In search of lost glory: Ajit Nambiar, CMD, BPL

Dynamic house, the operational group headquarters of the forgotten giant of consumer electronics and home appliances, the BPL Group, is beginning to breathe again. One of the most recognisable Indian brands in the late 1990s, BPL has fallen on bad times ever since. After what seemed an eternity, a master plan to rejuvenate the group's spiralling fortunes has been worked out, and 41-year-old Ajit Nambiar, Chairman and Managing Director of BPL, pronounces confidently: "BPL is back."

It may be a trifle early to say that though. With just 5.5 per cent marketshare in its core colour TV business (see The BPL Story) in 2003-04, a far cry from a high of 21 per cent in 2000-01 when it was the undisputed market leader, and far behind current market leader LG (20 per cent), BPL is in for a long haul to justify its CMD's confidence.

It's a classic case of a winner who forgot how to win. Showing the traits of a natural leader, BPL, a conglomerate of disparate businesses encompassing television sets, refrigerators, alkaline batteries, rechargeable lanterns, telephones and mobile phones services among others, identified the great Indian consumer electronics opportunity as far back as in 1982. Taking advantage of the growing numbers and aspirations of the middle class, the group saw its turnover of Rs 456 crore in 1993 multiply four-fold in a span of just five years, reaching Rs 1,940 crore by 1998-99.

But things started going wrong soon after. BPL failed to read changing consumer preferences for latest technologies, and in late 2002, Korean giant LG took over market leadership in the colour tv market. Since then, BPL has been on a path of continuous slide, with declining marketshares, shrinking top lines and red bottom lines. In its core business of colour TV sets, BPL today sells less than half the one million sets it sold in 2000.

BPL's Cup Of Woes

What started the slide was the entry of the two Korean giants, LG and Samsung, who had global sourcing capabilities and were able to raise money at cheaper interest rates internationally. BPL, on the other hand, had to borrow at exorbitant interest rates from the marketplace for its requirements. Nambiar acknowledges the disparity: "Our Korean rivals could borrow at less than 3 per cent in their market and invest here. Some of our borrowings were at rates as high as 24 per cent." Net result: despite having invested between Rs 650 and Rs 700 crore in brand building, and Rs 800 crore in creating manufacturing capacity over the previous 10 years, it could not match the aggression and discounts that the Koreans could offer. Worse, today BPL is saddled with debts running up to Rs 1,240 crore, with interest outgo of Rs 220 crore, a daunting figure for a company in financial distress.

But market conditions can't be blamed for all of BPL's woes. For instance, the Koreans put their money on advanced technology products, such as flat-screen TVs, on a value-for-money platform to further marketshare. And though BPL had the technology to match its rivals, it continued to plug conventional TV sets. Consumers, however, were increasingly looking at higher-priced and higher margin flat TV sets with more features. A recent ORG-GFK study points out that while 21-inch flat television sets saw a volume growth of 105 per cent in 2003 compared to 2002, conventional TVs in the same category declined by 11 per cent. The latent need was there, which the Korean players clearly identified and exploited. BPL chose not to, and was left ruing its decision.

Nambiar was also too trusting of the professionals working in the group. A B.S. in electrical engineering from Boston University, he was 23 when he was inducted into Electronic Research Limited, one of the group's numerous companies, in 1985. Between 1993 and 1999, when he was MD of BPL Ltd., he ran the company along with his father, T.P.G. Nambiar, the founder of the group. After Ajit became CMD of BPL Ltd. in November 1999, he delegated a lot of responsibility to subordinates and did not get into minutiae, unlike his father.

That proved his undoing, as the company's fortunes nosedived. Says a former director of BPL: "For a family-run group, this was suicidal. While TPG knew whom to trust and when to delegate, he would still retain overall control. Ajit expects everybody to be on the same ethics code as him." Nambiar admits his folly, but prefers to put that behind him: "I empower individuals and expect them to deliver. There might have been some who have misused that trust. But all that is in the past." His determination to look ahead is evident as he lines up a series of initiatives to bring the BPL group back into the running.

"Even now the BPL brand shares the top spot (with LG) in top-of-mind awareness" Jayanth Kumar/ Advisor/BPL Group

The Way Back

As a first step, Nambiar has restructured the group into five dedicated businesses to achieve better focus: soft energy (batteries, rechargeable lanterns, etc.), health care, digital entertainment products, engineering and manufacturing services, and wireless communication solutions. Next step: address the festering issue of its debt burden. After 18 months of negotiations, BPL recently entered into a 50:50 joint venture with the $22-billion (over Rs 1 lakh crore) Japanese consumer electronics giant Sanyo Electronics. The CTV business of BPL, valued at $80 million (Rs 370 crore), was transferred to the new JV. Since the JV has been initially capitalised at $20 million (Rs 92 crore), BPL would pay only $10 million (Rs 46 crore) for a 50 per cent stake; the remaining $70 million (Rs 322 crore) will go to BPL. This money will be used to restructure its Rs 1,240-crore debt. For the remaining debt, BPL is talking with its creditors to go in for one-time settlement. For additional funds, BPL may offload part of its equity in certain areas of its business, such as health care and soft energy.

Once the debt restructuring is over, the other parts of Nambiar's strategy will come into play. Utilising the technology leadership of Sanyo, BPL plans to launch a series of state-of-the-art products including home theatres, digital cameras, mp3 players, digital printers and mobile phones. A major area of thrust will be mobile phones. While BPL is non-existent in the hand phone segment at present, it has already successfully test-marketed its phones in UP, Punjab and Kerala, with a view to hit the markets by October. Nambiar expects to sell four lakh phones and earn Rs 137 crore in the first year itself. That's a tough ask, but part of his optimism springs from the fact that the group's mobile phone services company, BPL Mobile Communications Ltd. run by his brother-in-law Rajeev Chandrashekar, straddles four major circles including Mumbai, Tamil Nadu, Kerala and Maharashtra. The strategy: Offer bundled schemes with every new connection, and put in innovative features relevant to Indians like, say, a local language menu.

Despite the difficulties, one positive BPL can go ahead with is the awareness of the brand in consumer consciousness, an outcome of the huge amount of money spend on advertising in the 1990s. Jayanth Kumar, former CEO of BPL Ltd. and now an advisor to the group, says, "Even now the BPL brand shares the top spot (with LG) in top-of-mind awareness." An additional Rs 60-70 crore in advertising will look to stimulate that awareness.

But even as BPL has woken up to the benefits of latest technologies, LG and Samsung have already moved on to the next generation TV technology, flat panel TVs, comprising LCD, LCD Projection and Plasma TVs. BPL has a lot of catching up to do, but Nambiar is confident: "We are working hard to bring back the old glory. By this festival season (October), BPL will be back in full swing." To make that a success, changing the consumer perception of BPL being an "also-ran" will be the most formidable obstacle that Nambiar has to overcome.