Having hit the headlines twice in the last ten days, Venugopal Dhoot, chairman and managing director of the Rs 6,000-crore (Rs 60 billion) white goods and oil and gas player Videocon Group is on a new high. "I am the first Indian multinational with 11 factories across the globe," he says.
His dream of becoming one of the world's largest picture-tube maker, after acquiring the colour picture-tube manufacturing business of French media services and technology major Thomson SA globally for Rs 1,260 crore (Rs 12.6 billion), may have come true.
Also, last week's acquisition of Swedish white goods major Electrolux AB's Indian subsidiary -- Electrolux Kelvinator Ltd -- gives him the economies of scale to straddle the entire price spectrum in refrigerators, washing machines and air-conditioners. There is also a buy-back arrangement with Electrolux to supply to its global markets.
But the big question is: Can Dhoot pull it off? Can Electrolux and Kelvinator make a dent in the market? Or will it be like his stable of brands, which he is marketing -- Toshiba, Sansui, Akai and Hyundai -- which continue to be laggards? Also, with oil and gas, and white goods, to be clubbed under the Videocon Industries umbrella, what exactly does Videocon stand for?
Nobody faults Dhoot's recent acquisitions on strategic parameters. "There is a lot of merit in the picture-tube buys as he now has access to a wide sweep, from Africa to China, where people will use normal TVs. With Electrolux, he pursues his existing multibrand strategy," says strategic business consultant Nabankur Gupta, an ex-Videocon veteran.
There is little doubt that capacities have burgeoned -- 30 million units in glass tubes, 14 million in refrigerators (up from 8 million), 8 million in washing machines (up from 5 million) and doubling to 2 million units in air conditioners.
This will no doubt push up market shares. In the 3.4-million unit refrigerator market, according to white goods audit research firm ORG-GFK, Videocon's share will zoom from 6.4 per cent to 16 per cent.
The market leader is South Korean player LG with a 27.5 per cent share followed by Whirlpool at 21.5 per cent, Godrej at 19.2 per cent and Samsung at 6.4 per cent.
In the 15-lakh unit washing machine market, Videocon is in the third place with a 13.6 per cent share. LG leads with a 34.3 per cent share in this space as well, followed by Whirlpool at 13.9 per cent. In all this, does Videocon have the wherewithal to sustain the numbers? Dhoot thinks he does.
But the trade says that while technology has not been a plus for Videocon, its dealer-friendly offerings of bulk and cash discounts helped prop up its products earlier.
According to a leading Mumbai white goods dealer, three years ago, Videocon accounted for 30 per cent of colour television sales and 15 per cent of refrigerator sales.
Today, the CTVs are less than 10 per cent with refrigerators barely selling 2 per cent. "Mind you, all this is Videocon along with its other brands. It has no clout as a stand-alone brand," says the dealer.
"Marketing is a big issue. Their expertise has been for the mass markets and Electrolux is a premium brand. Do they have the bandwidth of managers for that? I doubt it," says a marketing consultant.
In the family-run company, Dhoot and his two brothers will see their stake go up to 75 per cent in the merged entity, Videcon Industries Ltd, which will have a capital of Rs 220 crore (Rs 2.2 billion).
There is also the issue of what Videocon stands for. Last month, as per the Development Bank of Singapore and ICICI Bank, it merged Petrocon Ltd, its oil and gas business, with Videocon Industries. Doesn't Dhoot know that traditionally diversified conglomerates get lower valuations than focused companies? Where are the synergies?
"We are a multi-product company where oil and gas gives us a steady flow of Rs 600 crore (Rs 6 billion). Consumer appliances get the strength from our oil business. This is a purely financial move," says Dhoot.
Today, the group has four companies -- Videocon International, which makes white goods, Videocon Industries, which is into oil and gas, Videocon Appliances, which makes consumer appliances, and Videocon Communications. For long, no market analyst has tracked the group because of "lack of transparency".
Dhoot says that he is determined to change his group's image. "I will get professional management. This is my chance to build credibility for the group."
