The Federation of Universities Videocon Group “As Indian business starts to go global, Videocon has proved that it is right in front. With 10 brands in its portfolio and with factories globally, Dhoot has proved that with strategy and fire in the belly, you can achieve much.” – Lakshmi Mittal, Chairman and CEO of Mittal Steel Speaking on Videocon Global Acquisition. Videocon Group, which has never been in short supply of ambitious desires to have more global presence, has scripted two blitzkrieg acts with; by the first act, Videocon Group Chairman Venugopal Nandalal Dhoot, on June 28, 2005, acquired Thomson SA’s entire color picture tube business spread in Europe, America and China. From this deal, V N Dhoot also got Thomson SA to invest in Videocon International and Videocon Industries, the two flagships of Videocon Group. Later, to increase falling market share of Videocon in electronic consumer goods and appliances, he acquired the entire stake of loss making AB Electrolux’s Indian operations – Electrolux Kelvinator, and got the AB Electrolux to invest in Videocon Industries. After scripting the twin deals, Mr. Dhoot moved to play the second act by merging Videocon International with Videocon Industries on the advice of Development Bank of Singapore and ICICI Bank, giving Videocon the cash to play for a greater role in the global market. But the acts surprised the financial markets. Market analysts wondered whether Videocon Group ambitious vision of becoming a global firm a hasty and hazy act. The financial markets also wondered whether Videocon had the financial strength to carry on its further investment plans. Mr. Dhoot, after having got two high profile low-cost acquisitions amidst severe competition, began reinventing Videocon with an eye on the global equipment manufacturing market. After completing the acquisition Videocon Group expects to increase its total turnover from Rs.50 billion to Rs.175 billion, with more than Rs.87 billion coming from the global markets. He adopted a new slogan for its group – ‘The Sun never Sets in Videocon’ and began moving towards making the group a multinational Indian company. Currently, he is planning to tap financial resources from capital and debt markets. VIDEOCON GROUP – THE EXPANSION PATH Videocon Group came into being with the incorporation of Videocon International Ltd. (VIL) in 1985. At present, the group consists of four listed companies – Videocon International, Videocon Appliances, Videocon Industries and Videocon Narmada Electronics Limited. Within a decade, the group shot its way into the big league and became a leading manufacturer of consumer electronic goods and house appliances in India. The Dhoot family, hailing from the backwaters of Maharashtra, traveled a long way from being producers and sellers of sugar and cotton to become producers of hi-tech products like Color TVs, refrigerators, washing machines, air-conditioners, and digital assistants. Videocon group was founded by late Nandalal Madhavlal Dhoot, who migrated from Marwar region in Rajasthan to Maharashtra and established himself as a successful sugarcane and cotton grower. Nandalal established sugarcane mill based on French technology in 1955 at Gangapur near Aurangabad, an important industrial center in the Marathwada region of Maharashtra. Madhavlal Dhoot’s sons Venugopal, Rajkumar and Pradeep Kumar built their business empire – Videocon Group, and raised it to become the leading producer of electronic appliances in India. VIDEOCON 2006-20 Venugopal Dhoot, the eldest son of Nandalal Dhoot, graduated in electronics engineering from Poona Engineering College and had also trained in TV engineering from Toshiba Corporation in Japan; he followed his father’s business managing the sugar mill and cotton gins. Venugopal Dhoot sighted an opportunity for producing color TVs in India when he noticed that Indians took a fancy for Color TVs ever since color TVs were introduced in India during the 1982 Delhi Asian Games. He procured a license and through a technical tie-up with Toshiba, Japan, set-up VIL in the year 1985 with an initial capital of Rs.100 million and began producing Color Television sets and also monochrome television sets. Their venture with Toshiba gave Videocon group to focus on product quality and durability and the right platform for establishing themselves in electronic appliances industry in India. Videocon International Limited got listed at Bombay Stock Exchange in 1992 and at the time of listing the company had an authorized capital of Rs.200 million and paid-up capital of Rs.82.80 million. The company raised money from the markets whenever it required the capital for investments since it got listed at the stock exchange in 1992. It also issued GDRs and Euro issues in the year 1994. In January 1994, the company issued GDRs at an issue price of Rs.255 and raised Rs.2.82 billion and later in October 1994 the company went for Euro issue, issuing non-convertible bond at an issue price of Rs.100 raising Rs.340 million from the issue. In 1998, Videocon Narmada Electronics Limited, a flagship company under Videocon Group, manufacturing glass shells that go into production of picture tube was merged with Videocon International Limited. The merger was taken by exchanging one share of Videocon International Limited for every 12 shares of Videocon Narmada Electronics Limited. WIDE RANGE OF PRODUCTS Videocon International Limited, along with Color TV sets, also manufactures digital videos, and home theaters under consumer electronics. It also manufactures refrigerators, washing machines, air conditioners and micro ovens under home appliances. In Color TVs, Videocon was the first Indian Company to introduce Picture-In-Picture, Turbo Sound, Surround Sound, Larger Screen Sizes, the Full Flat Square Tube, Bazooka technology and the Freedom features. It was the first to introduce frost-free refrigerators. Videocon tied-up with leading brands that entered into India post reforms era, and positioned itself as a multi-brand company. It also built a stronger distribution network and by the end of 1990s it steadily emerged from being the maker of color televisions to being the largest manufacturer of consumer electronic appliances in India. Videocon Group, taking the advantage of Tax holiday given to the industries set-up in rural areas, located its manufacturing units in policy-friendly locations. Its production facilities, located in the backward region of Marathwada, fall under Special Industrial Development Zones schemes. Its plants located in the industrial belt of Aurangabad get a tax benefit of 135 percent on investment, and about 70 percent of sales of Videocon group come from plants that are exempted from sales tax. The group’s major production facilities of home appliances are: 1. Videocon International Ltd., Chitegaon, Aurangabad. (Color TV assembly Plant) 2. Videocon International Ltd., Gandhinagar (Monochrome TV assembling Plant) 3. Videocon Appliances Ltd., Chitegaon, Aurangabad (Washing Machines and Air Conditioning assembling) 4. Videocon Narmada Electronics Ltd., Bharuch (Glass shells funnels and Glass shell panels) 5. Videocon Communications Ltd.., Bhalegaon, Aurangabad 6. Salt Lake Plant – Kolkata (Color TV). The Chitegaon and Bhalegaon plants were built with an investment of Rs.2000 million crore each and have an installed capacity of about 10,000 CTVs per day. The plants were built to give Videocon an edge over its competitors producing on the conventional lines. VIL manufactures glass shells (funnels and panels), electronic components such as electronic tuners, FBTs (Fly Back Transformers), ATDMs (Asynchronous Time Division Multiplexing) and deflection yokes that go 430 VIDEOCON 2006-20 into the manufacture of CTVs. A major strength of Videocon International is its engineering skills and tool room. The company set-up a high-level backward integration facility to ensure a smooth flow of material. The Dhoots made efforts to build their plants with state-of-the-art-technology to give them an edge over their competitors by constantly updating their manufacturing facilities with the changing technology and maintaining high standards of quality right across its spectrum of products. Built with the best technical features set to world standards, the plant has every facility, right from the basic process of manufacturing the components to the final assembly. The machinery deployed ensured that the products are of international class with zero defects. The accuracy of component insertion is of superior class, and about 90% of the components of the CTV are assembled through the process of Auto Insertion. The machine works at the plants are fully programmable. Further, the soldering of components is done in an Inert Nitrogen Chamber, which ensures oxidation free solder joints that are more reliable than the conventional soldering process. The near zero wastage technology adopted at the plants reduce manufacturing costs by optimizing material inputs at these plants. To ensure the smooth processing of material and to maintain product quality, Videocon adopts the Japanese 5-S (Seiri, Seiton, Seiso, Seiketsu, Shitsuke) the five tools of quality which focus on eliminating wastage at all levels of production. DIVERSIFICATION The ambitious Videocon Group, diversified into other sectors like real estate, financing, crude oil business by setting up Videocon Petroleum Limited in 1993, which was renamed as Petrocon India Ltd. and also in power and energy sectors. Exhibit 1: Videocon Group Company Name Year