The Hindu Business Line : Flakt recaptures market after 8 years

Not long ago a multinational major took over a smaller MNC which dealt (and very profitably too) in clean air equipment. Though a small company, it had an established brand with a significant market presence not only in India but in many countries. However, soon after the buyout, the smaller company lost its identity and its brand name.

After staying off the shelves for nearly eight years and after further change of hands, the company has discovered that it still has brand recall among customers. It is now trying to capitalise on this edge to wipe off its past losses.

The smaller company, Flakt, then had a turnover of over Rs 100 crore was acquired by the MNC major, ABB. Flakt, based in Kolkata, has production facilities here and in Chennai.

At the time of takeover, Flakt (India) Ltd - a company with 51 per cent overseas holding - had five business areas: air pollution equipment, industrial ventilation, industrial fan manufacture, manufacture of engineering systems for paint finishing and industrial drying systems.

While all were running as separate profit centres, air pollution control equipment and industrial fans, of which Flakt was the largest manufacturer, were doing particularly well.

In 1988, ABB came into being through the merger of Asea of Sweden and Brown Boveri of Switzerland. In 1989 it bought over 100 per cent of the global shares of Flakt, which lost its identity and continued its operations as the environment division of ABB.

After that, each business division of the erstwhile Flakt was attached with a specified business area of ABB. For instance, the air pollution control equipment was attached to ABB's power generation business.

Subsequently, ABB too went through restructuring with various divisions being sold to companies such as Daimler Benz, Alstom, and even to a small Swedish company called Sunds.

The fan business was picked up by the UK-based Compass group which bought another UK company called Woods, which was involved in industrial air handling and tunnel ventilation.

With this, the group now had two major companies manufacturing a range of air handling systems.

By this time, the earlier profit-making activities of Flakt like industrial fans had run into losses and Compass, it seems with the benefit of hindsight, made a good buy.

Post-buyout, Flakt and Woods became part of the FlaktWoods group headquartered in Luxembourg with the global management deciding on allowing Flakt to market its products under its own brand name in India.

Thus began the process of revival of a brand name which had all but lost its presence in a market where big names jostled with small unorganised sector players for space. The year was 2002.

Mr Aloke Mukherjee, Chairman, Flakt India - now a wholly owned subsidiary of FlaktWoods - said: "Even as a somewhat wary Flakt now got down to test the waters in a bid to relaunch itself, it had a surprise in store. It found that brand recall in the minds of former clients was very high."

Flakt did not even need a marketing blitz to announce its reappearance.

Letters from the Chairman to some major clients were enough. In the first full year of operations, the company clocked a turnover of Rs 25 crore. It expects to more than double the turnover this year and the order book is overflowing.

Mr A.R. Baijal, MD and CEO, said: "Our strongest USP is and has always been the cost savings that we offered through energy conservation. We manufacture fans of all sizes and for various buildings and industrial process applications. The largest one built so far in India is a five-metre diameter fan which consumes 8.5 MW. Imagine the cost savings that this can entail on the energy front."

This, along with the strong brand equity and team performance, helps Flakt beat competition from fellow manufacturers like Reitz and TLT, both of whom operate with German technology.

What sort of competition does the company face? In a market whose size varies with the number of projects being implemented (but is estimated at a minimum Rs 250 crore per annum) the stiffest competition is from the unorganised sector which offers a price advantage to the consumer. "We score on grounds of the basic engineering which is superior in the case of Flakt," said Mr Baijal.

Having regained its former confidence, the company is now gearing itself to increase market share from 12 per cent and neither the Chairman nor the CEO are willing to "sit on past successes". From a minuscule share in the FlaktWoods global turnover, the aim is to emerge as the biggest contributor in the Asian region.

"We are committed to not only capturing a greater share of the Indian market but to bring profits for the parent company (after a Rs 2.1-crore loss in 2002 and break-even last year)," they say in unison.

More Stories on : Performance | Environment | Engineering

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page