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Johnson Controls-Hitachi looks 20 pc growth in FY22; to reduce dependence on imports by half

·5-min read

New Delhi, Apr 4 (PTI) Cooling products maker Johnson Controls-Hitachi Air Conditioning India is looking for around 20 per cent growth in the current financial year, in comparison to the 2019-20 level, said a top company official.

The company expects factors such as pent-up demand and work-from-home, which will create a demand for additional room AC along with exchange requirement of old units, for the growth of the segment.

Besides, Johnson Controls-Hitachi Air Conditioning is also working on reducing its dependence on imports for components by half as part of its commitment towards indigenisation.

'We had clocked Rs 2,200 crore in the last year (FY 2019-20), in which a big chunk of sales from March was lost. So, we are just about similar to last year. If we would have been okay then we should have clocked at least Rs 2,500 crore. 'For the next fiscal year (FY 2021-22), I am sure that we should be reaching at least 20 per cent growth (by value) from FY 2019-20,' Johnson Controls-Hitachi Air Conditioning India Chairman and Managing Director Gurmeet Singh told PTI.

Like other players, Johnson Controls-Hitachi Air Conditioning has also gone for a price increase of 3-5 per cent to ward off the inflationary pressure on raw materials, including copper, aluminium, steel and plastics, and expects another price hike coming soon.

'It will be difficult to survive even in the month of April without increasing the price is my fear,' said Singh.

He added that 'the price of copper is almost 50 per cent higher than at the start of the year. Aluminium and steel have both increased' and diesel prices are going up. All combined have put tremendous pressure on the entire ecosystem.

Singh said the real changes the industry is facing lie in the business-to-business (B2B) segment, where 'sales are not up to the mark' as restaurants, shops, small hotels and offices are not opening up fully. 'Marriage halls, which is a large customer, have not not opened up completely which is affecting the demand in a certain way,' he said adding that 'but, otherwise in residential, we are definitely seeing an increase'.

When asked about the trend in sale growth, Singh said though the developed metro markets such as Delhi and Mumbai contribute a large chunk but the non-metro and smaller markets of tier-II, III and IV are growing faster than the big cities.

'I am now finding 50-60 per cent growth is coming from these developing markets,' he added.

The company has also corrected its price through innovations to make its products more affordable, though it has not compromised the features for which it is known in the market. 'The ticket size of a Rs 30,000-Rs 35,000 AC for a 1.5 tonne is relatively high ticket size if you compare it with other consumer durable,' he said.

He added, 'We are not the most affordable neither we will be cheapest ever in the class due to certain quality restrictions and design restrictions that we put in ourselves. We will always be the preferred brand for the customers and they will always be ready to pay a little premium for our products.' Singh also said that currently, the room AC has a penetration of around 6 per cent and is increasing by 1-2 per cent every year.

The company, a 60:40 JV between US-based Johnson Controls and Japanese company Hitachi, is also expanding its sales network and now has a reach of 200 towns pan-India through a network of 10,000 outlets. 'We are working aggressively to add more and more channel partners to our distribution network,' said Singh.

He added that it has recently added three exclusive showrooms also. The company has 72- 74 such exclusive retail stores, which sells only Hitachi products. Besides business-to-customer (B2C), Jonson-Hitachi is also focusing on institutional sales through its B2B channels. Currently, 70 per cent of the revenue of Johnson Controls-Hitachi Air Conditioning India comes from B2C, 20 per cent from B2B and the rest 10 per cent comes from the services such as annual maintenance contracts.

Hitachi is also looking to increase the export and expects a contribution in double digits in total revenue in the next two years. The company currently ships its range of products to neighbouring SAARC countries and African markets.

'Present volume is low, it's only 4-5 per cent of the total turnover of the company but I am aiming to take this to at least three times from here within a span of two years,' Singh added. The company has started internalising components such as printed circuit board (PCB), which was earlier imported, started manufacturing cross-flow fan. It is now buying compressor from Indian manufacturers and is working with the Aditya Birla Group firm Hindalco over the aluminium required for AC.

Unlike other players, the ratio of import versus domestic value addition for an AC unit is 52:48 for Johnson Controls-Hitachi Air Conditioning. Singh said this is lesser than the industry average of 70 per cent import.

'We are working towards reducing our import by half and increase the export by three times,' said Singh.

Currently, the Indian market accounts for around 10 per cent of the global sales of Johnson Controls-Hitachi Air Conditioning and is among top-four players. Japan is the leading market of the company, followed by Taiwan. PTI KRH HRS hrs