Johnson Controls-Hitachi Air Conditioning India, makers of Hitachi brand of air conditioners, is setting up a global design and development centre in India at a cost of $20 million (nearly ₹140 crore).

According to Gurmeet Singh, Chairman & Managing Director of the company, the investment has already been made and it is likely to be operational from September.

Nearly, 120-150 engineers will be working at the centre.

“The design and development centre should be up by September. It is nearly 80 per cent ready,” Singh told BusinessLine .

The design and development services are critical to its India growth story. It already features on the financial results of the company as a separate segment.

Growth in India

After a lacklustre FY19 following a slow-down in AC sales, Hitachi is targeting a 15 per cent growth this year. Room and commercial AC sales will be the drivers.

Turnover for FY19, remained near stagnant, on a Y-o-Y basis, at around ₹2,241 crore, while net profit stood at ₹86 crore (₹100 crore), down by 14 per cent . The company’s operating profit margin was 7.88 per cent and net profit margin 3.83 per cent.

AC sales are known to be seasonal with the first and last quarters (April – June and Jan – Mar) of a fiscal being the peak sale months.

“FY19 was not a good year for AC sales across the industry. However, April and May of this fiscal was positive. Roughly the market could have witnessed an 8-10 per cent growth during this period,” Singh said.

In fact, Hitachi is expecting gains coming in south and west Indian markets, apart from the north where it has a relatively stronger presence. In order to bring down price of its offerings, Hitachi re-designed products and optimised costs. “Earlier we were premium by 20 per cent. But, with product redesigning and cost optimisation, we command a 3-4 per cent premium. So we continue to be a premium brand, but with a much narrowed down product price gap,” he explained.

Hitachi’s manufacturing facility in India is at Kadi near Ahmedabad, Gujarat and it has a capacity utilisation of 75-80 per cent. The facility has a capacity to manufacture 900,000 split ACs in a single shift and can be ramped up. Almost all of its ACs sold in India, is Made-in-India.

Growing Exports

Hitachi already began exports (from India) of room ACs to select markets that include West Asia, Sri Lanka and Bangladesh. Nearly 3 per cent of its India turnover comes from export.

According to Singh, the company will tap West Asia, Africa and the SAARC region as it targets exports to go up to 5 per cent of its turnover.

“India-made products have good acceptance in these markets. So naturally, we would look to tap them first,” he said.

Related Topics