Bantwal Ramesh Baliga, Watertec India’s CEO, says that Bharat is ticking even though India has slowed during the pandemic. According to him, the demand for building products remains robust in tier II and III and rural markets, which have not been hit by the intensity of the coronavirus. Baliga shares his vision for the industry as well as Watertec in this article, which is an extract from his wide ranging conversation with Sourcing Hardware’s managing editor Deepak Gupta.
State of Industry
If you look at the state of the bathroom fittings industry, you will observe that traditionally manufacturers have competed on the basis of price. In fact, to a large extent, this continues to the present day. It is never the quality of the product. Moreover, the competition within the industry is between the organised and unorganised players. The other part of the story is that competition is coming from low-cost overseas suppliers. But the good thing is that a large section of the unorganised sector is changing its approach towards business and is getting organised, and more so during the pandemic. So, personally, I feel that the markets would continue to grow if there is healthy competition amongst ourselves.Comsumers would respect us and pay for quality and concern for their interests. I believe that competition makes us better enterprises, as it spurs innovation and pushes us to bemore customer-centric.
Enterprises in the bathfittings sector have traditionally been proprietor-owned, and interestingly, that’s a rather strong position to be in.When owners have a progressive and growth-oriented outlook, their professional managers are able to work in a supportive environment and take the business to a higher trajectory. Such owners tend to be financially disciplined and committed to their goals, and they are also better risk takers. With this kind of a backing, professional managers can better manage the day to day operations and be in control of their growth paths.
Retailing of bathroom fittings will always be a personal affair, where the customer will prefer to get a touch-an-feel of the solutions before making the purchase decision. These products cannot be sold purely through online channels, and the physical channel cannot be ignored.In the aftermath of the coronavirus, the significance of a physical-digital approach towards retail has been recognised. Marketers have understood that digital marketing of the products should begin right when the customer is at her home, and continue till she reaches the showroom, where the final decision is to be made.
We have realised that there’s a Bharat that exists outside of metro and tier I cities. And there the demand for building products continues unabated. So, while project and institutional sales are still subdued in the metro and tier I markets due to Covid-19, they are robust in tier II and III citiesand rural areas,where the incidence of the virus is not as intense. The same applies to consumer demand.
The next significant dynamic is that people who are homebound or working from home are increasingly renovating their homes. Consumers may not be investing in new homes, but they sure are spending on renovation. The demand for bathroom fittings is robust because the bathroom is a space where you cannot live with a leaking tap or broken toilet. That is why the replacement market is doing really well and Watertec is benefiting from this trend.
The markets would continue to grow if there is healthy competition amongst ourselves. I believe that competition makes us better enterprises, as it spurs innovation and pushes us to be more customer-centric.
As per our calculations,majority of the projects are in completion stage and are waiting for customers to buy them. So it may well take another year for the demand for building products associated with real estate to come back to 50-60% of pre-Covid times.
At Watertec we have a major play in the tier II and III cities and therefore a good understanding of consumer behavior in these markets. The customers in tier III lean towards the affordable segment, but those in tier II are aspirational. For example, in Tamil Nadu, Coimbatore is a tier II city but the quantum of premium products being sold there is higher than what’s being sold in a tier I city. Bharat doesn’t just mean affordable; it means good quality products at an affordable price, and value for money.
We did face a setback because of Covid-19 during the past six months. This financial year has been tough and we could clearly see customers holding back their expenditures. But if I were to compare with pre-Covid times, then I can say that Watertec has done quite well in the first half of the fiscal. We have touched Rs 232 crore in sales in the first half, while in fiscal 2019-20 for the same period we did Rs 212 crore. Watertec’s growth is happening in tier I, II and III cities, and tier IV cities too. We have solutions for all the market segments, which enables us to connect with customers at every level.
We are running at about 100-120% of our production. We also have increased our labour forces and our production capacity. Looking at the sales, I can proudly say that we are growing at 10-12% year on year since the pre-Covid times.
You see, 70% of our sales come from bath fittings and the remaining 30% from pipe fittings. We have an advantage of having a huge network of channel partners across the country, which has ensured that our revenues remained steady. And I can say that we would be on target, of growing 10-15% this year even after factoring in the ongoing crisis.
Since we have a strong presence in the southernand eastern parts of India, our focus this year is on building up our presence in the westand north. The markets of SAARC countries are another area where we aim to grow, and we have started off quite early in Nepal and Bhutan. Bangladesh and Sri Lanka are the new markets where we will mark our presence.
Our fourth plant for bathroom fittings in Coimbatore will be going on stream in the coming days. And in terms of new investment, we have some great plans. Though Covid-19 has forced us to postpone our outlays by a couple of years, by 2022-23 we would be investing about Rs 180 croreon production facilities for pipes in north as well as eastIndia. We are also in the process of completing the acquisition of a sanitary ware plant in western India. Here we will manufacture the ceramic parts, while the plastic components like seat covers and cisterns are already being manufactured at our plant in Coimbatore. We are also planning to set up a second plant in Malaysia.
When owners have a progressive and growth-oriented outlook, their professional managers are able to work in a supportive environment and take the business to a higher trajectory.
We continue to procure our metal faucets and accessories from a couple of excellent vendors located in the northand west. Prior to the onset of the pandemic we were in talks with an Italian manufacturer of designer bath fittings, for establishing a production joint venture in India. Our final talks, which were scheduled for June this year, have got postponed but I am positive that we will be finalising the JV soon.
When you have large networks, like we do at Watertec, it is important to ensure that there is no unhealthy competition amongst the dealers. If this were to happen, it would lead to loss of business and become a cause for dissatisfaction, which would eventually be bad for the brand. We have about 15,000 dealers across India and they are all directly linked with Watertec. My priority is to ensure that they get a decent return on their investment when they work with us.So, we safeguard their margins by building our brand value and creating demand pull. This provides passion to the dealer and accords respectability to the Watertec dealership.
See, traditionally we have been a products company. Since 1997 we have built a comprehensive product line that no other company can beat.And our products have always flown off the shelves of hardware and building material shops. But now, for the past two years, we have been moving up the chain in terms value and category. From being a pure polymer player, we have moved to brass fittings as well as combination of polymer and brass, which is an innovation that we have brought to the market. And then we have added sanitaryware. In this way we are helping our dealers cater to a more value-conscious buyer with large budgets. To facilitate this transition we are helping them improve their displays. Interestingly, most of our dealers have had long associations with us. Often they are second and third generation trade families with deep understanding of the business. The frontline owners are young and dynamic, and they are fully in sync with our vision for growth.
Bharat doesn’t just mean affordable; it means good quality products at an affordable price, and value for money.
Customer experience is going to be an important factor in ournew product categories, and we are on track in setting up 24 display centres across India where our ranges would be displayed. The first one is coming up in Mumbai and the second would be in Noida, NCT of Delhi. There would be no sales happening there; rather they would be like permanent convention centres where a customer can understand our products better and then go to a dealer’s counter.These centres would also provide the service support that our dealers and customers would require as we grow in respective markets.
Social responsibility has been one of our core values at Watertec, even before CSR was mandated by the government in terms of 2% of profits.Our focus has been on spreading education, skill development, healthcare and sanitation in the communities where we operate. Since bathrooms have been our core strength, we have been building these for government hospitals and schools. At our main plant in Coimbatore we have set up a plumbing lab, where youngsters can be trained completely in the skills of plumbing. At all our plants, we have set up infrastructure where plumbing training sessions are held every year in association with Indian Plumbing Skill Council. Under our vision of an atmanirbhar Bharat, we are committed to train 10,000 plumbers and 80 service technicians every year. The technicians that we train are people from tribal areas,whom we educate and place within our ranks across India. This is our way of sustaining the tribal community.