In a move representative of growing MNC (multinational corporations) interest in Indian manufacturing jewels, Japanese electrical giant, Matsushita Electric Works (MEW), on Monday announced picking up 80 per cent stake in Anchor Electricals Private Ltd, a leader in domestic electrical accessories and wiring devices, for Rs 2,000 crore.
The $14 billion MEW, well-known across the world for its brands National and Panasonic, is targeting leadership position in the Asia region, with the JV.
It is already leading the market share league in countires like Thailand, Taiwan and Philippines tables in electrical accessories. Anchor is the leader in India with a 60 per cent market share in the industry, mostly driven by the unorganised sector.
Announcing the deal, chairman and CEO of the new joint venture, Toshihide ARII, said, "Overseas expansion is the top priority for enhancing MEW's potential for growth. This association with Anchor Electricals will help us to further strengthen our number one position and leadership in Asian markets."
"Our priority is to bring in our speciality products such as power saving and security devices to the Indian market," ARII added. Besides the Japanese company is planning to bring in its home appliances, lighting, home automation and home improvement products to India in due course.
Anchor Managing Director Atul Shah, who will continue to be one of the managing director of the new entity, said, "The main aim is to take advantage of technology strengths and research capabilities of MEW in introduction of new products in the Indian market, where Anchor has a marketing edge."
"We are planning to double our sales in four years and targeting to touch Rs 9,000 crore in 10 years time, from Rs 920 crore in 2006-07," Shah added. The debt-free Anchor Electricals posted a Rs 187-crore of net profit in 2006-07.
Both the JV partners, however, denied further dilution of 20 per cent lying with the Indian promoters in favour of the Japanese company. With the Shah's not even commanding 26 per cent stake they would not be in a position to stall any MEW move at the general body meetings.
Anchor group also has presence in fast moving consumer goods segment with Anchor brand toothpaste, tooth brush, talcum power and Dyna soap. This segment has posted Rs 150 crore of revenues and Rs 17 crore of net profit during 2006-07. "Some of the funds from the deal will be channelled to our family businesses, including FMCG," Atul Shah said.
MEW had no presence in India so far. However, its parent Matsushita group had a JV for production and sale of home appliances, albeit without much success.
In a complex mix of management control to start with, the founders of Anchor Electricals, Dhanji Shah and Jadhavji Shah will hold the chairman, and chairman and senior managing director respectively. ARII of MEW will be the managing director and CEO. Marketing and manufacturing functions will be headed one each from both the partners, while finance will be in the hands of MEW representative.
The deal was advised by Kotak Investment Banking for Anchor and global investment banker Lazard for MEW. The Anchor brand name will remain unchanged even after the change in the ownership.
Wiring devices and switches industry is estimated at Rs 2,300 crore in India and growing at about 30 per cent per annum.
Responding to a query, Atul Shah said that the JV partners have not discussed about India being made an international sourcing hub.
"However, India with its labour costs lower than China, had every potential to become a sourcing hub in the future," he added.
Though ARII said that MEW would pump in required funds for introducing new products whenever required, Atul Shah said that introduction of new products may not require huge outlays with research being a major cost component in the industry with 70 per cent of capital cost.