Lava Aims for IPO With Over 40 Per cent Market Share Within Five Years
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Hari Om Rai, Chairman and Managing Director of homegrown mobile maker Lava has set the target of acquiring 40-50 per cent market share along with an initial public offering within the next five years. Nonetheless, he knows his ambitious vision as of now is thwarted with the bombardment of Chinese players. But Rai isn’t someone who would go down without a fight.
Domestic Phone Brands Have Been Hit Significantly in Past Few Years. Isn’t?
Indian brands have been affected by three things – demonetization, subsidized phones launched by Reliance and influx of Chinese brands. They shrunk the market while new competition acquired its share which certainly put a pressure on the Indian brands. But overall, the size of the Indian domestic economy is very small. In terms of value, it is probably 4-5 per cent of the world and 15 per cent in terms of volume. So it was a short-term blip but the growth journey will be great ahead for domestic brands.
But How do You See Indian Customers’ Appreciation for Foreign Brands, Particularly Chinese?
I believe customers don’t differentiate between Indian and foreign brands. They differentiate in terms of their offerings. Since Indian brands have been beginners in their nature, their offerings weren’t so great. So a lot of Indian customers rejected them. Five years back, either there were no Chinese brands and even if they existed, they were unknown to the world but today in China, they have 90 per cent market share and the third biggest brand globally is one Chinese. These companies took advantage of the manufacturing shift in China and created great cultures. As far as Apple’s entry in India is concerned, there is no competition as its target market is different.
India’s Manufacturing is also Rising. What are Your Plans?
We are also looking to leverage India’s rise as a manufacturing hub and build a global brand. We, at least have been prepared for such short-term affect for a long time to build a substantive and excellent company, whether on the product side or supply chain and distribution side etc. So it is a learning process. Especially in the product area, we consider our self to be at par with any global brand.
Can you Explain that?
Fundamentally, India is going to emerge as the most efficient manufacturer of domestic phone brands to serve six billion global population. It will export under $200 phones worldwide, the way Indian car manufacturers like Tata and Mahindra have done with their vehicles. Going forward, Indian brands would be occupying 70-80 per cent global market share in that category. For that, localization of the product is important which means it has to be relevant to the needs of people in different geographies and I clearly understand that for Lava to become a global brand.
But Largely the Indian User Mindset is that Domestic Brands are Inferior. Do you ascribe to this contention?
That’s the urbanized mentality which doesn’t allow us to cater to people who live in country’s interiors and aren’t under any sort of western influence. That’s the real opportunity. For instance, out of 110 million phones sold last year, only 10 per cent buyers were women. That doesn’t mean women don’t need phones. They need simple and feature-rich phone and Lava is fully capable to cater them.
Do you subscribe to the absurd valuations of brands like Xiaomi which have been modelled around online start-ups?
While Xiaomi has been making a lot of noises because of certain offerings, I don’t think it can sustain in the long term. It has 300 employees whereas Lava has 30,000 employees. At Xiaomi because everything is outsourced, they don’t know how to design and manufacture. Also, they don’t have a sales and marketing team nor do they have a credible after sales service. While they can say that they are asset light because of outsourcing and lower manpower cost and maybe they become successful in their public listing but one day these gimmicks will end. I am certain about it and not worried at all. You cannot build a phone brand that will have a great legacy without investing in the right resources.
What Drives Innovation in a Large Set-Up According to You?
Innovation is an output of a great culture. Large companies are not built due to such external factors but because they are great internally with their culture. I don’t believe in doing various things for innovation. If you are clear about your growth then you just need to set the right culture which I am building with integrity and excellence. Our first design in India, ‘Prime X’ launched in January this year is the result of that culture. In terms of excellence, what’s a matter of great pride for me is that it surpasses all the products built in its category by any company in the world including Samsung, Nokia etc. So that’s our innovation benchmark and is a testament to the fact that we refuse to exist as a sub-optimal Indian brand.
You Said it Surpasses its Peers. How?
It is the slimmest product in its market category and despite that, it has a five-day battery life with 17 days standby time which is higher than any competitor product. Also, it is the most durable phone among its peers. We tested that by throwing the phone from a 20-story building and it easily survived. Moreover, we have given a two-year replacement warranty because we know it will be a long-lasting product.
Is IPO on the Cards for You?
IPO is not the goal, just a means to an end. We will go for IPO once we are prepared and we want to ensure that no shareholder lose value if they join us. However, we will go public in less than five years. Our current market share in India is around eight-nine per cent and we are looking to become the market leader in below $190 -200 category. Going forward, I want to acquire 40-50 per cent share which will take five-seven years.