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Shyam G. Menon

Mumbai , Nov. 4

BP Ergo, a leader in the domestic market for modular furniture systems, is now integrating research into behavioural patterns at Indian workplaces, with design, to offer value-added solutions to customers. The company is part of the Rs 800-crore Dilip Piramal Group.

The findings were blended with broad client profiles - like those wanting a branded ambience at workplaces (read MNCs), those banking on workplace atmosphere as an ingredient for service quality (like call centres) and those betraying unique character like traditional business houses - to offer as customised a solution as possible in the relatively industrial world of modular furniture systems.

This approach graduates the firm's involvement in providing furniture solutions to an earlier point in the process of creating workplaces, unlike the mere furniture sales it traditionally did. "The value-added products are expected to enhance returns,'' says Ms Aparna Piramal, Executive Director.

The Rs 130-crore company's business grew by 40 per cent in the last six months. It earned Rs 85 crore last year selling its own furniture systems. BP Ergo also distributes modular carpet tiles (used by IT companies) from the Atlanta-based Interface and high-end seating systems from Vitra of Switzerland. Recently, it signed up with CBS, a British firm that is into office accessories and lays emphasis on ergonomics.

Ms Piramal has reasons for moving BP Ergo up the value chain, getting closer to the market in the process. The company reckons it has a 25 per cent domestic market share, other big players being Godrej and Featherlite. The market size in modular furniture systems is estimated at Rs 350 crore - Rs 400 crore.

But there is foreign competition building up in the form of imports from Malaysia and North America, courtesy a provision that allows export-oriented units (EOUs) to import their furniture duty-free. IT companies sometimes find this attractive, ironical as it was the boom in the IT industry that catalysed domestic sales in modular furniture systems.

"There is an anomaly here because if these customers buy from Indian companies offering similar products, they have to pay 15-20 per cent sales tax,'' Ms Piramal said.

EOUs prefer to source from the principal, in which case a commission adheres to BP Ergo if it is one of the foreign brands they distribute that has been bought. But importantly, when BP Ergo imports to sell to the non-EOU segment, applicable duty aggregates 40 per cent.

Same time, raw material costs have risen. The main items of consumption for modular furniture systems are steel, aluminium, medium density fibre (MDF) and particle boards. Of these, steel and aluminium need no explanation in terms of recent price trends. MDF and particle board prices have moved up in sympathy with petroleum prices.

Add to this, competition from duty-free imported furniture and the cost pressure on domestic players gets real. Less than two months ago, domestic players formed the Indian Office Furniture Manufacturers' Association and a representation will be made to the Government on the duty issue.

Ms Piramal said BP Ergo (its Nagpur plants can make 6,000 workstations per month) recently won an order for 1,200 workstations from Microsoft's Hyderabad facility. The local market is characterised by its young work force and need for bright colours."Servicing this is the challenge,'' Ms Piramal said. She added that capacity at Nagpur will be increased 30 per cent by the year-end.

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