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TVs: Looking through the 1980s - Views on News from Equitymaster
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  • May 7, 2001

    TVs: Looking through the 1980s

    The Indian consumer durable industry has come a long way in the last decade. Today, multinational companies like LG, Samsung, Aiwa and Sony hold more than 60 percent of the Indian television market share. In this article, we take a step backwards and analyse the industry structure in 1980s prior to liberalisation.

    The key players in the 1980s were Videocon, BPL, Onida, Bush, Crown, T-Series, Solidaire, Texla, Optonica, Weston, Uptron, Nelco, Dyanora and Salora. Most of these companies, barring BPL, Onida and Videocon, do not even exist today. They have either been acquired or they have shut down their operations because of various reasons.

    Competition intensified in the durable segment post liberalisation with the entry of multinationals. Some of the public sector undertakings like Uptron and Keltron had only regional presence and lower-end technology, which eventually led to their downfall. Moreover more than 50 percent of the costs of television sets were accounted by excise and other levies. Added to this, these companies could not scale up their internal efficiency to match the rise in input costs, as a result of which they went into the red. Therefore, companies like BPL, Videocon and Onida took advantage of this and gained significant market share by expanding their presence across markets.

    The robust growth of 1980s
    (m) CTV B&W Total % change
    FY81 0.0 0.4 0.5 -
    FY82 0.1 0.6 0.6 42.2%
    FY83 0.1 0.7 0.7 10.9%
    FY84 0.3 1.0 1.3 80.3%
    FY85 0.7 1.8 2.5 93.8%
    FY86 0.9 2.2 3.0 21.0%
    FY87 1.1 3.2 4.3 43.3%
    FY88 1.3 4.4 5.7 32.6%
    FY89 1.2 4.1 5.3 -7.9%
    Total 5.5 18.3 23.8

    If one were to look at the growth rate in the 1980s, the TV segment has grown at an astounding rate of 36% CAGR from 1981 to 1989 (from less than half million to 5 m sets). This is remarkable by any standards and this is also indicative of the potential of the Indian market. However, if you compare this with the current rate of the industry, the television segment has grown at a lower CAGR of 23% from FY95. Given the fact that the income levels have risen and the population under the poverty line has reduced, penetration levels have hardly improved (24% currently for the television segment).

    Till last year, on an average, Indian companies used to sell around 6 m television sets in India (3 m B&W TVs and 3 m CTVs). But in the current year, while B&W TV sales have dropped by more than 23% to around 2.3 m sets, CTV sales have declined by 10%-12%. The total television production has also decreased 16% to 1.9 m sets for the period ended April-January 2001 compared with 2.2 m sets in the corresponding period of the previous year. This is primarily on account of subdued demand in light of a less than average monsoon, which strained agricultural output in the current year.

    Of late even companies like BPL, Videocon and MIRC have started to feel the pinch of multinational competition. Within one and half years of entry, both LG and Samsung have sold one million CTVs in a single year. They are also among the market leaders in the refrigerator and home appliances segment. They seem to have understood the customers well within a year than the Indian companies. Even in the current year, these companies have grown at a faster rate than the industry growth as well as their peers. Given these facts, are we going to witness the end of these domestic players similar to what happened to the PSUs in the early 1990s?



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