, data centres etc. We are sure, post pandemic other
industries will also recover and will fuel growth of Commercial Air conditioning segment.
Amidst several challenges, announcement of Government initiatives such as Production
Linked Incentives (PLI) and Phased Manufacturing Plan (PMP) have shown some positive light
emphasizing on local manufacturing of critical components which is expected to boost
Indian Air conditioning Industry in the coming years. Company has also participated in PLI
scheme in White Goods Category and pledged investments for component manufacturing.
Risks, Concerns and Challenges
Seasonality Risk
The Companys core product businesses are seasonal in nature and hence any unfavourable
and unforeseen situation like Pandemic, weather events, changing economies and govt.
policies may impact the demand and supply forecast. To mitigate this risk of loss of
opportunity or excess inventory, the Company has put in place a demand and supply planning
process that allows it to stay nimble and react to seasonal variations.
Supply Chain and Raw Material price fluctuations
The Company, in its endeavour to deliver world class products to its customers, engages
in sourcing of key components and raw materials from reliable and high-quality sources
across the world. Unforeseen disruptions to global supply chains as well as unfavourable
fluctuations in raw material prices may put strain on Companys profitability. To mitigate
this risk, the Company has actively engaged in developing a network of local vendors and
dual sourcing for key components.
High price elasticity of demand
The Companys core product businesses are subject to high price elasticity of demand.
To mitigate this risk, the Company engages in carrying the premium brand image by targeted
marketing activities and improving customer loyalty by driving product differentiation and
high-end features.
Technology Changes
Post pandemic consumer preferences have changed. The Companys core product businesses
operate in highly competitive marketplace with a need to keep pace with technological
changes and frequent upgrades. To mitigate this risk, the Company has put in place a
robust product development process that develops a 3-year roadmap of new products and
upgrades combining customer insights, smart technologies, and regulatory requirements.
Government Policies
The Companys core product businesses is highly dependent on Government policies
related to energy efficiency standards, Green Environment initiative, incentives and taxes
etc. such policies may impact product and its prices directly or indirectly and may impact
Companys business. To mitigate this risk, the Company remains alert and updated about all
such policies and keep taking required actions.
Human Resources
Our philosophy at JCH-IN is that the Company always strives to promote a safe, healthy,
and happy workplace. It creates and instils a culture of partnership among its employees.
The empowerment of the human resource to acquire knowledge and build capability, grow and
prosper in a healthy work environment is the guiding philosophy of the Companys HR
policies. The Companys motivated work force has been making contribution to the best of
its ability in responding to business challenges successfully.
Our employees are the cornerstone of the organisation, and we continually strive to
promote a respectful and safe workplace. Through our performance-driven culture, we
encourage people to put in their best and they help us deliver excellence, thereby adding
value to our brand.
Human Capital
As on March 31, 2022 the total strength of employees (Staff and Operators) of the
Company was 1427. We believe that an organisations successful journey is attributed to
the competencies, capabilities, contributions, and experience of its human capital. Talent
attraction and retention, employee development and wellbeing, equal opportunity and
cordial relations are priority areas as we scale up our business and build a future-ready
organisation. We believe in offering careers, not just jobs. We strive to create an
atmosphere of "trust, confidence and transparency" for our employees. The HR
processes are driven by well-defined competencies and Company values.
Diversity and Inclusion
The Company is proud of its diverse culture and the ability to offer opportunities of
growth to all employees and help them to thrive both at professional and personal levels.
Cutting across the barriers of age, gender, religion, caste, or any other form of
discrimination, JCH-IN continually raises the bar higher when it comes to being an Equal
Opportunity Employer. Over past few years, the Companys efforts have been directed
towards strengthening and promoting gender diversity at the workplace. It welcomes
participation from women and its practices are curated to support gender inclusion at all
levels. Compensation standards and structures are solely based on education, talent and
experience of employees. Equal pay across all genders has been a stated corporate
practice.
Various welfare measures are taken to support and encourage our female employees.
Female connect programs like Roundtable with Leaders, Ask HR, Coffee with HR, etc are
being done to establish effective employee connect and communication platforms. We have a
Womens Interaction Support Engagement (WISE) Forum and ICC committee in place to reach
out to all female employees. International Womens Day 2022 was celebrated on the theme of
#BreakTheBias. We have also built strength of female work force at our plant by giving
opportunities to female operators from close by villages. All the operators have undergone
the gender sensitisation training, workplace harassment training and POSH Training.
COVID Response Team (CRT)
With the COVID-19 second wave outbreak, India was engulfed by an unprecedented crisis.
However, we responded quickly to the situation. Ensuring the safety & well-being of
our employees by taking all the necessary precautions, we lived up to our vision of
touching lives every day and our core values.
The JCH-IN Management team has consistently demonstrated essential humane qualities
such as resilience and empathy to support our employees. A dedicated COVID Response Team
(CRT) worked relentlessly to engage & support the employees and their families. Driven
by our purpose to Rise above challenges, CRT displayed utmost solidarity to support their
colleagues and their families during the pandemic as #OneJCH-IN spirit.
The Company focused on sensitising its workforce on proper COVID safety precautions.
Continuous communication led by the top leadership, along with vaccination drives were
conducted throughout the year. Internal communication was beefed up significantly to keep
reinforcing the importance of staying safe and taking care of families. Working from home
is not a viable concept in the manufacturing setup. However, in view of pandemic, the
Company adapted teared work from home practices to ensure well-being of employees while
ensuring business continuity.
Performance Management and Talent Development
Our Talent Management is designed to help the organisation spot the high-potential
performers within varied functions. The key positions and the talent pool are identified
for every function. After in-depth analysis, Talent Review is done with the aim of
preparing individual development plans for the identified performers. Placement of Senior
Leadership in 9-Box Matrix, identifying critical positions & creating a succession
plan for critical positions is developed. We ensure growth of our employees by recognising
outperformance, providing them with an empowering environment and building their
capabilities by providing abundant learning opportunities. The plans comprise extensive
training, cross-functional assignments, projects, and mentoring. All our employee related
strategies are geared to accelerate inclusive growth and drive momentum towards
collaborative success.
We endeavour to create a future-ready organisation by leveraging technology, enhancing
capability, and driving excellence. In doing so, we introduced a comprehensive 360-degree
feedback (also known as multirater feedback or multi-source feedback). It is a process
through which feedback from an employees subordinates, colleagues, and supervisor(s), as
well as a selfevaluation by the employee themselves is gathered. This survey establishes a
developmental approach to address specific areas of improvement for the employees. Global
Mentoring Program - Global Top Talents version in JCH was launched with a virtual Train
The Trainer(TTT) mentoring session for the Mentors & Mentees. All Mentors are from JCH
senior leaderships, and all mentees are from the cohort of high potential and high
performers and recognised as Global Top Talents. This program is also designed for high
potential leaders to prepare them as future mentors. This will also enhance the mentoring
experience between the mentors and mentees. Mental wellness of every employee is key to an
Engaged Team" and enhances overall productivity. A series of "Wellbeing
Workshops" were organised at Kadi plant to build awareness around mental health of
the employees. This program was designed to help employees increase their level of
happiness and overall mental health through various activities & discussions.
Functional Training for Plant Engineers
To achieve manufacturing excellence, many critical manufacturing skill development
trainings were conducted under JCMS (Johnson Controls Manufacturing System) process. This
includes the following trainings - Change Management, Introduction to High Performance
Teams (HPTs), Energy Hunt, Emergency Response & Preparedness, Simple Problem Solving
& 8-Dimensional review, Cycle Counting, Process Alignment- Fin-press, Total Productive
Maintenance (TPM), Process Improvement - PCB. We have also organized various skill
development program for Plant Operators like - Brazing Skill, Fin-press machines
operation, Mechanical Wielding, Safety Awareness & Importance of Personal Protective
Equipment (PPE) and HPT improvement sessions.
Industrial Relations Environment
The Company strives for stable and cordial industrial relations through effective
communication, participation of employees across levels in important decisions and various
employee welfare programs. A regular two-way communication led by Senior Leadership with
the employees across various levels keeps them informed on the overall business scenario,
providing them with a strong platform for exchange of views.
Internal Control and Systems
The Company has a well-defined and adequate internal control system commensurate to the
size of its business and the nature of industry it operates in. The Internal Control
system ensures safeguarding and protecting the assets of the Company. Internal Audit has
been conducted by external Auditors at plant as well as at all the branches of the Company
within the detailed scope defined and approved by the Audit Committee. The Internal Audit
is planned to substantiate and review the adequacy of internal controls and laid down
procedures & systems.
Observations of Internal Auditors and the detailed plan of action are reviewed and
discussed at the meetings of the Audit Committee on a periodic basis.
Risk Management System
Company has implemented Enterprise Risk Management (ERM) system to identify, assess,
monitor and mitigate the various risks associated with the Company.
Risks are identified and then classified into different categories such as Strategic,
Operational, Business risk and Risk related to act of God. Then score based on level and
significance of risk is given and subsequently risk mitigation steps are taken.
Every quarter a statement identifying new risks and updation on pre-identified risks
along with their mitigation process or counter measures taken are reported before the
Audit Committee.
Internal Financial Control
Internal Financial Control plan adopted by the Company is adequate with reference to
the Financial Statement.
1. Conduct of its business by adherence to Companys policies.
2. Safeguarding of assets.
3. The accuracy and completeness of the accounting records, Prevention and detection of
frauds and errors and timely preparation of reliable financial information.
|
For and on behalf of the Board of Directors |
| Place : Karan Nagar, Kadi |
Gurmeet Singh |
| Date : 26th May, 2022 |
Chairman & Managing Director |
+91-9892691696
