Price of LED bulbs and CFL to be the same in one year: Havells' CMD Anil Rai Gupta

In an interview with Vivan Mehra of Business Today, Havells' CMD Anil Rai Gupta talked about explosion of LED market in India, how market transited from CFLs to LED in past few years and company's future plans. Edited Excerpts.

Q. When and why did Havell decides to bet big on LED, considering the fact that you'd already invested heavily in CFL business?

A. In 2009/10, we started seeing the trend for LEDs coming into general lighting, before that it was more into consumer electronics. This trend led us to start developing our own R&D to look into all aspects of LED in general lighting. Initially, we thought that it will take a long time for the industry to change towards LED in general lighting. Our earlier projections were that by 2020, around 50 per cent of the general lighting market will convert into LED. Sometime around 2012-13 this change started happening very fast because the technology was moving very quickly towards to increasing LED output, as well as its decreasing cost. Initially, the biggest factor was high-cost of LED. When this cost started coming down, we started investing more and more into LEDs to give a  product which is affordable to the consumer. Today almost 60-70 per cent of our lighting business is contributed by LED.

Earlier, we estimated  the market to be 50 per cent by 2020, but we realised in 2016 that it has already converted to 65 per cent LED. That of course meant that we had to forgo our investments in CFL business.

I think as a leader one has to take a view that at some point of time certain industries will go into sunset. CFLs business is declining much faster because LED's is growing.

Q. How quickly were you able to switch from CFL to LED… How long did the turnaround take?

A. I think we were the early starters, because we realised that we have a large market share in the country in the lighting space and we didn't want to be left behind. The market opened much more initially because of the hype surrounding running-cost reduction. There were a lot of conversions, so the market exploded initially, though it settled down over a period of time.

This explosion brought in a lot of new manufacturers. This was also a problem because sometimes when fly by night operators come in, quality levels goes down. But we struck to our philosophy of brand and quality and somewhere around 2013 we said we will make big investments in manufacturing & R&D of LED's.

Q. Talk  a bit about the current LED market size and how much does Havell plans to invest over 3-5 years?

A. The lighting market in India would be close to about Rs 6,000 crore, and already about 60 per cent has converted into LEDs. The government is putting a lot of emphasis on converting traditional street lights to LEDs, so the market has suddenly exploded. We believe the total market could be about 30-35 per cent for LEDs. That's why Havells decided to invest big into LEDs. Our investment in LED space would be close to about almost Rs 400 crore in the next two years.

Q. How do you plan to maintain you leadership in the market given the fact that so many large companies are now getting into LED?
A. I think the way we look at it is that when the market explodes, new players come in bringing  low-quality products. This happens initially and after the dust settles down, a few survive. Only those companies who concentrate on brand, distribution and quality survive for a longer period. LED is perceived as more of an electronic play by many companies, but we look at LED more as lighting. The customer wants solutions to light up his home or office. So the customer wants company who has knowledge about lighting rather than LED. We have no apprehension on our market share getting affected in the long term.

Q. How important is new design and research for customer retention, or is it just a pricing game?
A. Beyond giving value for the customer, there's not much a difference between a better brand or a lighting brand. The main thing is to enhance the lighting experience of a consumer, be it a house consumer or an office consumer. So, if you understand the lighting space and if you can design a proper lighting experience for the consumer that is something which will be more important for the consumer in future.

Q. Increased capacities means more competition, which means your margin starts decreasing as the bulbs get cheaper. So what is your strategy to keep your margins up?
A. While the prices are going down, costs are also coming down. But we have the right reach, brand, and greater value to the customer in terms of better features. And because we are a margin-focused company, we don't see margins getting compromised in any manner.

Q. Your prediction on when the LED prices will come down?
A. LED in lighting is a huge industry and difficult to predict, because it ranges from large luminaire or street light to the small bulb. The bulbs which used to cost around Rs 300 a year ago, are now somewhere between Rs 100-120 depending on the quality and size.

So prices are almost down to level of CFLs, which is a big incentive for customers to change from CFL to LED. I believe, in a year or so, this will be at the same prices of that of CFL.