- 1 -

INDUSTRY ANALYSIS OF

HOME APPLIANCE SECTOR IN INDIA

AND

EQUITY ANALYSIS ON WHIRLPOOL OF INDIA LIMITED

- 2 -

AUTHORIZATION

To,

The Director

IBS

Respected Sir,

I the undersigned hereby declare that Industry analysis on Home Appliance Sector and Equity research on

Whirlpool of India has been done by me in the academic year 2014. This research has been done under the

guidance and supervision of Prof. Satyaki Ray, IBS Kolkata and Company guide, Mr. Ajay Jaiswal in

total fulfillment of the requirements of the Post Graduate Program in Management (PGPM) at IBS,

Bangalore.

I declare that this project is the result of my own effort and has not been submitted to any other institution

for the award of any degree or excellence.

Date: 30/05/2014 Rahul Chitlangia

Kolkata 13BSP0609

- 3 -

ACKNOWLEDGEMENT

I am greatly thankful to Mr. B.L Mittal Chairman of Microsec Ltd for inculcating in me the virtue of

wisdom and hard work for MBA in general and life in particular.

I would like to express my gratitude to Prof. Satyaki Ray for providing his valuable time & Mr. Ajay

Jaiswal for providing challenging platform in order to sharpen my thought process and teaching me the

concept of detailing.

Lastly, I would like to thank ALMIGHTY, my grandmother Late Jetha Devi Chitlangia and my parents

for their support.

- 4 -

INDEX

SR.NO PARTICULARS PAGE NO.

1. Executive summary 6

2. Consumer Durables – An overview 7-9

3. Key drivers towards the growth of the sector 10-13

4. Whirlpool Incorporation – A brief overview 14-20

5. Whirlpool and its global positioning 21-23

6. Whirlpool of India Ltd.- A brief overview 24-31

7. Peer Analysis 32-39

8. Valuation 40-48

- 5 -

EXECUTIVE SUMMARY

TITLE:

Industry analysis on home appliance sector and Equity analysis of Whirlpool of India Ltd.

OBJECTVE:

The objective is to understand the home appliance sector giving primary focus to Whirlpool of India Ltd

and then analysing its financials so as to find out the valuation of shares in order to recommend whether to

buy or not and to find out whether the shares are overpriced or under priced.

SCHDULE:

Week 1 : Study of Indian Home Appliances and Consumer Durable Sector.

Week 2 : Study of sector with respect to Global Markets.

Week 3 : Study Whirlpool Inc and its Poisoning in USA and India.

Week 4 : Study Whirlpool India Ltd

Week 5 : Preparation and Submission of Interim Report.

Week 6 : Study of the existing product line, New Products launched in the past two years

and Products Scheduled to be launches in the next two years.

Week 7 : Study financial for the past 5 years so as to find out the change in Sales,

Expenditure, Profits etc and the reason behind it.

Week 8 : Analyzing the stock trend of Whirlpool India.

Week 9 : Peer Analysis.

Week 10 : Valuation of shares and Recommendation for Whirlpool India.

Week 11 : Formulation of Final Report.

Week 12 : Preparation and Presentation.

MEHTODOLOGY: I have been assigned the scope of wore and detailed schedule stated above which

have to be followed strictly. The daily work has to be submitted to a junior Analyst who guides me on the

daily work & then a weekly presentation has to be made to Mr Ajay Jaiswal Company guide.

- 6 -

INDIAN CONSUMER DURABLE SECTOR

The consumer durables market is divided into two segments – Consumer electronics and Consumer

appliances (which includes Refrigerator, Air conditioner, Micro oven, Washing machine). In the initial

years, the sector relied greatly on media and advertising for consumer penetration. Accessibility to high-

end products was, however, low till mid 2000s. Last few years has seen high end and aspirational products

like air conditioners and High Definition TVs gained stronghold in the market. The share of revenue from

consumer durable sector in India is increasing due to government spending towards infrastructure and

rural electrification programme. In 1992 the Indian market first began to open up post liberalisation. The

penetration level of refrigerator was 18%, Washing machine was 6%, Air conditioners was less than 6%

and Microwave oven was less than 1% translating a potential market for new customers and building

respect of this sector among the others. Since then the entry of global players like LG, Samsung,

Whirlpool and others started. Share of Consumer durable market in India:

35%

65%

Market Share

Rural

Urban

E-commerce is the fastest emerging business nowadays and currently the industry is worth $10

billion. According to a report by Google maximum online buying is in the hands of consumer

durables which accounts to 34% of the total market. While 50% of the E-commerce sale happen

in non metro city depicting the acceptance of E-commerce web city’s in tier 3 and 4 cities.

- 7 -

The Industry Size of consumer durables in India stands at 350 billion (as on 2012). The sector is

marked by stiff competition between the players due to launch of new models, discounts and

schemes. The top 5 states in India in this sector (revenue wise) are:

1. Maharashtra

2. West Bengal

3. Utter Pradesh

4. Kerala

5. Gujarat

The market share of MNC’s is 65%.The primary target of the MNC’s is the lucrative middle

class because products like Air conditioner, Washing machine and Microven are no longer

considered as luxury item.

Source : Euromonitor India Consumer Appliance Report 2013,

http://www.adlittle.com/downloads/tx_adlreports/Consumer_appliances_report.pdf

31%

10%6.80% 5%

0%

10%

20%

30%

40%

Refregerator Washing Machine Air condioners Micro wave

Penetration level of Consumer Durables

- 8 -

WHITE GOODS SECTOR

Air Conditioners:

The Indian Air Conditioners market

accounts to sale of 3.6 million units in 2013.

Air Conditioners have a market penetration

of 6.8% including window and split Air

Conditioners. The segment has 13% market

share in consumer appliance segment. The

room Air Conditioners represents 50%of the

total market and other 50% comprises of

central and specialist Air Conditioners The

room Air Conditioners is further divided

into sub segment. On one hand residential

segment which constitutes a majority 60%

market Share and commercial segment

constitutes a minority of 40%.

Microwave Oven

Due to convenience of mobility and ease of

operations freestanding microwave oven

continue to dominate the Indian markets.

89%

72%

53% 50%

8% 7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Household penetration of Air

Condioners

4.8 5.87

8.610.6

13.315.5

0

5

10

15

20

2007 2008 2009 2010 2011 2012 2013

Market Size of Microven

(in INR Billion)

- 9 -

Refrigerator

The refrigerator sales stood at 14 million

units in 2013.this segment makes up 18% of

consumer appliance market. The market

share of frost free and direct cool are 76.4%

and 23.7%. Fridges with capacity range of

143-340 litters dominate the market

representing 74% of the total sales volume.

28.333.9

41.348.6

57.167.4

74.2

0

20

40

60

80

2007 2008 2009 2010 2011 2012 2013

Market Size of Refrigarators (In INR Billion)

Washing Machine

It is the second largest contributor to

consumer appliance sector. In 2013 the

sales of washing machine in India was 7.5

Million units. The major chunk of growth is

seen because of household replacing the

semi automatic machine with fully

automatic machine. 6-9.9 Kg is the most

popular category in India with 72.2% share.

23.629.4

36.947.3

58.5

73.1

87.4

0

20

40

60

80

100

2007 2008 2009 2010 2011 2012 2013

Market Size of Washing Machine

(in INR Billion)

Source : http://www.adlittle.com/downloads/tx_adlreports/Consumer_appliances_report.pdf

- 10 -

GROWTH DRIVERS OF THE SECTOR

Increase in organized retail

According to Aranca research report on Winning in Indiasretail sector currently India constitutes only

8% of organized retail and remaining 92% is left unorganized organised but the organised reatil is

expected to grow to 20% by 2020. Growth in various reatil formats are shoen below:

Source: http://www.ibef.org/download/Retail-March-2014.pdf

Favourable demographics: According to CIA world fact book the age structure of India are as follows

0-14 years- 28.9%

15-24years-18.2%

24-54 years-40.4%

55-64 years-6.9%

65& above – 5.7%

This shows that approximately 68% of the total population is in working class category which would

certainly drive growth in the sector because consumer durables are emerging as a necessity rather

than a luxury. So as India’s major population is under working class they would fulfil the demands of

the necessary consumer durables leading to show a boom in the sector. With this favourable dynamics

India is one among the largest consumer markets in the world.

Source: http://www.indexmundi.com/india/demographics_profile.html

- 11 -

Consumption Expenditure

According to BCG India consumer survey 2010 the expenditure on consumer durables is between 4-

5% of the total consumption irrespective of the diversity of income. This shows the potential of the

sector & its long term growth opportunity

Source: The Marketing White book.

E-commerce-

Apart from tradional & organised retail, E-commerce is emerging retail format because the

consumer gets the option of comparing and buying from the 24 hour open online retail store.

Consumer durables accounted for 7.8% of the total 47349 crore E-commerce market in 2012.

Source:http://yourstory.com//wp-content/uploads/2013/05/Digital-Commerce-Report_2013.pdf

Increasing Urbanization

Easy financing schemes

- 12 -

Financing schemes

It enable customers, especially those with lower income levels, to use future income streams to buy

consumer products upfront and pay in installments over a period. Consumer durable goods purchased

under financing schemes are shown below:

Source:http://www.thehindu.com/business/consumer-durable-financing-interestfree-schemes-gain-

popularity/article4253297.ece

Source:http://www.thehindu.com/business/consumer-durable-financing-interestfree-schemes-gain-

popularity/article4253297.ec

- 13 -

More than 85% of growth is expected from Asia Pacific.

www.mckinsey.com

- 14 -

WHIRLPOOL INCORPORATION

Brothers Fred and Lou Upton and their uncle, Emory Upton, founded

the Upton Machine Company, manufacturer of electric motor-driven

washing machines, in 1911 in St. Joseph, Michigan. Sears, Roebuck

and Co. began buying their products five years later, and by 1925 the

company was supplying all of Sears' washers. The Uptons combined

their company with the Nineteen Hundred Washer Company in 1929 to

form the Nineteen Hundred Corporation, the world's largest washing

machine company. Sears and Nineteen Hundred prospered during the

Great Depression and during WWII Nineteen Hundred's factories

produced war materials. In 1948 it began selling its first automatic

washing machine (introduced a year earlier) under the Whirlpool brand.

In 1950 the company changed its name to Whirlpool following the

success of the product and introduced its first automatic dryer. During

the 1950s and 1960s, Whirlpool became a full-line appliance

manufacturer while continuing as Sears' principal Kenmore appliance

supplier. In 1955 the company bought Seeger Refrigerator Company

and the stove and air-conditioning interests of RCA. Three years later it

made its first investment in Multibras EletrodomÚsticos, an appliance

maker in Brazil. (It has increased that investment over the years.) Other

purchases included the gas refrigeration and ice-maker manufacturing

facilities of Servel (1958); a majority interest in Heil-Quaker, makers of

central heaters and space

heaters (1964); Sears' major television set supplier, Warwick Electronics

(1966); and 33% of Canadian appliance maker John Inglis Company

(1969). It made a deal with Sony in 1973 for the distribution of

Whirlpool-brand products in Japan. Whirlpool sold its TV manufacturing

business to SANYO of Japan three years later.

Institutional

91%

Others, 9%

Current market price $150

$160

$107.8

$11.63

Share holding pattern

Market Data

52 Week high

52 week low

Market cap (billion)

WhirlpoolCorp

WHR

WHR:US

WHR.N

77 Million

$1

1.82

Consumer Durables

Stock Scan

Script Id

Script Code(NYSE)

Bloomberg Ticker

Reuters Ticker

Outstanding Share

Face Value

Beta

Industry

Meaning behind the Logo

The ring encercling the logo denotes the

commitment towards quality

- 15 -

Between 1981 and 1991, despite a static US market, Whirlpool's sales tripled to almost $6.6 billion. In

1986 the firm bought top-end appliance manufacturer KitchenAid (from Dart and Kraft) and 65% of

Italian cooling compressor manufacturer Aspera. Also that year it sold its Heil-Quaker central heating

business. David Whitwam was appointed CEO in 1987. Whirlpool took over total ownership of Inglis in

1990. The company formed Whirlpool Europe, a joint venture with Philips Electronics, in 1989; in 1991

it bought out Philips. Two years later Whirlpool took control of appliance marketer SAGAD of Argentina

and entered a joint venture with Slovakia's Tatramat (which it bought out in 1994). Whirlpool acquired

control of Kelvinator of India in 1994 and formed a joint venture in China with Shenzhen Petrochemical

Holdings in 1995 to produce air conditioners. The following year Whirlpool merged its Whirlpool

Washing Machines and Kelvinator of India companies to form Whirlpool of India. The company's

European division plunged into the red when competition and a recession kept consumers away from its

higher-priced appliances. In 1997Whirlpool initiated a restructuring (due to losses from its foreign

operations) that included plant closures and substantial layoffs (as much as 10% of its workforce). The

next year Whirlpool sold its appliance financing subsidiary to Transamerica. The company also began

using a new, more efficient product development model in 1998, similar to one used in the auto industry.

In 2000 Whirlpool launched the Cielo Bath line of jetted tubs, and in 2001 it introduced the Calypso

dishwasher and the Duet washer and dryer. Another global restructuring plan swept through the company

in 2000, resulting in significant pretax charges ($373 million, incurred in 2001 and 2002) and the

elimination of about 6,000 employees by October 2003. In February 2002 Whirlpool bought the

remaining 51% of Vitromatic it didn't already own. (Vitromatic -- the second-largest appliance

manufacturer in Mexico -- is now called Whirlpool Mexico.) In March the company purchased 95% of

Polar, Poland's second-largest appliance maker. Whirlpool introduced Gladiator GarageWorks (modular

storage systems for the garage) and Polara (the first electric range with cooking and refrigeration

capabilities) in 2002. Whirlpool acquired Maytag in early 2006 for about $1.9 billion. The deal added

several top brands to its already bulging portfolio, including Admiral, Amana, Jenn-Air, Magic Chef, and

of course, the eponymous Maytag. Once the dust settled, Whirlpool sold several businesses, including

Dixie-Narco, the Amana commercial business, its Hoover unit to Techtronic Industries, and its Jade unit

to Middleby Corporation. Buying Maytag also spurred Whirlpool to streamline operations and purge staff.

In 2006 it laid off some 4,500 employees, consolidated duplicate functions related to administration and

manufacturing, and shuttered some offices, including a Maytag research and development center based in

Newton, Illinois. Whirlpool shuttered Maytag's Iowa-based administrative offices and moved them to

Michigan and other locations. The company cut 700 jobs at several Tennessee plants the following year.

In 2007 Whirlpool acquired a minority stake in Elica Group in its effort to extend its reach into the global

- 16 -

air ventilation market. The company formed a 50-50 joint venture in 2008 with China's Hisense-Kelon

Electrical Holdings to make and sell home appliances there. In June 2010 Whirlpool closed its refrigerator

factory in Evansville, Indiana; some 1,100 US jobs were lost as a result of the move. The Upton Family

believed "there is no right way to do a wrong thing" which still exists in the Whirlpool roof leading to

foundation of a 100 year old company. Whirlpool contributes to building unmatched levels of loyalty

through lifelong relationships with its customers. Focused on embedding innovation as a core

competency, Whirlpool Corporation has made a long-standing investment to build this competency. This

investment includes redesigning business processes, training thousands of employees, building an

innovation management system and changing the culture of the company The Whirlpool brand is the

world’s no 1 Global Appliance Brand. Major customers of Whirlpool include retailers Lowe's, Home

Depot, Sears, and Best Buy. Operations Whirlpool organizes its business segments by product line:

Laundry Appliances, Refrigerators and Freezers, Cooking Appliances, and Other. To this end, net sales

generated by each of these segments are well-distributed. North America accounts for more than half of

its sales. Geographic Reach Whirlpool's largest markets are North America and Latin America. In North

America, it sells some products to other manufacturers, distributors, and retailers for resale in North

America under those manufacturers' and retailers' brand names. Whirlpool also boasts a significant

presence in Europe and India. In 2012 Whirlpool opened a new $200 million manufacturing plant in

Cleveland, Tennessee. The 1 million-sq.-ft. facility, which is the world's largest premium cooking plant,

produces cooking products, including ranges, ovens, and cook tops. Previously, the company reopened a

500,000-sq.-ft. factory in Ottawa, Ohio, that it had acquired from defunct Canadian appliance maker W.C.

Wood. Whirlpool also sells home appliances in China through a strategic alliance with Suning Appliance

Co., Ltd. Financial Performance Thanks to the unfavorable impact of foreign currency and lower unit

shipments, Whirlpool logged a 2% revenue decrease in fiscal 2012 as compared to 2011. These declines

were not offset, however, by favorable pricing and product mix. During the same reporting period, the

company generated 48% of its sales from outside North America, including 27% in Latin America, 16%

in EMEA, and 5% in Asia. Revenue in these three regions caused declines for Whirlpool due to the

impact of unfavorable foreign currency. Profits rose nearly 3% in 2012 vs. 2011 as a result of the

company's aggressive 2011 initiative to reduce costs and improve productivity. Whirlpool was further

boosted by a $133 million income tax benefit it received during 2012. Strategy The company is looking to

improve its operating margins and earnings by implementing cost-based price increases, initiating cost

reduction efforts, and making productivity improvements. The company shuttered its refrigeration

manufacturing facility in Fort Smith, Arkansas, in mid-2012. In Germany, Whirlpool relocated its

dishwasher production facility to lower-cost Poland in 2012. These two closures are expected to result in

- 17 -

$400 million in annual cost savings by the end of 2013. At the same time, these cost savings are intended

to give the company some flexibility as itmakes continued investments in new product innovation. Capital

expenditures for R&D related to new product innovation and improvement of existing products are now

holding steady after a few years of incremental increases, reaching approximately $553 million in 2012,

compared to $578 million in 2011, $532 million in 2010, and $500 million in 2009. Whirlpool is looking

for longer-term growth to come from certain emerging markets -- China and India in particular. In 2012 it

entered into a strategic alliance with China's Suning Appliance Co. to sell home appliances there. As part

of the agreement, Whirlpool enjoys access to some of China's smaller, fast-growing cities through

Suning's national distribution network of 1,700 retail outlets. In 2013 it's also buyin Sanyo Electric's 29%

stake in joint venture Hefei Rongshida Sanyo Electric Co.Ltd., based in Hefei, China. The move makes

Whirlpool a 51% shareholder and further strengthens its presence in sought-after China. Sales and

Marketing Whirlpool counts several big-name customers among its list of clients. It serves Meritage

Homes, Lowe's, Sears, Home Depot, Best Buy, Casas Bahia, IKEA, and Alno. In North America, the

company sells products to other manufacturers, distributors, and retailers for resale under those

manufacturers' and retailers' brand names.

- 18 -

Source: Bloomberg, Hoovers Inc

Source: www.whirlpool.com

BRAND PORTFOLIO OF WHIRLPOOL CORPORATION

- 19 -

WHIRLPOOL & ITS GLOBAL PROSPECTI

- 20 -

WHIRLPOOL & ITS GLOBAL POSITIONING

In the late 1980’s Whirlpool began a series of acquisitions that gave the company the scale and resources to

participate in global markets. In the process, it established new relationships with millions of customers

globally. Whirlpool's global initiative focused on establishing its presence in North America, Latin

America, Europe, and Asia. Whirlpool acquired the appliance business of Philips N.V., which gave the

company a strong European operations base. Whirlpool expanded its long-time involvement in the Latin

America market and established a presence in Mexico as an appliance joint venture partner. In order to

cater to the needs of different markets, Innovation and new product development became the primary focus

of the company. Thus, to serve a huge customer band the company decided to Rethink, Rework and

Redesign so as to recognize the company into business units to create a more responsive environment to

deal with the competitive dynamics of the global Industry. Whirlpool had success in refocusing a number of

its key functions to the global approach. Procurement was the first function to go global, followed by

technology and product development. The two functions led to significant savings. More important, the

global focus has helped reduce the number of regional manufacturing platforms worldwide. The work of

these two functions, combined with the company's manufacturing footprints in each region, has led to the

development of truly global platforms - products that share common parts and technologies, but offer

unique and innovative features and designs that appeal to regional consumer preferences.

Procurement's Prerequisite:

Procurement became the first function to be structured as a truly global organization. Because of the scale

of operations Whirlpool became a very attractive customer for suppliers. A partnership with Whirlpool gave

the suppliers an opportunity to sell globally and also gave them efficiencies within their operations. They

don't have to design for different places in the world. The suppliers contacted with Whirlpool to serve all of

Whirlpool’s global needs. This gave whirlpool an access to the best technology and to the best people

globally. They obtained savings as a global player, as opposed to a company that had four separate

- 21 -

businesses that come at a supplier in four different ways. Whirlpool's global procurement approach

complements the global development process. They purposely placed procurement within the Corporate

Technology Organization for two reasons:

First, to marry procurement with technology so that they could obtain value at the front end of

design

Second, to operate as a global unit so as to drive global design from region to region, category to

category, commodity to commodity.

- 22 -

PRODUCT DEVELOPMENT

The global product development structure and process allowed Whirlpool to rapidly migrate innovative

consumer solutions from one part of the world to another. For example, the units in Brazil manufacture

refrigerators with innovative features and designs that appeal to consumers worldwide. The region exported

these refrigerators to Europe

Before the globalization of product development took place there were multiple platforms in each product

category, little feature leverage, multiple technologies with wide performance variations, significant

technical resources to keep all of these platforms going, and long and costly product development. Today

they manage 60 percent of the commodities globally with fewer platforms. Global product development

cuts down the engineering costs considerably leading to consumer benefit.

The goal in global product development was to evolve quickly from regional platforms to a global

platform, while ensuring that they meet the unique set of needs of consumers in all the diverse markets they

serve. Through a transfer of technology and knowledge around the globe - the product reached the

marketplace faster.

Source: www.geplcapital.com

- 23 -

WHIRLPOOL OF INDIA LIMITED

WIL was incorporated in 1960 by J R Desai in collaboration with

Kelvinator International Corporation, USA. The company entered into a

tie-up with Whirlpool Corporation USA whereby Whirlpool contracted to

purchase from White Consolidated Industries Inc, USA. Also, Expo

Machinery Ltd, a wholly owned subsidiary merged with the company.

Whirlpool Washing Machines Ltd merged with the Kelvinator India Ltd

and the company changed their name from Kelvinator of India Ltd to

Whirlpool of India Ltd. Whirlpool of India Ltd (WIL) is an 82.3%

subsidiary of Whirlpool Inc, US. In the year 2000, the company expanded

their product range by launching Air conditioners and Microwave Ovens

for the first time. WIL has its main plant at Faridabad in Haryana - to

manufacture refrigerators and freezers. The washing machine unit is

located at Pondicherry. In 1998, the company established yet another

refrigeration plant at Ranjangaon near Pune. The main product offerings of

Whirlpool are Refrigerators and Washing Machines. ACs and Microwaves

are the two other products which form the basket of offerings from

Whirlpool to the Indian market. WIL's export business has an excellent

volume. It is the largest exporter of home appliances from India. The 4

main pillars of Whirlpool are communication, product, retail and service.

It has been a pioneer in identifying innovations which are of operational

excellence and lead to cost reduction and at the same time offer better

quality. The offering of Whirlpool to the Indian market is its 6th Sense

“Frost Control”: Refrigerators which have a unique property of having

Frost Free features in a Direct Cool Refrigerator. This was a revolution in

the Indian Market. The company exports their product to Russia and East

European countries and exports small appliances to the USA. Today,

Whirlpool is the most recognized brand in home appliances in India and

holds a market share of over 25%.The brand ambassador of WHIL is Kajol

and Ajay devgan.

Source: ACE Equity

Current market price 232

244

141

2842

Whirlpool of India Ltd

WHIRLPOOL

Script Code(BSE) 500238

WHIRL IN

WHR.BO

126.87 Crore

10

0.91

Consumer Durables

Bloomberg Ticker

Reuters Ticker

Share Capital (INR)

Face Value(INR)

Beta vs Sensex

Industry

Stock Scan

Script Id

Script Code(NSE)

Market Data(INR)

52 Week high

52 week low

Market cap (Cr)

Share holding pattern

Forigen promot

ers,

75%

FIIs, 7.01%

DIIs, 5.45%

Others, 12.54%

- 24 -

PRODUCT LINE OF WHIRLPOOL OF INDIA LIMITED

1. Refrigerator

2. Washing machine

3. Air conditioners

4. Microwave Oven

5. Water Purifiers

6. Inverter

7. Induction Cook top

CONTRIBUTION OF PRODUCTS TOWARS REVENUE

62%21%

7%

10%

Break up of Revenue

Refrigarator

Washing Machine

Air condioners

Others

Source: Annual Report

- 25 -

BUSINEES INSIGHT

Whirlpool India Limited is revamping its product range with the highest ever launches in a year under

implementation in Financial Year 2014. New products host unique features better exterior design and

colours. WHIRL is reducing the revamp product life cycle (earlier a model used to be revamped every 3

years which has now been compressed to 1.5 years). It has also occurred an incremental expenditure of INR

400 million to upgrade the manufacturing capacity to cater to the new launches. The company expects to

have dominance in Refrigerator and Washing Machine to continue in near term. While Air conditioners,

Water Purifiers and Microwave Oven, which together accounts for 10% of the total revenue are future

growth drivers. Whirlpool India Limited has revamped its branding strategy to communicate an

International appeal.

DISTRIBUTORS INITIATIVE STRUCTURE

WHIRL has a strong distribution presence with a network of 3500 dealers across 150 towns. In line with

mass market focus to increase its presence, WHIRL plans to penetrate into tier-2, 3 and 4 towns so as to

increase the customer band. It in reworking on the distributor structure so as to provide trade margin’s in

alignment with the other peers. It has hired Boston Consulting Group to restructure its distribution model

which will be fully operative by the end of FY14.

IMPACT OF RBI’S NORMS ON DURABLE FINANCING

WHIRL’s revenue will not be much impacted by RBI’s new norms on consumer durable financing, which

mandates to show true interest rates instead of specifying 0% interest rate. WHIRL sales through consumer

finance route are only 7%, creating a very minimal impact.

- 26 -

PRODUCT LINE OF WHIRLPOOL OF INDIA LIMITED

Refrigerator

Single Door Refrigerator - MRP Ranging from 12150 -20875

Double door Refrigerator - MRP Ranging from 22050-57850

Multi door Refrigerator - MRP Ranging from 26625-55125

French Door Refrigerator - MRP 150000

Washing Machine

Fully Automatic(Top Load) - MRP Ranging from17250-24850

Fully Automatic(Front Load) - MRP Ranging from 25000-33500

Fully Automatic 360 - MRP Ranging from 28500-30100

Semi Automatic - MRP Ranging from 9500-14500

Air Conditioners

Window AC - MRP Ranging from 19000-33500

Split AC - MRP Ranging from 58800-340000

Microwave Oven

Crisp Range - MRP Ranging from 10290-19290

Magicook 1-2-3 - MRP 8490

Magicook Range - MRP Ranging from 5490-13890

Water Purifier

RO Purifier - MRP Ranging from 15500-17500

Non Electric Purifier - MRP Ranging from 5000- 6500

- 27 -

Home Power

Platinum Series - MRP 880

Gold Series - MRP Ranging from 7000-11000

New Silver Series - MRP Ranging from 4200-5500

Induction Cook top - MRP Ranging from 3790-5790

Apart from these core products Whirlpool sells accessory for all the above listed products.

- 28 -

FOCUS ON INNOVATION & COST CUTTING

WPL concentrates on healthy margins rather than generating increased revenues. Only projects that will

provide company healthy margins are taken up. This is reflected in its operating margins which have

remained in the range of 7-9% last couple of years even after a tough 2012. WPL is tapping its core

competencies by heavy capex in growth and innovation. It has got global technology support and local

innovation through own design centre and has launched many innovative products like - next generation

refrigerator claiming 40% faster cooling than any other machine in the same category. This product has

got tremendous response from market. WPL follows a sensible approach toward advertising expenditure.

The company follows an ideology of minimum advertising expenditure, as things such as AC, washing

machines and refrigerators the consumers will only prefer buying the product after touching and having a

sense of the product rather than watching the advertisement. It has maintained its advertising expenditure

below 3% of sales in last 5 years. Having shown a major focus on cost cutting it has tremendously

improved its working capital management. It has maintained its employee costs between 7.5%-8.3% in the

last 4 years.

1511.6 1236.6

3123.43676.1

3499.2

0

1000

2000

3000

4000

2009 2010 2011 2012 2013

R&D Expenditure( In lakhs)

2.652.85 2.8

1.851.67

0

0.5

1

1.5

2

2.5

3

2009 2010 2011 2012 2013

Advertisement Expense(as % of Sales)

Source: Annual Report

- 29 -

Whirlpool’s share price was Rs17 in 2005 went up to Rs60 in 2008 and went on to touch a record high of

Rs338 in November 2010 due to continuous innovation brought into the products creating greater value add

to customers. Whirlpool added new products from premium to mass straddling multiple price points.

Whirlpools new innovative product line includes:

Magicook1-2-3 Microwave oven.

Frost free Refrigerators called Neo Ichill.

Direct cool Refrigerators Ice magic.

Line ups of Spilt Air Conditioners: 3D Cool and Chrome Turbo.

Kitchen products comprising Built-In Ovens, Barbeque, Hobs and Hood.

White Magic 1-2-3 nxt with new and advanced 6th Sense Washing Machine

PROPOSED INNOVATION & ADAPTATION

Capacity expansion of Pondicherry plant.

Accquision of a new export market (Australia).

New energy requirements with minimal cost increases.

Lumia launch with 7SKUs helped to increase volume.

Use of environment friendly R-600a refrigerant in refrigerators.

Variety of color options of washing machines for wider consumer choice.

Introduction of French Door Bottom Mount Refrigerator for Indian markets.

New range of refrigerators (242L to 480L 2-Door Frost Free.

- 30 -

INDUSTRY STRUCTURE & DEVELOPMENTS

The long term growth opportunity that India offers is attracting a number of international appliance

brands. Recent entrants include brands from Germany, New Zealand, Japan and China which is making

the Indian appliance industry more international in character. Joint ventures and strategic alliances are

being forged. Several new entrants are investing heavily behind brand, distribution and manufacturing.

For the moment however, the home appliance industry is highly concentrated, with the top 4 brands

accounting for more than 80 % of the appliance market. Category dynamics remain largely unchanged for

refrigerators and washing machines, where single door and twin tub formats dominate. The Air

Conditioner category has seen tremendous change with split air conditioners fast replacing windows.

Indeed, several brands are exiting the window business altogether. In the Microwave category, more and

more offerings are in the Convection and Grill models, which are more versatile products. An over

arching phenomenon is that premium segment of all appliance categories is seeing a lot of action. Today,

it is common to see multi-door refrigerators, sophisticated front-load washing machines, inverter

technology air conditioners, and Built-in products growing in awareness and distribution.

- 31 -

PEER ANALYSIS

- 32 -

BLUE STAR LIMITED

Blue star is the largest Central Air condoning company with an annual

turnover of 2800 crore having 7 manufacturing facility, over 1800 dealers

and 2700 employees. It fulfills the AC needs of large number of corporate,

residential and commercial customers. Blue star has primary focus on

CORPORATE & COMMERCIAL MARKET. Having acquired great

success in the above segment it has penetrated into residential segment

also. The company also manufactures and markets a wide range of

refrigeration products which include water coolers, bottled water

dispensers, deep freezers and cold storage. It has heavily invested in R&D

to produce energy efficient products. Having set up strong R&D facility no

technology has been imported in the last 5 years.

BUSINEES SEGMENT

Blue Star operates in three segments:

1. Electro mechanical projects.

2. Cooling products.

3. Professional Electronics.

SEGMENT WISE REVENUE BREAK UP

Source: ACE Equity

Current market price 212.85

223.6

130.15

1419.2

Market Data(INR)

52 Week high

52 week low

Market cap (billion)

Share holding pattern

40%

32.85%

15.16%

9.04%2.43%

Directors

Public

Foreign institutionals

Foreign holdings

Blus Star Ltd

BLUESTARCO

BSE Code 500067

BLSTR:IN

BLUS.NS

8.99 Cr

2

0.8

Consumer Durables

Outstanding Share

Face Value

Beta vs Sensex

Industry

Stock Scan

Script Id

NSE Code

Bloomberg Ticker

Reuters Ticker

70%

23%

7%

Electro mechanical project

Cooling products

Professonal Electronics

Voltas vs Sensex

74.4094.40

114.40134.40154.40174.40194.40

29

-Ap

r-2

01

3

29

-Ma

y-2

01

3

29

-Ju

n-2

01

3

29

-Ju

l-2

01

3

29

-Au

g-2

01

3

29

-Se

p-2

01

3

29

-Oc

t-2

01

3

29

-No

v-2

01

3

29

-De

c-2

01

3

29

-Ja

n-2

01

4

28

-Fe

b-2

01

4

31

-Ma

r-2

01

4

CLOSE(Voltas Ltd) CLOSE(SENSEX)

- 33 -

VOLTAS LIMITED

Voltas is one among India's largest air conditioning company, and one of

the world's premier engineering solutions providers and project specialists.

Voltas Limited offers engineering solutions for a wide spectrum of

industries in areas such as heating, ventilation and air conditioning,

refrigeration, electro-mechanical projects, textile machinery, mining and

construction equipment, water management & treatment, cold chain

manufacturing units at Thane, Dadra and Pantnagar. Voltas established a

clear lead in AC sold in multi brand outlets in 2012-13 possessing 20%

share in these outlets. According to GFK Nelson market share of Voltas as

per revenue in AC segment stand at 18%.The AC segment is the highest

contributor towards profitability. It has plans to enter into Refrigerator and

washing machine segment in next 5 years.

BUSINEES SEGMENT

Voltas operates in three segments:

1. Electro mechanical projects.

2. Engineering products.

3. Unitary cooling products.

SEGMENT WISE REVENUE BREAK UP

Source: ACE Equity

Current market price 165.5

176.25

67.2

2495.48

Share holding pattern

52 Week high

52 week low

Market cap (Cr)

Market Data(INR)

Promotrs30%

Institutional

Investors

47%

General Public 17%

Others6%

Script Id Voltas Ltd

NSE Code Voltas

BSE Code 500575

Bloomberg Ticker VOLT:IN

Reuters Ticker VOLT.NS

Face Value 1

Beta vs Sensex 1.69

Industry Diversified

Stock Scan

Electromechanl Projects,

40%Engeering products,

52%

Cooling products, 8%

Voltas vs Sensex

74.4094.40

114.40134.40154.40174.40194.40

29

-Ap

r-2

01

3

29

-Ma

y-2

01

3

29

-Ju

n-2

01

3

29

-Ju

l-2

01

3

29

-Au

g-2

01

3

29

-Se

p-2

01

3

29

-Oc

t-2

01

3

29

-No

v-2

01

3

29

-De

c-2

01

3

29

-Ja

n-2

01

4

28

-Fe

b-2

01

4

31

-Ma

r-2

01

4

CLOSE(Voltas Ltd) CLOSE(SENSEX)

- 34 -

HITACHI HOME & LIFE SOLUTION INDIA LIMITED

Hitachi home and life solution India is a subsidy of Hitachi Home

appliance Inc, Japan. Hitachi India has a primary focus on B2B business.

It is the market leader in telecom AC segment. In the refrigerator segment

it is focusing on models with Inverter compressor. Hitachi India is

constantly strengthening the after sales network having 35 exclusive

service centers in 26 towns apart from 600 other service points including

multi brand stores and service dealers. With this network it covers 317

towns across the country.

BUSINEES SEGMENT

Hitachi India operates in four segments:

1. Refrigerators.

2. Air Conditioners.

3. Spares.

4. After Sale Service

SEGMENT WISE REVENUE BREAK UP

SEGMENT WISE R EVENUE BREAK U

SE GMENT WISE REVENUE BR

Hitachi vs Sensex

Source: ACE Equity

Air Conditioners

, 81%

Refrigerators, 6%

Spares, 5%

Service, 8%

75.12

85.12

95.12

105.12

115.12

125.12

135.12

29

-Ap

r-2

01

3

29

-Ma

y-2

01

3

29

-Ju

n-2

01

3

29

-Ju

l-2

01

3

29

-Au

g-2

01

3

29

-Se

p-2

01

3

29

-Oc

t-2

01

3

29

-No

v-2

01

3

29

-De

c-2

01

3

29

-Ja

n-2

01

4

28

-Fe

b-2

01

4

31

-Ma

r-2

01

4

CLOSE(Hitachi Home & Life Solutions

CLOSE(SENSEX)

Current market price 165

52 Week high 183

52 week low 99

Market cap (Cr) 295.95

Script Id Hitachi

NSE Code HITACHIHOM

BSE Code 523398

Bloomberg Ticker HTHL IN

Reuters Ticker HITA.BO

Face Value 10

Beta vs Sensex 0.74

Industry White Goods

Stock Scan

Hitachi vs Sensex

Market Data(INR)

Share holding pattern

Promoters,

74.45%

Public, 15.25%

Corporates,

9.31%

Foreign Institut

ion,

0.99%

- 35 -

DETAILED PEER ANALYSIS

Average collection Period

The Average collection period of Whirlpool is unmatched in the industry

PAT growth

Whirlpool registered a very minimal increase on the PAT margins because summer accounts to

40% of the total sale of Whirlpool and due to slow onset of summer in most parts of India the

summer sale of whirlpool was hit badly and GDP slipped down to 5% adding on to reduction in

sales. Hitachi showed a dramatic PAT growth % wise by actual money wise it increased from 3

Crore to15.3 crore mainly due increase in refrigerator sale by 24% and its focus towards cost

reduction lead to increase in operating profit. While blues star showed an increased growth in

PAT because of Electro mechanical project turned around and showed a profit of 72 crores from

a loss of 85 crore. Thus to sum up PAT margins of Whirlpool’s competitors increased mainly

because of their presence in other sectors. With increase in the overall growth in India Whirlpool

is expected to show better growth.

Source: Annual report, Management discussion

- 36 -

Sales per employee

The average sales per employee at Whirlpool are highest among its peers which

Shows its focus towards hiring and retaining skilled employees. In order to derive

the best from the employees Whirlpool has taken up the following measure:

Improving Managerial Effectiveness, a key management competency, continued to receive

extraordinary focus from the HR team at Whirlpool. Specific feedback on one's managerial

ability was gathered through a managerial skill survey, followed by a skill building workshop

where Managers were trained to become better and more effective supervisors. The Critical

Thinking and Communication Skills Workshop and Project Management Course were

continued to enhance execution capability. Specific focus was applied on improving "Art of

People Assessment Interviewing Capability”. The initiatives outlined above resulted in an

increase in Employee Engagement Score to 83%, placing Whirlpool of India Limited, amongst

the highest in the Whirlpool world. This created more growth oppurchnity which resulted in

80% more role changes than previous year.

- 37 -

Operating Profit Margin

Whirlpool’s operating margins are best in the industry because of its focus in cost cutting.

According to Shantanu Das Gupta Vice-President (Corporate Affairs & Strategy Asia

South) the company has become more judicious in hiring non- essential workforce in all

divisions other than the sales and marketing team. Apart from this raw materials account

to 65% of the total Sales. Also the company which imports 28% of total raw materials

consumed has increased domestic sourcing to save itself from rupee depreciation and

increasing cost

PAT Margins

.

- 38 -

Whirlpools PAT margins are best among the peers because its top line is best among the

peers and adding on to it the company is debt free which is major advantage it has which

majorly influencing the PAT on the other hand the company paid short term interest of 3

crore which is bearable for Whirlpool.

Export

Whirlpool achieved a commendable export business because of neighbouring SAARC countries

performing well accounting to 50 % of the total export. Whirlpool entered Thailand & Dubai

with the launch of Neo I chill refrigerator. While in Nepal & Bangladesh Whirlpool has opened

exclusive brand retail outlets to expand its retail coverage. In future to expand its overseas

business Whirlpool has plans to penetrate into Australia & Sri lanka also.

EPS

- 39 -

Debt/ Equity ratio

Among the listed players in White goods Whirlpool is the only debt free company because it does

not wants to bear any king of fixed financial charges as the sector is very price sensitive and

presence of fixed interest would hamper its PAT & in case of any additional cash requirement it

gets support from its parent Whirlpool Corporation. On the other hand Videocon has a high debt

whose interest cost it can’t bear has plans to sell 10% of its stake in Mozambique Gas field to

raise 16300 crore to retire its debenture and cut down the interest cost which it can manage .

Source: http://www.business-standard.com/article/companies/videocon-to-cut-debt-with-10-stake-sale-

in-mozambique-ga

- 40 -

VALUATION

- 41 -

- 42 -

- 43 -

- 44 -

- 45 -

Ratio Analysis

- 46 -

Shedules

- 47 -

- 48 -