Company Background: Videocon Industries was incorporated in 1986.The company has two core activities, which includethe manufacturing, assembly, marketing anddistribution of consumer electronics and homeappliances, and exploration and production of oil andgas.The company presently has seven operatingbusiness divisions, in which major divisions areconsumer electronics, homeappliances,components, etc.In India,Videocon has eleven manufacturingfacilities.The manufacturing facilities produce acomplete range of consumer electronics, homeappliances and critical components such ascompressors, etc. It is the only manufacturerof glass panels in India.The facility at Bharuch islargest in the world at a single location and the thirdlargest overall. Videocon is one of the major CRTmanufacturers globally, with plants in Poland, Chinaand Mexico.The Poland plant also produces glassshells. It assembles air conditioners in Oman andCTV¶s in Italy.The company has emerged as one of the largestcolour picture tube (CPT) manufacturer in the worldafter the acquisition of Thomson's CPT business, andexpects this to grow its international sales to EUR782.36 million within three years.

It is an ISO 14001 and OHSAS 18001 certifiedcompany and has received the CE approval forexports to the EU. It has also been certified bythe VDE Testing and Certification Institute andcorresponds with British standards as well.The

company believes that its strategy of end to end supplychain integration with global scale and low cost base andwith entry into the global brand space through theacquisition route will transform it into a global CE & HApowerhouse with a strong cash flow from the oil and gasbusiness.yFactorsforSuccess:

ySynergy with Eastern Europe:

The strategic acquisition of a manufacturing facility inPoland has provided Videocon with a fully integratedfacility as well as experiencedmanpower. Being cheaper than other EU nations,Polandalso acts as a low cost manufacturing base for thecompany in the EU.An additional benefit accruing to the company is the scope offered by the Poland plant for expansion into other areas.The company plans to optimise its glass sourcing

by expanding the plant capacity as well as by using thesynergies with other glass factories of Videocon, so that itcan be at par with the tube capacity.

y Focus on R&D:

R&D is an ongoing process for Videocon, dueto the rapid obsolescence of technologies andproducts witnessed in this industry.The company hasthree product development centres located at China,India & Italy. It has recently applied for a patent for a lowcost production process for the plasma panelmanufacturing. In the LCD space, the company havesigned a patent assignment agreement covering 70patents with a major US corporation.yRelationship with Global Majors:

Global majors AB Electrolux and ThompsonElectronics have recently acquired stakes inVideocon, their nominees are on the Board ofVideocon Industries and the resultant experience andexpertise of these companies should help it in capturing asignificant share of global markets including the EU.y FuturePlans:

yCapacity Expansion:

Videocon proposes to upgrade the facilitiesacquired from Thomson SA by adding new product linesincluding Slim Tube, Plasma, LCD and other flat paneldisplays. In the long term, the company plans to developinto a global sized vertically integrated entity in thedisplay device segment along with CPT glassmanufacturing.

This acquisition is in tandem with an increase in itsdomestic CPT manufacturing capacity to 24 millionpieces per annum (presently 17 million pieces) as well asadditional capacity of five million pieces per annum fromthe alliance with BPL and JCT. It will help the VideoconGroup to transform into one of the largest players in theworld in integrated manufactur-ing of CPTs with CPT glass.The company intends to make investmentsof over EUR 391.18 million to meet these plans,and willsource these funds from domestic or internationalmarkets at an appropriate time.In its Italian facility, the company has re-engineered theplant and it now assembles end products suchMultinational players are making their presence felt. Thecompany¶s integration strategy and global scale hasenabled it to supply consumer electronics and

home appliances products in India to organised retailchains such as Reliance Retail, Pantaloon Retail andinternational brands such as Wal-Mart Best Buy etc.which would ensure a regular off-takeof products.The company plans to further leverage onthis strategy.

y Investment Rationale:

y Videocon to launch mobile services:

Videocon Group will launch its mobile services inMumbai and Chennai by March, it is planning toincrease the number of its retail outlets across thecountry to facilitate its foray. The company plans tocover the entire country with its GSM mobile serviceswithin the next 18 months. . Datacom has now beenrenamed as Videocon Telecommunication Ltd, whichhas earmarked an investment of Rs9,000 crore and islooking at becoming profitable in coming years.y Focused Oil& G as business:

The group has a strong presence in the oil explorationbusiness,both domestic and overseas. It is currentlyinvolved in exploration activities in various oil blocks. Ithas oil blocks Australia, Brazil,Mozambique andIstanbul. Videocon is planning to enter the oilextraction business and has received some proposalsfrom foreign players. The company also plans to startextraction activities in oneof its Brazilian blocks by nextyear.

y Planning to start 500MWpower Plant in

Maharashtra: Videocon Group, a consumer electronics giant, isplanning to set up a 500MW power plant in its

homeland, Maharashtra. It also expectsto achieve financial closure for its Gujarat-based1,200MW power plant by end-March. The financialclosure for the first phase of600MW has been achieved; the second phase¶sfinancial closure is getting completed. The company islooking into the land availability issue and other issueslike coal transportationy Discoveryofhigh-quality net oil pay:

The BM-C-30 offshore block in the Campos Basin ofBrazil, owned by a consortium of which VideoconIndustries and Bharat Petroleum Corporation (BPCL)are part through their units, has discovered Morethan 90 feet of high-quality net oil pay while drilling theWahoo-2 or Wahoo North well in the region. TheWahoo North well is located five miles to the north anddown-dip from the original Wahoo discovery well, whichhad encountered oil in 2008.Anadarko also expects todrill two to four additional exploration wells in theRovuma Basin this year.

y Videoconplans pan India presence:

Leading conglomerate Videocon, has forayed intomobile handset space, it plans to achieve a pan-Indiapresence by end of February and roll out 15 moremodels of handsets in two months in addition toexploring the option of coming out with 3-G handsets.y Opportunities in Oil a nd Gas:

Videocon plans to expand its activities in the oil andgas sector. It has recently bid for block in Egypt and isalso exploring opportunities in the CIS block and otherpotential countries.The company is alsohoping to be successful in the New Expl-

oration and Licensing Policy ± V (NELP V) for which ithas already submitted bids.y Acquisition of D aewooElectronics:

The company has been chosen as the preferredbidder to acquire South Korea¶s third largestelectronics manufacturer Daewoo Electronics from itscreditors, who presently hold 97 per cent of thecompany. This acquisition would allow it to strengthenits presence in key markets including The US,Korea,Japan and the EU.The acquisition would also result inderiving value out of synergies from back end due tobetter cost efficiencies.

y Expansion Plans:

Videocon plans to enter the insurance sector, a growtharea for the Indian economy.The company is in talkswith three French multinational insurance companiesfor a possible joint venture for the same. The Ind-ian economy is growing at a very healthy rate of over 8per cent per annum.Traditionally consumer durableshave grown at least three times the GDP growthrate.The company expects the domestic market to growat least 20 per cent per annum.With the wide productrange, an extensive distribution network and strongbrand equity it isn well positioned to lead the growth inthis industry.The organised retail industry is one of thefastest growing segments in the economy. Large Indianand Multinational players are making their presencefelt.The company¶s integration strategy and global scalehas enabled it to supply consumer electronics andhome appliances products in India to organisedretail chains such as Reliance Retail,PantaloonRetail and international brands such as Wal-Mart Best

Buy etc. which would ensure a regular off-take ofproducts.The company plans to further leverage on thisstrategy.

Type Public(BSE: 511389) Industry Conglomerate Founded 1979 Founder(s) Nandlal Madhavlal Dhoot Headquarters Aurangabad, Maharashtra, India Key people Venugopal Dhoot (Chairman) K. R. Kim (CEO) Products Consumer Electronics Home Appliances Components Office Automation Mobile phones Wireless Internet Petroleum Satellite television Power Revenue US$4 billi n (2010)[1]

N tin m US$276 milli n (2010)[1]

Empl s

5 000 (2010)[1] W bsit Vid n. m

y Display industryand its components:

After the acquisition of Thomson in 2005, Videoconhas emerged as one of the largest Colour Picturetube manufacturers in the world. It has plants inMexico, Italy, Poland and China and manufactures arange of high-tech products such as slim CPT, extraslim CPT and High Definition 16:9 format CPT.y DT H:

In 2009, Videocon launched its DTH product, called'd2h'. As a pioneering offer in the Indian DTHm ark et,Videocon offeredL CD & TVs with built-in DTHsatellite receiver with sizes 19" to 32". This concept in the DTH service is relatively new in the presence ofother players like ZEE tv's Dishtv, Tata Sky, Air telDigital Tv and Reliance's BIG TV providing only theset top box.� Telecommunication: Videocon Telecommunication Ltd has license formobile service operations across India. It launched itsservices on 7 March 2010 inMu m b ai.

Videocon Industries: Innovativeness 94.1 Quality & Depth of Management 87.0 Financial Performance

101.0 Ethics & Transparency 101.0 Quality of Products & Services 83.0 TalentManagement/PeoplePractices88.0 Global Competitiveness 87.0 Total Score 641.1

Role of local government in the acquired units: y ITALY:

The LCD television segment is one of the fastest interms of growth rate in Italy. The compounded growthrate is projected to be around 70% in the next fewyears. Videocon in partnership with the localgovernment is going for a Greenfield venture in thissegment. The Italian central government is giving a euro180 million grant whereas the regional authorities aregiving a 40 million grant. Videocon would itself pitch inwith about euro 300 million whereas bank loans wouldprovide a further 700 million.y CHINA:

In the Thomson plant located in China the local Chinese Government is the minority shareholder. y Mexico:

When Videocon acquired Thomson¶s CPT business, italso gained control of Thomson¶s Mexican plants.

However Videocon Industries has a view that it wouldexpand in the country only if the government gives itenough incentives. Videocon is demanding a 25-30%cash benefits from the authorities who are currentlyready to give only about 20%.

MajorAchievements ofVideocon IndustriesLtd: The largest panel production facility in the world under

one roof providing very high economies of scale. One of the world's largest and most respected CRT

glass manufacturers. Firing the largest furnace of its kind in the world with a

tank size of 3300 sq ft. One of the few companies in the world to convert sand

to TV. One of the largest and most acknowledged CPT

manufacturer in the world .

1YearComparativeGraph: Videocon Industries

BSE SENSEX

Sector outlook: There has been strong competition between the majorMNCs like Samsung, LG, and Sony. LG ElectronicsIndia Ltd. has announced its extension plan in 2006.

The company is going to invest $250 million in India by2011 and is planning to establish a manufacturingfacility in Pune. TCL Corporation is also planning toestablish a $22 million manufacturing facility in India.The Indian companies like Videocon

Industriesand Onida are also planning to expand. Videocon hasacquired Electrolux brand in India. Also, with theacquisition of Thomson Displays by Videocon inPoland, China, and Mexico, the company is markingits international presence. Customer, Corporate and Videocon : y Corporate Overview :

TheVideocon Group is committed to create a better quality of life for people and furthering the interests of society, by being a responsible corporate citizen.

y Creating Happiness :

We will bring happiness into every home, offering high quality

consumer durables at affordable prices, spreading the culture of convenience, entertainment and comfort, far and wide. y Achieving Progress :

We will pursue innovative technologies in the fields of

Electronics and Energy, create products and services that will improve the quality of life, realize the goals of the world community and protect the environment. y Sustaining Growth :

We will be a source of pride to our business associates by

ensuring mutual prosperity and growth through the implementation of forward-looking corporate strategies, aimed at identifying opportunities and responding intelligently to the dynamics of change.

y Pursuing Excellence :

We will provide a conducive environment for enabling our

employees to develop their potential and make a significant contribution to the Group's success. In 1985, through a technical tie-up withToshiba

Corporation of Japan, VideoconInternational Limited launched India's first world class Color Television. Today, Videocon InternationalLtd., the flagship company ofthe Videocon Group, is India's leading manufacturer ofConsumer Electronicproducts. Fired by a passion for innovation, Videocon has kept pace with the changing face of technology, constantly upgrading

its manufacturing facilities to incorporate advanced technology and high standards of quality into its product range, right across the spectrum. AMBITIONSa n d TECHNOLOGIES: y Technology with a Heart :

Committed to giving the consumer the best the world has to offer, Videocon has developed near zero wastage technology which helps reduce manufacturing costs by optimizing material inputs. Coupled with quality-consciousness at every stage, the consumer benefits enormously by getting premium products at affordable prices. The company currently manufactures Colour TVs, Black & White TVs and Audio products. At its modern plant at Chitegaon and Aurangabad, the Company has also undertaken complete backward integration to manufacture all critical and important components of its products, such as

Electronic Tuners, FBTs, ATDMs and Deflection Yokes, thereby reducing costs, ensuring quality control and becoming vertically integrated. It has set up a unit at Gandhinagar in Gujarat for manufacturing Black & White TV picture Tubes. y The Sound of Excellence:

Videocon produces a sophisticated range of Home Audio Systems, Stereo Radio, Recorders and Personal Stereos, as well as the contemporary international range of Kenwood Digital Hi Fi Systems. y First with theBest:

Continuous upgradation and

indigenous manufacturing has been and continues to be an integral part of the company's philosophy. Perceived as an innovator in its field, Videocon has notched up many exciting firsts, by exploring the world's most advanced technologies. In Colour 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 series.

y GlobalA mbition:

Looking beyond India, Videocon is now a global player, acknowledged by the world. It is the first Indian company to win the prestigious CE approval for exporting its Colour TV to Europe. Videocon is now entering world market with its

operations in the Middle East, Europe, Indonesia and South Africa. Videocon Narmada Glass (VNG): a division of Videocon International Ltd., has the distinction of having set up India's first plant for the manufacture of Glass Shells for Color Television Picture Tubes, in technical collaboration with Techneglas Inc., USA (formerly known as OI-NEG TV Products Inc., USA), world leader in Glass Shell Technology. The projects in 1990, when the then Prime Minister of India, the late Shri Rajiv Gandhi, laid the foundation stone for the project.

ANALYSIS AndFINDINGS

COMPARISON WITH OTHER COMPANIES REFRIGERATORINDUSTRY AT A GLANCE y Refrigerators are being manufactured inIndia for the last

four decades. y Till early nineties only direct cool refrigerators were used in India. y Videocon introduced frost-free refrigerators in 1991.

In 2005-06 the market was as follows

Segment Price % Market Share Direct Cooling Low 85% Frost Free 35-40% more than DC 15% 0 0.2 0.4

0.6 0.8 1 Price % Mkt. Share Direct ooling Direct ooling Frost Free

SUCCESS STORIES:

y The Heights of Success

VNG has some remarkable achievements to its credit, starting with the successful absorption of sophisticated technology from Techneglas Inc., USA. The CTV Glass Shells manufactured by VNG are at par with international standards and the Color Picture Tubes made with VNG glass have already received VDE approval. The facilities include a state-of-the-art Tool Room and Mould Shop to manufacture and maintain its mould requirements. Having initially successfully established its 20V, 19V and 13V CTV glass parts, VNG has now developed the 20V 2R the latest models. y A Picture Perfect Future:

Till 1994, Indian manufacturers of CTV Picture Tubes were importing Glass Shells. VNG's production has replaced these imports, thereby saving almost Rs.200 crores of precious foreign exchange every year.

VNG has now surpassed the norms of performance guaranteed by the collaborator, Techneglas Inc., U.S.A. and is operating the plant with 150% capacity utilization - with efficiencies exceeding international standards. Where fields of sugarcane grow tall and

proud. Where bushes of cotton bud blooms. Where tourists flock to the world-famous caves of Ajanta and Ellora. Where India's NO.1 Consumer Electronics and Home Appliances take shape, to take millions of Indians into a better, brighter future. This is Marathwada, India, where the Dhoot family launched Videocon International Limited in 1984, with the avowed purpose of producing world-class Colour Television through a technical tie-up with Toshiba Corporation of Japan. Within a decade, Videocon emerged as India's leading brand of both Colour and Black & White Televisions and continues to dominate this highly competitive market. The leader innovates. The leader forges ahead. The leader breaks new ground. Harnessing the advanced technology,

relentlessly pursuing quality to achieve various international standards of Quality Control Breaking through, time and again, with innovative products for a better life.

New Product Line Introduce CCTVs as it has the demand in several areas like restaurants, airport, railways stations,banks, hospitals, shopping malls, company offices. ³A lifestyle statement´ People do not see the television as a mere electronic device providing sight & sound. It has now become an entertainment experience and a lifestyle statement that people are willing to pay for. Since consumers are ready to shell out money for a lavish entertainment experience, there is today no limit to the number facilities that a television can envision of offering. From in built

recording to internet facilities to supreme sound etc. The opportunity for this industry lies in coming up with new features to the conventional CTV. There is therefore lot of scope for growth and innovation.

Industrial Strategy: 1. Consider improvement in production lines set-up: investments, line speed up / mergers? Target is to increase output and decrease product costs by increasing productivity of existing lines 2.This will reduce manpower and overheads per picture tube by 30% that will be redeployed on new activities in the sites (new technologies) 3. Improve the furnace output in the Poland Glass factory by making some changes into furnaces including electrical boosting. Consider increasing capacity through one more furnace.

4. t is envisaged that 100m¼ will be invested in the next 2 years for this purpose 5.Expand into LCD panels back-end assembly (from buying LCD arrays from big suppliers like LG, SDI, CMO, AUO, Sharp) Cost Strategy: 1. Leverage the strong base of Videocon¶s glass business: Thomson-Videocon partnership will have a very strong negotiation position and can reduce impact of glass pricing volatility 2.Reduce production cost by upgrading and improving the production lines. Thomson-Videocon partnership will have its own base of additional 4 million units CTV (other than India) 3. Necessary to rationalize R & D efforts, necessary to make its cost below 1.5% of sales

Product Development: 1. i-TV ± web enabled TV at the price of 13,900 with exchange offer for an older version.

2.TVs With hard disk to store programs.

3.Wall mounted Flat CTVs at the price of 12,990.

4.Aimed at fulfilling needs of customer who can not buyLCDs but prefer to do away with CTV models which occupy space in living rooms. 5. CTVs with inbuilt set top box 6. Tie up with DTH player and provide annual subscription offer 7. to provide Direct to home services. 8. Bluetooth enabled CTV.

INDUSTRYANALYSIS

(REFRIGERATOR INDUSTRY IN INDIA) THREAT OF ENTRY Barriers of entry y Economies of scale:

The players like Godrej, BPL , Whirlpool, Videocon and Electrolux have achieved economies of scale. Godrej has a capacity utilization of 75% and the highest capacity in the industry. This declines their unit cost of every function of business and enables them to keep their prices low. This will force the entrant to come in at a large scale and risk strong reactions from them or come at a small scale and accept a cost and price disadvantage.

Godrej also possesses economies of vertical integrationasit manufactures its own compressors, whichconstitutes asubstantial part of the manufacturing cost. The otherplayers like BPL and Videocon who are currently

outsourcing their compressors also plan to set up theirown manufacturing units for compressors in the longrun.y Product differentiation:

The companies like Godrej, BPL and Videocon, being very old players in the Indian market enjoy high brand awareness and consumer loyalties. These brand names are associated with trust and reliability in the Indian market. The Korean players like LG and Samsung who engaged in heavy advertising and brand promotion during the last year have also created a niche for them in the premium segment. Their brand awareness has grown tremendously after the recent Cricket World Cup Tournament, during which they advertised heavily. These create a barrier to entry by forcing the entrant to spend heavily to overcome existing consumer loyalties and to build a brand image.

y Capital Requirements:

Huge Capital requirements are posed in front of the new entrant in terms of advertising, product development, Production facilities, Distribution channel credit, inventories and for covering up the start-up losses. y Access to the distribution channels:

The Indian players like Godrej, Videocon and BPL which are catering to the mass market have a strong distribution and dealer network.. They have a presence in the urban as well as the rural areas. Moreover these companies have established developed ties with the channel members over the period of time, which are hard to break. Whirlpool has also developed a strong network of 4000 dealers in urban and semi urban areas in a period of few years. The South Korean Majors like Samsung and LG have a dealer network of more than 1500, mainly in urban areas and plan to expand it in rural and semi urban areas also. This poses a major threat in front of the new entrant as the

existing firms already serve the channels and the new entrant will have to persuade the channels to accept its product through high margins,

promotional allowances, better credit facilities and advertising support, which will reduce the profits. Cost disadvantage independent of scale y Learning or Experience curve: The old players

like Godrej, BPL, Videocon are high on the experience curve, as they know the Indian Market well. This Experience lowers their costs in production, marketing, and distribution and in other areas of business, thus giving a cost disadvantage to the new entrant. y Government policy: The Government policies of

levying duties on the imported Refrigerators and refrigerator parts gives an advantage to the Indian Players and in a way protect them from price competition in the market with the MNCs.

y Expected retaliation: The industry as a whole faces

excess capacity and the supply exceeds demand and so the existing competitors are expected to respond forcefully to a new entrant. The new entrant will face competition based on the segment to which it tries to cater If the company enters in the Direct cool segment Godrej and Whirlpool will pose the major threat. If the company enters in the Frost free, high capacity segment (above 300 Ltrs) it will have to face main competition from LG, Samsung, BPL and Whirlpool.

VIDEOCON PRODUCTS 1.

Colour Televisions 2. Washing Machines 3. Air Conditioners 4. Refrigerators 5. Microwave ovens 6. Mobiles and many other home appliances, selling them through aMulti-Brand strategy with the largest sales and servicenetwork in India . Videocon Group brands include Akai,Electrolux, Hyundai, Kelvinator, Kenstar, Kenwood,Next, PlanetM, Sansui, Toshibha, Philips (TV Products)etc.