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“There is a clear conflict of interest between a computer and a television…” - Views on News from Equitymaster
 
 
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  • Jan 6, 2001

    “There is a clear conflict of interest between a computer and a television…”

    Mr. Vijay Mansukhani, the Managing Director of MIRC Electronics, is a graduate from the College of Marine Engineering, Mumbai. After working for Arya National Shipping Company, Iran and Shipping Corporation of India for 9 years, he promoted MIRC Electronics in collaboration with JVC of Japan in 1990.

    In an interview with Equitymaster.com, Mr. Vijay Mansukhani spoke about where the Indian consumer durable industry is heading and his vision for MIRC Electronics.

    EQM: How do you the see consumer durables moving from here say, in terms of volumes and price? Do you think 30% growth per annum that we saw for the last two years would continue in the future?

    Mr.Mansukhani: It should continue because there is tremendous scope for growth. One of the primary reasons behind this is the fact that our penetration level continues to remain sluggish. China sells more than 25 million television sets per annum while we sell just 5 million sets. But, the per capita income of both the countries are almost the same.

    The problem we have is with the government policy. It only shows that our taxes are very high. Government is killing the industry with high customs, excise, octroi, sales tax and import duty, which are not sustainable in the long run. If these are rationalised, not only the government would earn more money but also the consumer would buy more. Otherwise, if you see, India’s export price and China’s export price are the same except for the fact that local taxes are low over there.

    Regarding volumes, I think it will pick up in rural as well as in urban areas if prices come down. Even in urban areas there is a vast chunk of population who do not hold televisions. So we cannot work on the assumption that only rural markets would be the likely impetus. Today, India has one of the least household colour television penetration levels among the developing economies. Just one in twenty two have CTVs. Even Vietnam and China are far ahead of us.

    But, with DTH coming, it would become even better. People just have to install a dish antenna and can see 100 channels. So there is plenty of scope for growth. But if rationalisation of duties takes place, we could witness huge growth in volumes.

    So, the government better start looking at this as an educational product and not as an entertainment product because people still think television sets are an entertainment product, which is not the actual case.

    EQM: You have recently launched Candy in the 20’ inch category and Web Cruiser in the web-based television segment. How well have these products been received?

    Mr.Mansukhani: Candy is doing wonderfully well in the 14’ inch segment, as it is a niche product targeting young, trendy and affordable segment. In the 20’ inch segment, volumes have been lack lustre because there is nothing called as trendy and young in this category. What really matters in this segment in just cheap, cheaper and cheapest. We are planning to introduce candy in the 21’ inch segment. This would do well because people in this category want TVs to be trendy as well as an affordable.

    Web Cruiser unfortunately has not sold much because I feel that we are a bit ahead of our time. It is a poor-mans computer. There are two reasons for this. Resolution of these TVs is comparatively lower. Second, there is a clear conflict of interest between a computer and a television. You switch on television to put your brain off, but you switch on the computer to put your brain on. I think many companies have invested billions of dollars trying to match this conflict and integrate this gap in the past. But still they have not found the right formula. I doubt anybody will enjoy too much of success in this migration between television and computer. But we have introduced the model and infact have bettered it.

    Nevertheless, the concept of black box would be better in which you can change in the black box and update it as against purchasing a new one. If you have a web TV, it may become obsolete but in case of a black box you have the same TV, but just upgrade the existing one. Even in this case, the idea is a bit far ahead because half of these web TVs and black boxes are not java compatible. If it is not java compatible, you wont get a good picture.

    EQM: Coming to MIRC’s product mix, television contributes around 83% of the turnover and you have washing machines in the traded goods category. Is there any plans to extend to say, microwaves or home appliances?

    Mr.Mansukhani: No, we want ourselves to be identified as a television company in India. We would be focusing on TVs and infotech. We have incorporated a new company named Onida Infotech. We hope to focus more on software in the future.

    EQM: Which area does this company focus on?

    Mr.Mansukhani: At the moment, it is implementing SAP solutions. We are very confident of undertaking SAP implementation.

    EQM: The Indian consumer durable industry has become competitive like never before. In the second quarter, operating margins have fallen by 300 basis points for MIRC. What is your view on current status of the industry?

    Mr.Mansukhani: Margins have fallen because we had the world cup last year. But I am sure that for the whole year, our profits should be higher by 20% and topline should grow by 10%. But nothing to really worry about competition if you are alert and understand market dynamics. Indians by and large are clever people. So we have nothing to fear from multinationals.

    There are many individuals who are taking on multinationals individually because I personally feel that television technology at the moment is quite flat. But convergence is happening. Our research and development is one of the strongest in India. I do not think there I any other company in India, which has two R&D teams. We have one in Mumbai and one in Delhi. We also have an R&D team for JVC, Japan. In fact, multinationals are sourcing from us and not the other way round.

    We have full confidence in competing with the multinationals because companies like Philips or Mitsubishi who manufacture components like microprocessors or IC units do not restrict sale of these components to their own companies. They sell across the board to everybody. Though we are smaller, we can grow faster.

    EQM: On the retail front, how do you see dealer margins performing in coming years?

    Mr.Mansukhani: The dealer margins definitely are going to get squeezed. We only worry about our competition and dealers should worry about their competition from not just eight or ten manufacturers but from 500 to 5,000 dealers as each dealer is trying to outperform their peers.

    I think this is the time for dealers to change from just sales outlets to a one-stop shop. One-stop shops are those where dealers could do sales, hire purchase financing and provide for after sales service. So he makes money not only on sales and services but also on financing. This is because Indian consumers do not throw their television like in US or Japan. They maintain it atleast for ten years.

    Even in sales he should basically have a cartel of dealers, who buys from this cartel. In India, we have individual shops unlike in US where they have dealer chains. One chain means 1,000 shops. So, they have a collective buying power. Of course, the shop’s brand equity goes up. That is how a dealer would make money. We will try our best to provide for better dealer margins. But at the end of the day, any dealer who does not offer any of these three services can expect a squeeze on their margins.

    EQM: MIRC is also engaged in import, marketing and servicing of professional grade studio and broadcasting equipments of JVC, Japan. What are your plans on this front?

    Mr.Mansukhani: Television is going to become more like a projector. As television size gets bigger and bigger, you cannot enlarge picture tubes beyond a certain level. You have to have projection television beyond a certain range. This is because when size gets bigger, you lose contrast, luminance and picture quality.

    To overcome this, JVC has tied-up with Hughes Aircraft to use aircraft bombing technology to enhance its contrast and luminance. We are now aiming to bring this technology to the consumers where you can have pictures of high quality with a flat projection on the wall. We are creating awareness among consumers. Once we get it at an affordable price range for the consumer, we would mass-produce it here in India.

    EQM: How do you see the industry growing post WTO regime with import restrictions moving out?

    Mr.Mansukhani: Our TVs are the best in the world. Why would anybody want to import TVs when we are exporting the same? But, I do hope that the government will use its discretion in putting custom duties under three slabs. One would be for the product, second would be for its components and the last for the raw materials, which are used in manufacturing television sets. Otherwise, you would kill the domestic industry. What we are saying is that let the customs duty come down from 45% to even 20%, but there has to be some differentiation between imports and domestic manufacturers.

    EQM: What is your vision for MIRC Electronics?

    Mr.Mansukhani: We see a lot of convergence taking place between computers, telephony and entertainment. This is where all our R&D teams are working. We have Onida Infotech and we also have a company called Odino Telecom, which is our stride backwards. TVs as we know it will not be the same in the future. We will find people using TVs for commerce and we call it T-commerce and not E-commerce. We are preparing ourselves for that.

    EQM: Any favorite books or personalities that have influenced you?

    Mr.Mansukhani: My favorite magazine is Fortune, which gives you all the latest developments in technology and ideas.

    I have never given it a thought because I personally believe that whether you are successful or not, you are an ordinary person. Of course, there is a difference. Some people stand outside the ring and shout but some jump into the ring and fight. They emerge as the winners.

     

     

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