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BW Businessworld

‘Plan To Expand In India’

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Legrand is a French multinational that claims a history of 154 years. The company, in its current form, has been around for 88 years. Starting life as a porcelain workshop, it has managed to evolve and, today, it is the global market leader in switches and sockets. It is also a major player in electrical installations such as miniature circuit breakers and distribution boards. In 2013, it clocked revenues of $6.18 billion and net profits of $882 million. Legrand has had a presence in India since 1996 and its revenues from India are pegged at around Rs 2,000 crore. It has 15 manufacturing facilities across the country. Gilles Schnepp, global chairman and CEO and Jean Charles Thuard, CEO, Legrand India, in conversation with Venkatesha Babu. Edited excerpts:

You are an European company, but is the focus now outside Europe for growth?
India alone represents 4-5 per cent of our total sales and we have expanded very fast globally over the last few decades. We actually started to move outside of our French base in the 60s and out of our European base from the early 70s. We have gained leadership in many countries and today, we sell in 180 countries, including newer economies, of which, India is a key representative. Other new economy countries include Brazil, Russia, China, the whole of South America, eastern Europe, the Middle East (West Asia), Africa and other parts of Asia excluding Australia. The sales (in newer economies) represent close to 40 per cent of the total; the US sales represent 17 per cent of our total sales. So, a majority of our sale is outside Europe. A lot of this (geographical revenue diversification) work was done by my predecessors and I have been able to develop it further. In India, for instance, we are the market leaders in miniature circuit breakers and single-phase UPS and the No. 2 in wiring accessories.

The acquisition of MDS, 17 years ago, marked your entry into the country; you acquired Indo Asian Switchgear in 2010 and Numeric UPS in 2012. You have retained those Indian brand names. Why is that? What is your long-term goal in India?
The strategy of the group has always been to grow on two pillars — one is organic growth and the other one is through acquisitions. In India, too, we have grown 50 per cent through organic growth and 50 per cent through acquisitions. Typically, organic growth comes from the development of existing products. But, it also comes from developing new categories of products and, probably, from expanding our accessible market. Apart from leading in miniature circuit breakers, Legrand is now also present in wiring devices, cable management products and home automation.

When you acquire a company, a substantial part of the asset that you acquire is the brand. Today, we have 30-35 brands in the group. On their own, I would say, each one has a strong legacy and there is no reason for these brands to not exist together. These brands create value; they do not destroy value. By changing the name, we will definitely destroy them and that is not our intention. Indo-Asian is really strong in what we call the B-segment and there is a very strong Indian retail market. Legrand is more in the premium segment and the project market. Those brands are complimentary. We run them with the aim of becoming leaders in their respective segments.

In India, Legrand is very strong in the retail segment, but not in the commercial end of the market, relatively speaking...
We see this the other way actually. We have a significant position in the core market and the project market, and the acquisition of Indo-Asian allowed us to go faster in the retail market. That is the way I would look at it. At the (global) group level, the mix of residential and commercial industry is between 42 per cent and 46 per cent, respectively, and more or less it is the same mix in India as well.

In India you are the second-largest player, compared to most multinational competitors such as Schneider, ABB, GE, but there is this perception that you have not brought in your full portfolio. Is it because the market is not prepared for the premium end of your offerings? Have you innovated exclusively for the Indian market? I would like Jean Charles to answer the second part of the question. When you mention these large multi-national companies like Schneider and Siemens, they are active in many product categories, systems and services that we are not in. In the product categories where we are present, we have leadership. The objective is clearly to expand the product portfolio as much as we can. Actually, we are present in most product categories and are leaders in three categories. We expect to grow in the other categories. It is a matter of time that we will grow in other product categories — through acquisitions and organic growth. The ambition in India is to cover the entire spectrum.

Jean: There is no lag in launching our global portfolio here. The wiring devices range we launched for India happened at the same time as the rest of the world. There was no delay. The new range of circuit breakers and protection business, which really is the core business of Legrand in India, was launched here after only 1-2 years after its launch in France. We have taken the time to adapt the product to the Indian environment. We are not launching old products but up-to-date products of the group. This range has been developed in India for India.

Our aim is to cover all markets — from the entry level to the premium segment — and this is what we are doing. We are not stripping features to sell them in India, we have all the functionalities for products in the premium segment. We have good products to enter in certain segments such as mass housing. We don’t have any issue with the price position. Nevertheless, these products comply with the standards and they are tested in France.

There are three centres of expertise and R&D teams in India — for UPS, wiring devices and protection devices. Their core mission is to make sure that the capability to create and design products for the Indian market is there. One example of the capabilities of the Indian R&D team is the recent development of the wiring devices range for China. Our first focus is how to address the Indian market and how to grow in it. We have significantly expanded our manufacturing facilities. Some 85-90 per cent of what we sell in India is manufactured in India. Over the years, India has become a centre of expertise for wiring devices and protection products. India is not an export base for the group but we take advantage of our capabilities to complement products sold in Asian countries including China.

Does Legrand France mandate which country manufactures what?
Our industrial division is responsible for naming countries or centres of excellence for designing or manufacturing products. What is interesting is the history of Legrand in India — a short history of 17 years. Legrand started by importing products as a purely marketing and sales organisation. Then it moved into manufacturing and designing products from here and, today, we are entering Level 3 — India has gained the expertise that allows it to export products designed and manufactured in the country. This is an interesting stage for the Indian management. It is an exciting development, of course. In India, today, we have 15 factories in the group for wiring devices, circuit breakers and UPS. We are more south-centric for UPS as the facility is in Chennai. For wiring devices and protection range, we are in the north, closer to Delhi and Maharashtra. We have grown 10 times over the last 10 years. So, definitely, the manufacturing capacity had to increase. Hence, there is a strong network of sub-contractors that we have developed over a long period of time, which is a part of this capacity.

When you acquired Numeric, one of the reasons attributed was to plug a gap in your offerings in the domestic market. Do you see any gaps now which you think you can plug by taking the same route?
We cannot predict acquisitions and, if you had asked me four years ago, whether we would make the acquisitions that we made, I would not have been able to quote them because this is a matter of relationships. And, at certain points in time, you know sellers are contemplating selling and at other times not. So, to answer your question, yes, there are many product areas in the Indian market that we would love to grow faster through acquisitions. The list is endless. Again, no quota on products. What is important is the value and quality of assets that you are considering. What is clear is that the Indian economy is growing faster than the world economy and the probability of growing from our base in India is faster in terms of marketshare than what we have elsewhere — In France or Italy or US with higher marketshare. For these two reasons, we believe we are going to grow faster here. From a 4-5 per cent share in India’s contribution to our global sales today, we will go up. This is my strong conviction.

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(This story was published in BW | Businessworld Issue Dated 05-05-2014)