We may bring housing business to India in the future: Panasonic

New Delhi: Kazuhiro Tsuga, president of Panasonic Corp., was in India recently to meet company employees and business partners. In the past four years as president of the $66 billion Japanese conglomerate, he has visited India four times, emphasizing the country’s importance in Panasonic’s global scheme of things.

Together with Manish Sharma, president and chief executive of Panasonic India and South Asia, he spoke about the changes in India’s business environment, Panasonic’s investment plans for India as well as future products it is working on. Edited excerpts:

What is on the agenda for this visit?

This visit is mainly to meet with our employees and business partners. My last visit was in December 2014, when we met the prime minister. And since our Indian operations are getting stable and our business is going well here, that is why within the ISAMEA region (India, South Asia, Middle East and Africa) we are more focused on Africa and the Middle East. Although when I became president, I promised to visit India twice a year. But I cannot find the time.

Between your last visit to India and now, do you see changes in the business environment and in the way the country is being run?

We have read a lot of articles in Japan about Prime Minister (Narendra) Modi and all this news is favourable for us. The Indian economy, relatively speaking, is more stable. So, we continue to invest and grow in this country.

With the government’s focus on Make in India and Smart Cities projects, are you looking at bigger investments in the country?

We will do bigger investments when the time comes. This is not the time. But we are carefully watching what we could do. As you know, we have a lot of assets to grow, for example, factories, technologies and business relationships, so we are watching globally and also carefully watching India to see what will be the right time to invest heavily here. But we have already invested in India in air conditioners, washing machines, televisions as we expanded capabilities. Earlier, product planning was done in Japan. But local needs are more important. So, we invested in Malaysia, Vietnam and also China. And when the time comes, we’ll do similar investments in this country.

What would be the triggers to bring more investments to India? Are you waiting for the monsoon to revive demand?

Manish Sharma: For almost all appliances, manufacturing in India has already started. But from the industry’s perspective, one of the challenges is that the demand at this point of time is relatively small compared to the supply available.

So, when you talk about televisions, the current demand is at the level of, let’s say, 11 or 12 million units. Our internal capacity is about 1.2-1.5 million units annually with a market share of 8%. We are at 80% utilization. Similar is the case with other appliances like air conditioners. There is surplus availability of manufacturing capabilities in the country. So, it’s not about short-term impact of, say, a better monsoon this year.

The last couple of years have not been good in terms of growth. But a correction will happen. I am sure it will be a good year for manufacturers in terms of utilizing their current assets. However, a greenfield investment will happen once we cross this kind of situation.

The point we are making is that we are watching the situation carefully and will expand accordingly, although we keep expanding existing capabilities anyway. For example, we increased television capacity from 0.8 million units last year to 1.2-1.5 million units. Similar is the case with AC (air conditioner) facilities.

You are in multiple businesses. Which part of your business is the largest revenue earner in Asia?

Definitely appliances, including TV, which is the biggest sector. But in North America, our consumer appliances business is very small—it is only 10%.

What about India?

Sharma: Consumer products are the biggest here. Maybe globally when we look at consumers, it would be much smaller when we compare it to B2B businesses. In India, out of Rs.8,700 crore, “only consumer” is Rs.4,000 crore. I am not very sure where you put Anchor Electricals because at the end of the day it is reaching out to consumers of lighting devices and wiring devices. It is a Rs.2,000 crore business approximately. If we put both of these together, then this is approximately 70% of the revenues.

What constitutes the housing businesses?

We build houses in Japan. We build houses for senior people and eldercare. We build prefabricated houses as well as those on-site. We are in the service business and do kitchens and other housing-related material.

So housing won’t come to India?

Maybe, in the future, it could. Currently housing is heavily concentrated in Japan. We are expanding this business to Taiwan, Malaysia, Indonesia as well as China. It is moving out of Japan. Asia is already initiated. In India, I have visited big houses, employees’ houses as well as rich persons’ houses.

Does India require the kind of houses you make?

India is a very hot country. But we have a technology for that. It is a technology that you can utilize on the ceiling. And these materials are made by Panasonic. The technology comes from our refrigerators. The refrigerator requires heat separation. We have various technologies.

What is your business target for the next five years?

Sharma: We have a three-year target. For FY2018-19, we are looking at Rs.18,000 crore. One- third of this we want to come from mobile phones and a larger chunk from energy storage (read batteries), and approximately Rs.6,000 crore from consumer businesses. The balance will be from Anchor and six other companies in India.

You don’t pursue the mobile phones business elsewhere?

We used to have it in Japan but we gave it up. Japan is an aged society. There are opportunities like housing for senior people. But India is a young country. Also, India is an open market. Japan is a carrier-driven market.

Is the consumer business profitable in India?

Yes. It broke even last year.

Currently, where does India stand in overall global revenue—in terms of percentage?

It’s just 2%, but it is the fastest growing market. In 2018, we are looking at 4.5% contribution from India to the global revenue. India as a priority is getting higher and higher.

Are there any new, interesting and revolutionary global consumer products being launched?

We are currently investing heavily in the automotive industry including in electric vehicles. We are a battery supplier to Tesla Motors. Countries that have a lot of environmental regulations need electric cars and these need a lot of batteries.

Are you investing in Japanese car companies too?

Historically, Japanese car makers are good at producing hybrids. We are providing batteries to Toyota and Honda. They are the biggest hybrid car manufacturers in the world.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.