Wednesday, January 05, 2005

Daikin India to spin off into two distinct companies

The $4.5 billion (about Rs 20,000 crore) Japanese consumer durables major Daikin Industries is planning to split its Indian arm — Daikin Airconditioning India Pvt Ltd — into two companies. While one company will focus on manufacturing, the other will be a trading company. Daikin Airconditioning India, is planning to demerge its manufacturing units at Faridabad and Silvassa into a separate company. The residual company will then be the trading arm. The plan is awaiting approval from foreign investment promotion board (FIPB) at the moment. The idea behind the split is to impart greater focus to the operations of the company and to facilitate brand building. The Japanese consumer durables major Daikin kicked off the first phase of its restructuring operations in India a little over a month ago, when it bought the 20% stake held by its joint venture partner — the Shriram group — in Daikin Shriram Airconditioning. The stake was held through Siel. Post this buyout, the company has been subsequently re-christened Daikin Airconditioning India. The company had clocked a turnover of around Rs 150 crore in 2003-04. The integrated airconditioning company Daikin Industries had entered the Indian market through this joint venture in 2000. Daikin Industries is a multi-product company with the air-conditioning business accounting for 74% of its business. It has a 10% share in the residential air-conditioning market and 36% in the commercial air-conditioning in Japan. The company has a presence in eight major international markets, and is now aiming to be a global leader. Earlier, Daikin had plans to set up a plant in India but dropped it as it felt the economy had still not opened up enough and that certain components required for the manufacture of ACs were still not available. The company has scaled down its manufacturing activities drastically in Silvassa after the government introduced a 12% exit tax. The Indian operations are functioning primarily on the basis of imports from Japan and Thailand.