Corporate Reports BUSINESS I NDIA ◆ THE MAGAZINE OF THE CORPORATE WORLD A force to reckon with

Lava is set to emerge as a promising Indian brand International. “And this has been a profit-led growth. We are positioned to maintain this momentum going oida-based mobile company forward as well”. One of the biggest Lava International Ltd, has markets for features phones, has Nbecome the only Indian com- witnessed an estimated growth of 17 pany to launch a ‘Designed in India’ per cent in 2017. Reliance Jio, one of the . Prime X, the recently biggest disrupters had imported a large launched mobile set is fully devel- number of handsets and was largely oped and designed by its own design responsible for this surge in growth. team in India. Having launched this Lava sold about 10 million smart- the R6,500-crore com- phones and over 17 million feature pany is now also looking to launch phones in FY17. The share of smart- the country’s first ‘Designed in India’ phones in its domestic sales mix (value smart mobile phone, this year. It plans wise) has increased from 17 per cent to replicate this for the entire range of in 2012-13 to 51 per cent in 2016-17, Lava mobiles in India by 2021. moving further to 57 per cent during Committed to the government’s the first nine months of 2017-18. ‘Design and Make in India’ initiative, According to IDC quarterly mobile Lava has set up its Design Centre (a tracker, the market share of Lava’s fea- first of its kind in India) in Noida, with ture phones was 7.2 per cent in 2017, a team of 30 designers and engineers. below Reliance Industries which was The design team spent over a year in around 8.3 per cent. Samsunge contin- China getting trained and guided by ued to retain its top position, followed the company’s team on industrial, by and Micromax. The top 5 mechanical, hardware and had a combined market share of nearly design. It has made an initial invest- 60 per cent. (see table). In the smart- ment of about R250 crore in develop- Rai: aiming high phone market, retained ing its designing capability and will its lead at 24.7 per cent followed by roll out advanced products at various witnessed a CAGR of over 90 per , Vivo, Lenova and . price points. cent since inception. The company The future for both The Research & Development Cen- crossed the $1billion mark in revenues and feature phones is bright in India tre in Shenzhen, China, has over 700 in 2015-16 and managed to maintain and that is the reason for many man- engineers, covering the entire gamut gross revenues at that level in 2016-17, ufacturers to focus their attention in of mobile designing. Since inception when the industry was being crippled this market. “Over the last few years, in 2009, the Lava team has grown to by demonetisation. In the last five India has not only become one of the over 25,000 people. years, the company has seen an over- prominent markets in the world, but “The ‘Design in India’ initiative all mobile sales growth of about 90 per is now also fast gearing up to become is one of the most significant mile- cent CAGR (feature phones: 66 per cent; the largest manufacturing base for stones towards achieving our coun- smartphones: 248 per cent), even as mobiles. Working towards this, Indian try’s vision of making India a global the industry achieved a growth of just mobile players are also building up hub for mobile phone manufacturing,” 6 per cent. The company has sold over their processes and capabilities as part says Hari Om Rai, 51, CMD, Lava Inter- 110 million mobile handsets in the last of a larger ecosystem. We are definitely national. “It is a critical step towards five years. One reason for this growth heading to start our next growth phase building the mobile components and has been its strong network of retail- on a much stronger foundation,” says parts using the ecosystem in the coun- ers it has assiduously build up over the Amitabh Khurana, general manager, try. Over the last few years, Lava has years. “Lava has built up a very strong technical and manufacturing of Del- built its capability and expertise in supply chain where it is directly con- hi-based . mobile design. It is indeed an achieve- trolling and monitoring its distribu- When Lava launched its smart- ment for our Indian engineers to have tion and retail network,” says Shobhit phones in in 2015, the built not just India’s first ‘Designed in Agarwal of Noida-based GNH Telecom product specifications and features India’ mobile phone, but also one that which has been distributing Lava’s it offered were the best in the price is a hallmark of excellence”. phones for the last five years. range and that made the brand popu- Lava has grown over the years. “Our growth has been remarkable,” lar there. So much so that it managed The topline and bottomline have says Ritesh Suneja, group CFO, Lava to garner a hefty market share there

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for manufacturing,” says Rai. “These developments are similar to what China experienced some 15 years ago, when manufacturing shifted from Japan and Korea to that country. In China, the cost of manufacturing is going up and that is where India is well-placed to explore the emerging opportunities”. Rai feels that India is well-poised to become a major hub for mobile manufacturing in the next decade or so. It is estimated to com- mand 40-50 per cent of share (in term of volume) from the present 10-15 share (value terms: 2-3 per cent) in the global mobile manufacturing. Though a first generation entrepre- neur (son of a government employee, with a middle class background), Rai started his career in a modest man- in a short span of time. Lava was the The deal is strategic in nature and ner in 1992, working in a small stu- second largest player there in 2016, has synergies that will flow to Lava, dio, engaged in making documentary says a Counterpoint Research study. because of its access to Tsinghua’s films. Four months into this job, he The same study also concluded that major chip designing subsidiary’s R&D started feeling restless and decided to Lava was also the second largest fea- and design centres in India. start his own venture. He co-founded ture phone brand in Asia during 2016. The company is also ramping up a biotechnology firm called Biogentek Now, it already has overseas operations its mobile manufacturing facility in in 1993. In a short span of just two in 13 countries, including Thailand, India. It is planning to invest over years, the company became a leader in , , , Indo- R2,600 crore in its manufacturing facil- its field, where it would represent (sales nesia, Mexico, the Middle East and ity, which currently has two units in and marketing services) top European Russia. It has also made its foray Noida. “We want to dominate the sub- and US companies (manufacturers into the African continent recently, R12,000 segment (mid to bottom seg- of laboratory apparatus and equip- through . ment) by acquiring over 40 per cent of ment like bio-reactors, automatic cell The company’s efforts on the the market share in almost all the mar- counters and incubators). The Delhi- designing, R&D and manufacturing kets we operate in,” asserts Rai. “By based biotechnology enterprise main- front has already drawn global atten- 2023, Lava will have an annual pro- tains its leadership position even now tion. Chinese Tsinghua Unigroup duction capacity of 216 million mobile and is a premier firm representing top recently made their first investment phones, which will help us achieve global companies such as Kuhner AG, in India by partnering with Lava and our goal”. Switzerland; LEEC Ltd, UK; Nexcelom made a strategic investment of $30 Rai feels that mobile manufactur- Biosciences, USA; Applikon Biotech- million on a valuation of more than ing is shifting in a big way to India nology, Holland; and Labconco Cor- $1.3 billion. Tsinghua Unigroup, a 51 from China. More than 75 per cent of poration, USA. per cent-owned subsidiary of Tsinghua the mobile shipment in India is manu- “It was while working with the Holdings, has varied interests – rang- factured indigenously and the same is Europeans that I realised the signifi- ing from , energy expected to touch at least 90 per cent cance of value and also total customer and software outsourcing to PC manu- in the next couple of years. satisfaction. And that is something facturing, LEDs and fabless semi-con- “The next 10-15 years will belong I have continued to follow through- ductor manufacturing, etc. to India, as it builds up ecosystem out my entrepreneur journey,” says Rai, who, after moving out of Bio- Top 5 Smartphones and Feature phones Market share (Units) 2017 gentek in 1995, co-founded another (%) Feature phone firm. It was a logistics company – Per- fect Handling (later renamed as Amex- OPPO Lava 7.5 7.2 Samsung press Worldwide Logistics), engaged in Samsung 20.5 freight forwarding, customs clearance, 7.8 24.7 Reliance Ind. Vivo 8.3 warehousing and distribution. The 9.4 Micromax company (still in operation with 400 Xiaomi Transsion 8.7 20.9 13.7 odd employees) would cater to a large number of clients including reputed names Like LG, Unilever, Modi Xerox Source: IDC 2017. Notes: IDC Quarterly Mobile Phone Tracker, February 12, 2018 and others.

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It was during his days with the phones and nine feature phones), logistics company that he developed and has decided to focus on quality, a good relationship with the manage- and provide customers with ment personnel of LG, which was look- improved features. ing to launch GSM mobiles in India in “We have consciously decided to early 2000. Rai saw this as a big oppor- consolidate our portfolio and come up tunity to get into the highly potential with lesser products which can well mobile market. He floated a company be managed and serviced with bet- – Pacetel – which could help LG in set- ter quality and features, even as now ting up its distribution network in our phones are little more expensive India. However, before he could start (20-25 per cent),” says Gaurav Nigam, operating this entity, his contact was head, products, Lava. called back to Korea and, so, he had to abort the operation. Manifold benefits But since he had already set up the In terms of distribution, Lava has a sin- firm and invested in office and man- gle-layer distribution model wherein power (one of the top officials from Bee- over 1,200-odd distributors pan-India tel had already joined him), he started are directly managed and controlled looking out for other avenues. He trav- by Lava. Such a distribution model is elled to Korea and China and, in 2003, Raina: unique distribution model often not preferred by competitors due finalised a deal with China’s premier to the fact that putting up such model land line and fixed wireless phone has a roadmap and action plan to calls for longer gestation for scaling maker BBK Telecom Co (now known achieve this. up. But once the model is operational, as VIVO) to sell co-branded products in Right from inception, Lava has been it entails multifold benefits. India. In a short time, Pacetel turned at the forefront of building a strong “We are the only mobile company out to be a number one player, with ecosystem of design and manufactur- to have a single-layer distribution clients among all major service provid- ing of mobile handsets. The company model,” says Sunil Raina, president ers such as Reliance, Idea, Tata, Voda- has also invested significantly to build & business head, Lava International. fone and Airtel. up its R&D facility in both India (Ben- “We are attempting to completely After working together for almost galuru: 2016) and China (2011). change the way retail distribution is four years, in 2007, BBK pulled out of Lava is in the process of investing done, even as it is a long gestation the partnership, having decided to over R2,600 crore in ramping up its process. Apart from strengthening its focus on mobile manufacturing in manufacturing facilities in the next presence in the offline channel, the China. Having not much of option five years. Having built up its design project will help it gain significant left, Rai also decided to venture into facility, the company is now looking market share”. the mobile business and founded to localise its production in a big way. “We have put in place a well inte- Lava International which, he says, In the next five years, it will localise 70 grated and robust supply chain which is an offshoot of Chinese mobile per cent of its mobile handset produc- will help us in achieving our goals major VIVO. tion from the current 25 per cent. and targets in a much effective man- The Lava chief has always aimed The company is now in the pro- ner. This is crucial, when you want to high. Over the last few years, he has cess of setting up two greenfield man- have a complete control over your pro- created a requisite platform and fun- ufacturing facilities – one, coming up duction and quality,” says Nikhil Jain, damentals for his mobile business at Tirupati, Andhra Pradesh; while the chief strategy officer & head, supply also and is well positioned to take this other, along the Yamuna Expressway chain, Lava. company to a pole position in its seg- near Greater Noida. Lava is also implementing its brand ment of business. The segment where “Manufacturing is a core to any effi- building exercise quite aggressively. Lava is present accounts for almost 65 cient supply chain. At Lava, we are put- It has consciously positioned itself in per cent in terms of volume and 26 per ting up a strong base for manufacturing the largest ‘mid to bottom segment’, cent in terms of value. in order to achieve our set goals.” says where India as a country is emerging “Our aim is to give the world the Sanjeev Agarwal, chief manufacturing as a major manufacturing hub going first global consumer brand from India officer, Lava international. forward. The company is ramping up in the next 10-15 years and I feel all While Lava is building up its manu- all the requisite aspects to lead India’s factors are in the favourable zone for facturing capability, the company has transition story where the country has us,” surmises Rai. now come up with a new strategy to already replaced Vietnam as a second In the next five years, Lava is look- consolidate its product portfolio. In largest maker of mobile phones in the ing to achieve a sales turnover in place of more than 50 products (about world. Lava has put in place in a metic- excess of R35,000 crore, while also tak- 20 smart phones and some 35 feature ulously chalked out road map and ing its market share to about 35 per phones) a couple of years ago, it has action plan to realise its goals. cent (from the present 6-7 per cent) now brought down the size of its port- ◆ ARB IND GUPTA in the process. The company already folio to less than 15 phones (five smart [email protected]

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