Videocon

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Videocon Industries Limited.
Type Public Company
Traded as BSE532129
NSEVIDEOIND
Industry Conglomerate
Founded 1979
Founders Venugopal Dhoot[1]
Headquarters Mumbai, India
Key people Venugopal Dhoot
(Chairman & managing director)[1]
Products Consumer Electronics
Home Appliances
Components
Office Automation
Mobile phones
Wireless
Internet
Petroleum
Satellite television
Power
Revenue IncreaseINR181572.7 million (US$3.0 billion)(2012–13)[2]
Profit DecreaseINR-716.3 million (US$−12 million)(2012–13)[2]
Employees 9,000 (2012)
Subsidiaries Videocon Telecom
Videocon d2h
Videocon Consumer Electronics & Home Appliances
Website www.videocon.com
videoconworld.com

Videocon Industries Limited (BSE511389, NSEVIDEOIND) is a large diversified Indian company headquartered in Mumbai.[3] The group has 17 manufacturing sites in India and plants in Mainland China, Poland, Italy and Mexico. It claims to be the third largest picture tube manufacturer in the world.[4][5] The group is a US$5 billion global conglomerate.

Corporate profile[edit]

The Videocon group's core areas of business are consumer electronics and home appliances. They have recently diversified into areas such as DTH, power, oil exploration and telecommunication.

Consumer electronics[edit]

In India, the group sells consumer products like colour televisions, washing machines, air conditioners, refrigerators, microwave ovens and many other home appliances, through a multi-brand strategy with the largest sales and service network in India.[6]

Since the entry of Korean Chaebols and their rising popularity in the Indian market, Videocon from a stand-point of market leader has seen a slow decline to become a no 3 player in India. The company continues to do well in the washing machine and refrigerator segment but has significantly lost ground in the consumer electronics space[7]

Mobile phones[edit]

In November 2009, Videocon launched its new line of mobile phones.[8] Videocon has, since launched a number of handsets ranging from basic colour FM phones to high-end Android devices. In February 2011, Videocon Mobile Phones launched the hitherto unknown concept of 'Zero' paise (1 paise is the 100th unit of 1INR) per second with bundled SIM cards of Videocon mobile services for 7 of its handset models.

In June 2013, Videocon Mobiles launched its own flagship smartphone Videocon A55HD in India for Rs. 13,499.[9]

Oil and gas[edit]

An important asset for the group is its Ravva oil field with one of the lowest operating costs in the world producing 50,0000 barrels of oil per day.[10]

DTH[edit]

Main article: Videocon d2h

In 2009, Videocon launched its DTH product, called 'd2h'. As a pioneering offer in the Indian DTH market, Videocon offered LCD & TVs with built-in DTH satellite receiver with sizes 19" to 42".

Telecommunication[edit]

Videocon Telecommunications Limited has a licence for mobile service operations across India. It launched its services on 7 April 2010 in Mumbai.

Retail[edit]

Videocon owns three retail brands: Planet M, DigiWorld and Next.

Acquisition of Thomson SA[edit]

Videocon through a Wholly Owned Offshore Subsidiary acquired the Colour Picture Tube (CPT) businesses from Thomson S.A having manufacturing facilities in Poland, Italy, Mexico and China along with support research and development facilities.

Acquisition rationale[edit]

The acquisition came at a time when Thomson was facing a fall in demand in developed markets for television with CPTs and was moving more towards Flat-screen and Plasma Television. However, Videocon saw an opportunity in the emerging countries for CPTs and hence pursued with the acquisition. Besides, the acquisition gave Videocon, the access to advanced technology giving the company control over an R&D facility in Agnani, Italy. The major reasons behind this acquisition were:[11]

Cost cutting – Videocon was better positioned to shift the activities to low-cost locations and also it could integrate the operations with the glass panel facility in India with the CPT manufacturing facilities acquired from Thomson S.A. Videocon wanted to leverage its position in the existing parts of the business and this acquisition would give it a strong negotiation position and could reduce impact of glass pricing volatility. Videocon could also reduce the costs by upgrading and improving the existing production lines.

Vertical Integration – The acquisition helped Videocon in vertically integrating its existing glass-shell business where it had been enjoying substantially high margins.[12] Videocon’s glass division had the largest glass shell plant in a single location. This gave the company an unrivaled advantage in terms of economies of scale and a leadership position in the glass shell industry. The acquisition also gave Videocon a ready-market for its glass business and it was part of Videocon’s long-term strategy to have a global vertically-integrated manufacturing facility.

Rationalisation of Product Profile – Videocon modified its product profile to cater to the changing market needs like moving away from very large size picture tubes to smaller ones.[13] Apart from the overall strategy Videocon also had a plan on the technological front. It wanted to improve the setup for the production line and line speed post-merger. Its focus was to increase sales while reducing the costs and thereby improving the productivity of the existing line. The company also wanted to foray in a big way into LCD panels back-end assembly . On the sales front the company wanted to leverage on the existing clients of Thomson and build relation as a preferred supplier to maximise sales. Also, Videocon could benefit from OEM CTV business with the help of Videocon’s CTV division, invest for new models and introduction of new technologies.[14]

Thomson’s perspective[edit]

In 2005 Thomson planned entry into the high-growth digital media and technology business. Also, Thomson wanted to exit consumer and electronics businesses as they were incurring significant losses. After sale of its TV business to Chinese group TCL, and Tubes to Videocon, Thomson divested from the audio/video accessories business which was the last unit of its consumer electronics business. The need to divest are quite evident from the losses that it incurred in these businesses particularly that the unit that it sold off to Videocon, the Optical Modules activity, and the Audio/Video & Accessories businesses which totalled around €749 million for 2005. Moreover Thomson had done some acquisitions that were in line with boosting their revenues in the following years. [15]

Other competitors for the acquisition[edit]

When Videocon entered the race for the colour picture tubes manufacturing capacity of Thomson SA in November 2004, there were 16 other bidders. Videocon stood slim chances given the fact that it had to battle it out with players like LG, Philips, Samsung and Matsushita, Daewoo and several Chinese manufacturers but finally managed to close the deal. The deal catapulted Videocon into the No. 3 slot in the global pecking order for CPTs. An official of Videocon said on the deal "The word is out in the world that India and Indian companies are not just a good bet by themselves, but also a hedge against China.“[16]

Thomson’s exit from Videocon[edit]

Thomson is looking to sell out its share in Videocon (a 10 percent share via GDRs) and in most likelihood it would be bought by Videocon itself. Thomson would be exiting at a loss as it had acquired the stake at around INR400 (US$6.60) per share.The deal is expected to happen at current market prices. Videocon’s GDR is currently traded at around $5.06 on the Luxembourg Stock Exchange. On the Bombay stock exchange its trading around INR 150 against the 52-week high of INR 868 in Jan 2008. Another point to be noted is that this won’t attract the market regulator’s "creeping acquisition" norm which comes into force once they acquire more than 5% stake,as the deal would be an overseas. [17]

Possible purchase of General Electric's Appliance division[edit]

On 23 May 2008, Videocon announced that it is studying an invitation from General Electric (GE) to bid for its century-old appliances division, which it has put up for sale.[18]

References[edit]

  1. ^ a b "Annual report". videocon industries. Retrieved 11 October 2012. 
  2. ^ a b "VIDEOCON INDUSTRIES LTD". BSE. Retrieved 11 September 2013. 
  3. ^ https://videoconworld.com/reach-us
  4. ^ "Tube Opportunist". Forbes.com. 
  5. ^ "Videocon Industries". 
  6. ^ "Company Profile". Videoconworld.com. Retrieved 29 July 2010. 
  7. ^ Singh, A. "Market share". Retrieved 31 October 2013. 
  8. ^ "Videocon Mobile Phones, Compare/Buy Online Mobile Phones Deals India". Videoconmobiles.com. Retrieved 29 July 2010. 
  9. ^ Aditya Dey. "Videocon A55HD Launched in India for Rs. 13,499". TechStake. Retrieved 29 June 2013. 
  10. ^ "Reserves deplete at PMT, Ravva fields". business-standard-b.com. 
  11. ^ "Videocon FY 2006 Annual Report". videoconworld.com. 
  12. ^ "Business World – Oct 06 article". videoconworld.com. 
  13. ^ "Videocon FY 2006 Annual Report". videoconworld.com. 
  14. ^ "Videocon Thomson CPT article". videoconworld.com. 
  15. ^ "Thomson FY 2005 Annual Report article". Thomson.net. 
  16. ^ "Business Today Article on Videocon December 2006". videoconworld.com. 
  17. ^ "Dhoots to buy Thomson’s residual stake in Videocon". business-standard-b.com. 
  18. ^ Videocon may bid for GE's appliances division

External links[edit]