Their main markets are in the South and also Gujarat. Hence mostly they have Southern film stars for promotions. They started off with Tier2 towns as promotion expenses are lesser but now they are gaining traction with their brand and tightening terms with dealers and trying in Tier 1. They even refused Vijay sales as it’s terms were unacceptable. Their margins in ACs are among best in industry as they are backward integrated as they produce own coils. They have a 12% market share in aircon now and are doing better than industry growth. The TV and washing machine business is still in infancy and they just assemble and sell for now to test the waters. If I am not wrong they were once sole supplier to Daikin but I dont think it is so now – some players may have changed suppliers since Lloyd is now also a competitor. They also supply to Bombardier etc. So Quality of product is not an issue – but building a brand is an expensive affair, which is captured in the valuations. Air conditioners are hugely under penetrated in India ( what isn’t) and is still an aspirational product so the runway is very long. The margins in TVs have declined of late and is expected to remain the same because it has become highly competitive with online sellers burning money. I do think their ad campaigns are interesting though and are not targeted at the middle class buyer anymore. Also their website for online sales. What they are trying to push is that they will provide exceptional customer service and make it their differentiator – every customer complaint is provided with a no that the customer needs to give to the technician if he is happy. Else the matter gets escalated and the customer gets a call from the central helplines to resolve the issue. LG, samsung, voltas etc do not have this concept. In Voltas anyway customer is left to fend for themselves. The focus now will be on invertor ACs as next year Aircon star ratings are again going to be revised making them more expensive.
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