Digital solutions like Internet of Things (IoT) and Artificial Intelligence are fast changing the way factories, offices and homes function. As a global leader in this transformation, what do you see are the major changes happening and how are they significant for India?
In this era of digital transformation, there is a huge potential for digitalising traditional products. Take a light switch. It can be converted to a switch that can be switched off from outside. So, you can create scenarios, such as managing lighting using voice. All that is interesting for the end-user and that is possible only if you have a digital wiring device. Same is the case with circuit breakers or door phones. Door entry can be managed with a video phone, Internet, phone/smartphone. Besides convenience and comfort, you can reduce electricity bills. Remember, 35 per cent of the world's energy is consumed by buildings. So, this is a digital revolution. Another area of big scope is assisted living where the aged can be made comfortable with digital solutions in homes.
Commercial buildings are also changing. For all types of buildings, we already have a digital solution. For example, if you add our solution to connect the switch gear, you can remotely access all electrical information about the gear. This is basically for the maintenance team for commercial buildings where one needs to monitor switch gear and installations. We estimate that 60 per cent of the IoT market worldwide will be for commercial buildings and professional use and 40 per cent for use by end-users. Therefore, the professional market would be bigger than the end-user market. Our comprehensive product range addresses a market worth over $100 billion.
We have launched a programme called "ELIOT" aimed at digitalising 40 out of our 100 product groups by 2020. By the end of 2017, we had added digital capabilities to 30 product groups. This area is growing, and in the last three years, we have been witnessing double-digit growth, which will continue. Now, such products contribute 10 per cent to our revenues, and that is a significant number. It is a programme made not just of products. It is also about lots of partnerships. We already have close to 40 partnerships - with technology providers, start-ups, etc. I am sure there will be a huge potential for this product in India as well, because India is being digitalised at a very fast pace.
Legrand came to India by acquiring switchgear maker MDS in 1996, and followed it up with four more acquisitions, including fuse gear and switchgear maker IndoAsian, the UPS business of Numeric Power Systems and electronic enclosure systems maker Valrack. How far have these helped in consolidating and tapping the Indian market?
We had sales of Rs 40 crore when we started with MDS. Last year, we achieved Rs 2,300 crore. So, it has been a fantastic journey of growth, both organically and inorganically.
We sell over 10,000 products in 53 product categories, which shows the significant investments we have made in India. We did five acquisitions and all those were significant investments. Except in the US, we have not done five acquisitions anywhere else. Now, we have 10 factories and 5,500 people here. We have been recruiting 400-500 people every year. We have three R&D centres and will open more to develop engineering capabilities locally. India is probably one of the main countries where we have been investing heavily for the last 22 years. India is the fourth-largest market for us after the US, France and Italy.
India contributes about 5 per cent to group sales. It is also important in terms of people because it accounts for 15 per cent of our 37,000 employees worldwide. Actually, we have more Indian than French employees. Obviously, we see India as a priority market and have been investing a lot here in R&D, local manufacturing, sales, new products and acquisitions. And we will keep investing.
Among your major brands in India, you have retained the identity of all the acquired brands, which is not a strategy of most multinational companies. Any specific reasons for this? How were you able to retain top managements and make the cultural integration happen?
When MNCs acquire an Indian company, you may expect a cultural digression to happen. You might be wondering how we, as a French company, deal with these family-owned businesses. First, to clarify, we are not a French company, we are an Indian company. Out of the 5,500 people here, there is only one French national. When a Numeric or an IndoAsian joins Legrand, there is no cultural shock. The point is, you should respect the business model. When we acquired IndoAsian or Numeric, we didn't change their business model, but only added new businesses and products.
IndoAsian was a super specialist of retail. We retained that. We reshuffled the product offering for our Indian customers and added to their basket of products, for example, light switches. So, the priority is to keep the people, keep the business model and then fine-tune the business model so that it can accelerate growth. There is no disruption of old models. It is all about people and for growth to continue we have to rely on the same people. The top executives managing Numeric or Indo Asian or Adlec were part of the earlier management team. We retain people and empower them. And we always keep the brand ethos intact.
At group level, we have experience of acquiring more than 150 companies, and hence we have processes to take care of those companies. We target companies that have very good market leadership and are run by good leaders. We target companies in good shape with good management team, good products, clear strategy - all that makes it easier to integrate. We still have the Numeric founder on the board. We maintain very good relationship with brand owners. Vimal Mahendru, part of the Mahendru family, which sold IndoAsian to Legrand India, is still with us. Keeping such people and motivating them is the best recipe for doing a good docking for a newly acquired company.
In the last few years, India has been witnessing lot of infrastructure creation like smart cities. How far have you benefitted by it?
In the last five years, we have grown nicely targeting all segments. For example, we have been very active in Delhi and are looking with a lot of care at what is going to happen in Mumbai. We have a lot of data centre projects and we are part of the 100 smart city projects. Recently, we got projects for the UN Headquarters in Delhi where we installed latest lighting controls.
With smart cities being built, India will have a large requirement for data centres, and we have products for that. Already 60 airport products out of the 130-140 in India are equipped or powered by our Numeric products. We opened 'Legrand Innoval' experience centres in Mumbai, Chennai, Ahmadabad and Lucknow to create brand visibility and will soon open more such centres in Bangalore, Kochi and Dehradun. We will aggressively tap the potential of the Indian market with a wide range of new products and services. Of course, we are always on the lookout for acquiring more quality electrical companies and brands in India.