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Riding the Indian tailwind

United Technologies Chairman and CEO Louis Chenevert wants to grow his India business five times in as many years. He is not crazy.

N. Madhavan        Print Edition: December 12, 2010

For a company with nearly 12 decades in India, United Technologies Corp., or UTC, has oodles of ambition. Nowhere is it more evident than in Chairman and CEO Louis Chenevert's travel schedule, which has India popping up often in recent years. On each trip, Chenevert stresses on pushing sales of UTC brands here, which enjoy much more visibility than the parent company. Otis Elevators, Carrier air-conditioning systems and Pratt & Whitney aircraft engines enjoy top of mind recall, with names such as Sikorsky Helicopters and UTC Fire & Safety making their presence felt in India.

UTC believes India is today where China was ten years ago. "In 2000, China revenues stood at $600 million; it rose in nine years to touch $2.6 billion," says Chenevert. "Our revenues from India today stand at $500 million but we expect it to grow rapidly to $2.5 billion by 2015." Or, revenues doubling in each of the next five years. That is a tall order even for the most optimistic of salesmen but not for Chenevert.

One way of achieving the target is to recover the ground UTC has lost over the years. It entered the market when Otis installed the first elevator at Raj Bhavan in Kolkata in 1892. For the next 100 years, Otis had a stranglehold on the Indian elevator market and even today it is the largest UTC business here with sales of $200 million.

As late as 1996, Otis is estimated to have had a market share of 60 per cent. But it was around then that things began to go wrong for the elevator brand. "Persistent labour problems restricted the management's ability to be flexible and respond to the needs of the market," says A. Sankara-krishnan, a lifts industry veteran and a former managing director of the Indian unit of Kone Elevators, a Finnish company and Otis's rival. "A few strategic mistakes followed. They closed their factory and began outsourcing products from China which led to quality problems," he adds.

Otis, which to a large extent has overcome these challenges, today is planning to double its production capacity to 10,000 units at its factory in Bangalore and aims to increase sales to $1 billion a year (of the total $2.5 billion annual revenues UTC targets) by 2015.

Carrier similarly entered India in 1930 and enjoyed a large chunk of the market before Voltas, Bluestar, LG, Samsung, Hitachi and others carved up a sizable chunk for themselves. Carrier is hitting back and expanding capacity to half a million units from the current 200,000.

Chenevert with (immediately behind) Jothi Purushotaman, President of UTC India, and the local team
Chenevert with (immediately behind) Jothi Purushotaman, President of UTC India, and the local team
In this ramp up, UTC is betting on the rapid growth of India's cities. "Large scale urbanisation is the game changer for us,'' says Zubin Irani, Senior Managing Director of UTC's commercial business in India which includes Otis, Carrier and UTC Fire & Security. He quotes a recent McKinsey report on urbanisation in India, which estimates that by 2030 over 590 million people (nearly twice the population of the United States today), will be living in cities. Urban middle class households will rise to 91 million in the next 20 years from 22 million today. That will require up to 900 million sq. ft of commercial and residential space - equivalent to the size of Chicago - to be built every year.

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