Companies

IFB bets on local manufacturing of parts to overcome currency fluctuations

Abhishek Law Kolkata | Updated on July 24, 2019 Published on July 24, 2019

IFB Industries, which sells home appliances and other white goods under the ‘IFB’ brand, has begun a de-risking mechanism against currency depreciation by substituting high-cost imported components with locally manufactured alternatives.

According to the company’s annual report for 2018-19, localised production for some of high cost imports remain a key agenda.

Going local

A significant portion of electronic controller imports are being substituted by localised production.

In FY19, the home-grown appliance-maker reported an increase in revenues for the appliance division; but EBITDA (earnings before interest, taxes, depreciation and amortisation) margins “were not satisfactory.” Standalone revenues stood at ₹2,552 crore last fiscal, while profits dipped by 11 per cent year-on-year to ₹74 crore.

“Bottom-line was hit mainly due to depreciation of rupee, higher material cost, increase in custom duty and higher operating expenses. All business segments posted revenue growth,” it said in the annual report.

De-risking

Accordingly, the company is looking at further localisation of imported offerings. Plans are afoot for manufacturing fixed speed and inverter ranges of air conditioners.

A ‘project’ has been planned in Goa and commercial production is expected ‘by end January 2020.’

IFB Industries further added that along with plans to grow markets, it has also targeted reduction in material costs in manufacturing which is being addressed through projects.

The price increases and material cost reductions are under implementation and these will help improve bottom-line margins and negate impact of the current forex levels and customs duties.

“This (local production) is a key de-risking mechanism against future currency depreciation impacts on our business. The focus on localising manufacturing within India has resulted in a new generation of electronic components for models being manufactured in India,” the company pointed out.

Other launches

IFB further added that its ongoing product development continues to focus on IoT capabilities, water and energy efficiency, user-convenience and interface designs, across its washing machines’ range.

The company has also recently ramped up its top-load washing machine manufacturing capacities. Plans are also afoot for a design upgrade in the clothes dryer category which has been “growing moderately” for the company.

Earlier in November 2018, IFB Industries took over the commercial laundry equipment manufacturing business of Ramsons Group for ₹35 crore in a slump sale. The acquisition will help IFB in consolidating its position in the “industrial laundry equipment” business.

Published on July 24, 2019
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