Business Today

Churning Out Profits

Arvind Uppal believes in growth without giving up profitability.
twitter-logoManu Kaushik | Print Edition: January 3, 2016
Arvind Uppal Chairman, Whirlpool of India (Photo: Vivan Mehra)

The office of Arvind Uppal, Chairman, Whirlpool India, has a framed wall decor titled Arvindisms. It's a collection of quotes, with his caricatures, that he frequently uses in front of colleagues. "They are going to print a book when I retire to remind me of all the stupid things I have said," he says.

While it seems that these quotes can be compiled into a book, it is surprising that Uppal doesn't read books at all. "I have my own theories on leadership. You will never find a paper on my desk because I delegate everything," says the 53-year-old Uppal, who has steered Whirlpool of India through numerous ups and downs since he joined in 2005.

"From 2004 to 2011, all emerging markets were in an uptrend. The discretionary business was growing, and so was FMCG. Everybody was a hero. No matter what you did, it turned into gold," says Uppal. But in 2012, when the down cycle started, many consumer businesses were hit. This impacted Whirlpool too.

  • INCOME/ 3-YR CAGR: Rs 3,332 crore/ 8 per cent
  • OP. PROFIT/ 3-YR CAGR: Rs 331 crore/ 14 per cent
  • PAT/ 3-YR CAGR: Rs 211 crore/ 19  per cent
  • AVG MCAP/3-YR CAGR: Rs 6,084 crore/ 31 per cent
  • AVG MCAP (APR-SEPT 2015) YOY GROWTH: 114 per cent
  • ROE/ROCE: 25.8 per cent/ 37 per cent
  • CASH/DEBT: Rs 536 crore/0
  • NET PROFIT MARGIN: 5 per cent
Standalone data, net of extraordinary income and expenses

However, in spite of the pressure, it has preferred profits over market share, hoping that when the momentum turns, it will be in a good position to win back the market share. Its competitors, on the other hand, have cut prices, mostly by offering products on zero per cent EMI, which essentially translates into an 8-10 per cent discount for consumers. "If rural demand is soft and consumers are not coming to the store, reducing prices to gain market share seems futile," he says.

Whirlpool is a major player in refrigerators and washing machines. Today, its market share in these categories is 17 per cent, about two percentage points less than two years ago. "We are clear that our focus is going to be on profits," he says.

For this, the company has taken a two-pronged approach. One is improving product quality. Earlier, it would consider refreshing a product after three years. This was gradually reduced to 18 months and then to less than a year. The other is an attempt to bring down costs. Here, it gained a lot from the slump in global commodity prices, as a big part of its raw material costs are accounted for by metal and plastic. As a result, in 2015, raw material costs fell 6-7 per cent compared to the previous year. "We are capturing the full benefit of the fall in commodity prices right now. But some of that is getting neutralised by currency depreciation. In addition, fixed costs are always a challenge in India due to inflation. We expect wages to also keep rising," he says.

The results of this single-minded focus on profitability are evident. In the past three years, Whirlpool India's profits have almost doubled, from Rs 123.73 crore in 2012 to Rs 210.51 crore in 2015. The revenue growth, however, has been slower, from Rs 2,657.94 crore in 2012 to Rs 3,293.78 crore in 2015, reflecting a rise in margins.



In 1908, Lou Upton, a US citizen, invested his savings in a venture to manufacture household equipment. When that company failed to materialise, Upton was offered the opportunity to select something of value from the venture. He chose patents on a manual washing machine that he thought might be electrified.


The company entered India in the late 1980s under a joint venture with the TVS Group and established the first Whirlpool manufacturing facility in Puducherry.


Whirlpool acquired Kelvinator India in 1995 to mark an entry into the Indian refrigerator market. The same year also saw acquisition of a majority share in the joint venture. In 1996, the two were merged to create Whirlpool India.

Uppal's focus on profitability is partly due to the lessons he learnt at Whirlpool early on. In 2005, when he joined the company, it was incurring losses. However, things were different in the mid-nineties as it had no global competitor and the only threat was from Videocon and Godrej. Within no time, it became a market leader, though it never made money as it was in an investment phase. In 1999, Korean players LG and Samsung entered India, and things began to move faster. By 2004, it was in deep trouble and announced a loss of Rs 100 crore.

Uppal was in Nestle then. When he joined as managing director, his first task was to ensure that the company does not go belly up as its entire base capital had been eroded. "My friends asked why did you leave Nestle? But the team was strong, and the brand was also strong. In two years, we were leaders again. We became profitable," he says.

Whirlpool India is today the third-largest consumer durables company in India after LG and Samsung in terms of revenues. Uppal says he can double revenues today but for that will have to sacrifice profits.

In addition to Indian operations, Uppal heads Whirlpool in 18 countries, including Australia and Japan. In May, the company appointed a Managing Director, Sunil D'Souza, who reports to Uppal. He says till recently he was spending a disproportionate amount of time in India and now plans to focus on the rest of Asia as well.

Uppal says consumer durables is a wartime industry and the nature of business dictates the strategy a company should adopt. "It's basically the availability of time that differentiates a wartime industry from a peacetime industry. In a wartime industry, when you lose, you lose badly. In peacetime, it's more like a friendly match," he says.

His instructions to the new MD are clear: never forgo profitability. "If you are profitable, you will always bounce back. The biggest mistake one can make in a wartime industry is to sacrifice profits for market share. I have never seen that work," he says.

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