Sudhir Hasija, a first-generation entrepreneur and the Chairman of Karbonn Mobiles, always longed to create a brand with an expansive reach. And, when he saw a few home-grown companies cashing in on opportunities in the mobile phone market, he knew that the time was right to take the plunge. Hasija takes The Dollar Business through the company’s origins and future expansion plans.

TDB Intelligence Unit | August 2017 Issue | The Dollar Business

TDB: You have had an interesting career graph — from managing distributorship of several telecom companies to owning one of India’s largest mobile phone companies. What prompted you to start Karbonn Mobiles?

Sudhir Hasija (SH): Right from the beginning, I was driven by an ambition to start my own venture. I left my hometown Meerut (in Uttar Pradesh) after completing my Class 10 exams and moved to Hyderabad, where I spent three years in a machine tools company. Later, with a very small amount of savings, I managed to set up my own business of selling TV accessories like antennas and trolleys in Chennai. Back then, I was managing most of the business myself – and that included climbing rooftops of buildings to install antennas!

Eventually, the business expanded to other south Indian cities as well. Soon, I was managing the entire South Indian region as a distributor for Samsung before finally giving it up in 2009 to start my own venture, Karbonn. The name Karbonn was coined as the company was Karnataka-born and the additional ‘n’ was added for numerological reasons. And, it has worked out well for us!

 
TDB: China-based handset makers have upped the ante by grabbing a 51% market share in the January-March quarter of 2017, primarily at the cost of Indian players. Where did domestic handset makers go wrong?

SH: While creating your own space in such a highly competitive environment is always difficult, the complexity is magnified when there is a strong existing brand-connect with the audience. There is a need to meet their ever-changing expectations, which is not easy at the best of times. The reason for the recent dip in the sales of the Indian manufacturers is primarily because of the sudden shift to 4G handsets – thanks to the telecom companies. While China-based vendors had shifted to 4G handsets sometime back, our homegrown vendors had perhaps not anticipated this shift to happen so soon – and hence suffered inevitable losses. However, we have now cleared our 3G smartphone stocks and have made the switch to 4G devices. Soon, we will gain back the lost marketshare. We are vigorously focusing on 4G devices and are optimistic about the response from customers.

 
TDB: Unlike other handset manufacturers, you chose to stay away from diversification. Do you plan to expand to other categories in the future?

SH: We wanted to mainly concentrate on our mobile business and make it our forte before venturing into anything else. We have ventured a bit into the tablet space but that is still a minuscule part of the business. We plan to get into televisions in the future. That said, currently, we want to scale up the production of 4G phones. The mix right now for us, in terms of sales, is 72% feature phones and 28% smartphones. Eventually, we plan to make it 50% for both the segments. Feature phone is a high-volume business – we make 12 lakh feature phone handsets every month as against 3 lakh smartphones.

"We wanted to concentrate on mobile phone business and make it our forte" 

TDB: Is the company planning to ramp up its exports? If yes, which new markets would you be exploring?

SH: Currently, Karbonn is creating a strategic presence in over 40 countries, spread across the geographies of Africa, South-East Asia and Middle East. But soon, we intend to expand to 65 countries by initiating country-specific partnerships. We are in the process of partnering with national distribution chains and operators alike, in line with country-specific strategies, as we expand our footprint worldwide.

We have been quite encouraged by the response that we have been receiving from Spain, of late. We are also looking at some eastern European markets like Romania, Poland and Hungary. I recently returned from a trip to Ghana and saw that the market has immense potential. The kind of business opportunities that can be tapped in African markets is enormous. At present, exports contribute to about 7% of our total revenues and we plan to increase this share to about 20% by the year 2018.

 
TDB: At the moment, Karbonn imports components from China and Taiwan, and then the handsets are assembled in India. Are there any plans for more localisation?

SH: We import semiconductors and processors from China and Taiwan. We already have two plants in Noida and one in Haryana. The fourth one is coming up in Tirupati, Andhra Pradesh, at an investment of Rs.200 crore and the facility will have surface-mount technology (SMT) production and assembly lines, along with charger and battery manufacturing units. The plant will have a manufacturing capacity of 500,000 units a month. And, going forward, in a span of few years, we intend to produce up to 70% of the components locally.

TDB: What challenges do Indian handset manufacturers face?

SH: There are at least 21 departments that we need to communicate with! It all becomes extremely tedious. I am hopeful that GST will bring in the much-needed ease of doing business. A more streamlined approach is the need of the hour.

I must also add that unless India has fabrication plants, we cannot become a 100% made-in-India enterprise. Currently, processors and circuit boards, for instance, cannot be made in India due to a lack of the requisite fabrication facilities. Even though the talks of having fabrication units in India have been going on since 2008, the ground reality is different.

TDB: How many mobile phones do you sell every month? Are there any innovations in the offing?

SH: The company sells about 7,10,000 feature phones and 2,90,000 smartphones every month. Karbonn feature phones are relatively low priced (in the range of Rs.600-1,200 per piece) as against smartphones that cost around Rs.5,000 -15,000, and that makes the feature phone business a high volume one for us. I think there is a lot of potential for price-friendly and quality mobiles in our target markets.

In addition to the plans to expand our presence to 65 countries and set up a manufacturing unit in Tirupati, we would be focussing on value addition. For instance, last year, we partnered with artificial intelligence (AI) company, Staqu Technologies, and came up with an AI-enabled fashion search features in a bid to attract more youngsters. In the past, we have also introduced some smartphones with virtual reality glasses to give the user a grand, theatrical feel while watching a video. We plan to keep adding new and fresh features.

TDB: Do you see India becoming a global manufacturing hub like China?

SH: ‘Make in India’, ‘Digital India’ and other such initiatives by the government would surely go a long way in making India the next manufacturing hub. According to a report by IIM Bengaluru and market research firm Counterpoint Research, India will consume $80 billion worth of mobile phone components over the next five years. However, we also need to simultaneously focus on fabrication facilities and R&D. If that is done, India will surely find a place on the global manufacturing map.