The Hindu Business Line : Less growth at the bottom of the pyramid

The trouble with seeking profits at the `Bottom of the Pyramid' as business school professors would advise of Indian corporates is that in some sectors at least, the pyramid bulges at the middle and the top.

Consider, what Whirlpool of India has had to say in its Annual Report for the fiscal 2005-06. Even though the market for refrigerators and washing machines as a whole grew by only 7 per cent in 2005-06, the pricier segments within them grew at a substantially faster rate. For instance, customers seem to opt for frost-free refrigerators in big way with this segment growing at 27 per cent, while the refrigerator industry as a whole grew by only 8 per cent, the company said.

Similarly, among washing machines the fully automatic ones posted double-digit growth, while semi-automatic segment grew only by a modest 3 per cent. Ditto with air-conditioners with the split type is where the company sees `a distinct trend' of above average growth.

A case of India adding to the population of the wealthy in larger measure than the not so rich? Perhaps. It may not have wiped the red off the company's balance sheet. But it has certainly helped. The company succeeded in reducing its net loss for the year (2005-06) to Rs 38 crore, down from nearly Rs 100 crore in the previous year.

Even as the flow of overseas investments into China continues unabated, opinion is sharply divided on how profitable are such investments with many sceptical voices beginning to be heard over the long-term prospects of such investments.

On the other hand, Nokia or a Volkswagen has tasted no small success with their China investments. Well, at least for now, Sundram Fasteners will have to be on the other side of the dividing line.

In 2005, the first full year of operations, its China venture had turned in a loss of Rs 288 lakh on a turnover of a little over Rs 10 crore, the company had stated in its Annual Report for the fiscal 2005-06. But it is hopeful of breaking even in the year 2007, on the back of increasing capacity utilisation and a wider portfolio of local and MNC customers.

Compiled by D. Sampathkumar