MOSL: VOLTAS (Sell)-Voltas-BEKO JV-Targeting 10% market share in 10 years-BEKO to bring technology

​Voltas: Voltas-BEKO JV: Targeting 10% market share in 10 years; BEKO to bring technology, european brand, product range

(VOLT IN, Mkt Cap USD2.5b, CMP INR509, TP INR400, 21% Downside, Sell)

We interacted with the senior management team of Arcelik on its plans for the Voltas-BEKO JV in India. Our key takeaways:

10-year targets: USD1b sales, 10% market share, 11% margin

• ​The Voltas-BEKO JV targets USD1b sales in 10 years, with 10-11% margin and 10% share in the Indian consumer durables market.
  
• All sales would be routed though the JV - would look at introducing air conditioners as well post four years.
  
• The JV would be incorporated by September-October 2017 after all approvals and start seeding the market with imported products from the BEKO manufacturing facilities globally.
  
• Could do USD300-500m sales in 3-5 years, and then scale to USD1b in 10 years.
  

Entry to India through tie-up with the Tatas

• ​Arcelik has been looking at the Indian market for the last five years and finally agreed to a JV with the Tata Group. The company had looked at greenfield expansion, but it would take a lot of time to establish a brand and distribution in India. An acquisition did not make economic sense.
  
• Arcelik brings the BEKO brand, technology, product range and global sourcing, while Voltas has local knowledge, strong brand, and wide distribution network.
  
• Arcelik has been focused on SE Asia. It started a refrigeration plant in Thailand in 2015 and recently entered Indonesia, Malaysia and Pakistan.