Margins come under pressure when the channel sells

What is your channel strategy?

90 percent of our business comes through the channel. We have segmented our
distribution network. One is the mark distribution, which is through the
distributors. Secondly, we appoint specialized partners who focus on corporate
customers and institutions. We have also tied-up with some re-distribution
partners.

We have a very focused approach for our channel. We currently have 10,000
active dealers across the country and would be looking at adding more in the
next fiscal and have various partner programs planned for the future. We also
want to provide our dealers with various skill sets in terms of training them
with respect to sales and even after-sales services.

With low margins being a constant threat to the channel, does Luminous
have any plans to counter this situation?

Margins come under pressure when the channel sells without much
value-addition. Partners do box pushing without providing any value-addition
along with it-be it in terms of educating customers about buying the right
product that suits their needs best; or without providing after-sales support.
Unless the customer is provided these extra incentives, sales as well as margins
would continue to shrink.

Many vendors around the globe are opting for technologies like flywheel
mechanisms. Do you have plans to opt for similar technologies?

The flywheel technology can be applied only on large applications. But in
smaller applications, not many new innovative trends have been introduced that
could replace the existing practice of using lead in the batteries. However, the
soaring price of lead is really challenging and we have to work on that aspect
to reduce the cost along with improving the standards.

Sunil Bhalla Director, Luminous Power Technologies

Do you have plans of involving your channel in offering service as well?

We have a strong team of 400 people that look exclusively at providing
after-sales support. We have our service centers in almost all cities across the
country with completely automated software system, which is capable of handling
the entire operation. We always look for partners with expertise in providing
efficient after-sales services, since we feel that they are closest to
customers.

What are your predictions for Luminous, keeping in mind your USP?

We are an established player in the inverter market and have also been
facilitated with the Frost and Sullivan's Market Leadership Award in APAC.

We are the only player to have both, power electronics strength as well as
battery strength, apart from a strong R&D setup, good brand equity and
distribution network, supported by an after-sales network all over the country.

We are looking at organic as well as inorganic growth to add to our numbers
and have set a revenue target of Rs 1,000 crore by 2009. We are also looking at
acquisitions in domestic as well as international markets.

The UPS market is unorganized and fragmented. How do you plan to tackle
this situation?

Local brands have always been there but their share in the market has
shrunk. Few established players dominate the high-end UPS market. The industry
is consolidating with small time players aligning with the biggies. Leading and
established players having good strength in electronics as well as batteries
would dominate the industry.

Are your factories in India manufacturing for domestic sales only?

Currently, we have two manufacturing units in Himachal Pradesh and soon plan
to open another one in the same region. The total capacity of factories is 1.8
million units per year. We also have a battery-manufacturing unit, which no
other power electronics manufacturer in India possess. Once our third factory
would be operational, we would be manufacturing our own VRLA batteries parallel
to SMF batteries. These units are used both for domestic consumption as well as
for export purpose.

NR Sethuraman

sethuramannr@cybermedia.co.in