1 June 2017
Update
| Sector:
Capital Goods
Voltas
SELL
BSE SENSEX
31,146
S&P CNX
9,621
CMP: INR509
TP: INR400 (-21%)
Voltas-BEKO JV: Targeting 10% market share in 10 years
BEKO to bring technology, european brand, product range
Stock Info
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)
M.Cap. (USD b)
Avg Val, INRm
Free float (%)
VOLT IN
331
512 / 287
20/48/36
160.9
2.5
570
69.7
We interacted with the senior management team of Arcelik on its plans for the
Voltas-BEKO JV in India. Our key takeaways:
10-year targets: USD1b sales, 10% market share, 11% margin
Financials Snapshot (INR b)
2017 2018E 2019E
Y/E Mar
Net Sales
60.3
67.4
75.5
EBITDA
5.8
5.9
6.7
PAT
5.1
5.3
6.0
EPS (INR)
15.5
16.0
18.1
Gr. (%)
30.1
3.6
13.2
BV/Sh (INR)
100.0 111.8 125.2
RoE (%)
18.0
15.1
15.3
RoCE (%)
16.5
15.0
15.1
P/E (x)
32.9
31.7
28.0
P/BV (x)
5.1
4.5
4.1
Shareholding pattern (%)
As On
Mar-17 Dec-16 Mar-16
Promoter
30.3
30.3
30.3
DII
26.5
27.1
29.2
FII
20.7
22.4
19.5
Others
22.5
20.2
21.1
FII Includes depository receipts
Stock Performance (1-year)
Voltas
Sensex - Rebased
600
500
400
300
200
The Voltas-BEKO JV targets USD1b sales in 10 years, with 10-11% margin and
10% share in the Indian consumer durables market.
All sales would be routed though the JV – would look at introducing air
conditioners as well post four years.
The JV would be incorporated by September-October 2017 after all approvals
and start seeding the market with imported products from the BEKO
manufacturing facilities globally.
Could do USD300-500m sales in 3-5 years, and then scale to USD1b in 10 years.
Entry to India through tie-up with the Tatas
Arcelik has been looking at the Indian market for the last five years and finally
agreed to a JV with the Tata Group. The company had looked at greenfield
expansion, but it would take a lot of time to establish a brand and distribution
in India. An acquisition did not make economic sense.
Arcelik brings the BEKO brand, technology, product range and global sourcing,
while Voltas has local knowledge, strong brand, and wide distribution network.
Arcelik has been focused on SE Asia. It started a refrigeration plant in
Thailand in 2015 and recently entered Indonesia, Malaysia and Pakistan.
Voltas-BEKO JV to price products in line with the Koreans
The JV plans to start local production of refrigerators by the end of CY18, with
an investment of USD85m for local manufacturing, and scale this up to
USD155m in 10 years.
It intends to price products in line with the Korean brands, LG and Samsung.
The products would be positioned in the popular category.
With the Koreans/Japanese already present in India, competition would be
intense – not looking at price cuts/entry level strategy to take share.
The Koreans/Japanese brands have a lower cost base. BEKO intends to
leverage its premium European brand image, international experience,
technology and product range, while using the Voltas brand and trust to gain
market share in India.
In Europe, BEKO has taken share due to its association with football, and would
like to step up advertising in India, as well.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Ankur Sharma
(Ankur.VSharma@MotilalOswal.com); +91 22 6129 1556
Amit Shah
(Amit.Shah@MotilalOswal.com); +91 22 6129 1543