The devil strikes

For over a year now, the only significant buzz emanating from the House of Onida has been that of gnawing differences between the promoters, with at least two of them reportedly actively thinking of getting out of the company by selling their stakes.

Last fortnight, two of the promoters—Sonu Mirchandani and Vijay Mansukhani—were reported to have begun talks with representatives of Videocon and Future Capital of Kishore Biyani for selling their 33 per cent individual stakes in Guviso, the holding company for Mirc Electronics that markets consumer durables under the Onida name. Their grouse: serious differences with Gulu Mirchandani, Chairman and Managing Director over issues of control. But as usual, when confronted, the promoters as well as the others concerned either denied any such move or declined to comment.

If the promoters are indeed thinking of selling out, what could be their alibi? True, all these years Gulu has presided over the Onida empire, while his elder brother Sonu and brother-in-law Vijay (he is married to the sister of Gulu’s wife) have stayed in the background. In fact, Sonu is not even on the Mirc board.

In May, Vijay was elevated as Managing Director and given charge of operations apparently to placate him. Industry watchers do not discount the resentment angle entirely. Says Nabankar Gupta, founder of Nobby Brands Architects and Consultants: “Gulu has always been at the helm of affairs because of his hard work, hands-on approach and ability to take new initiatives. In fact, he even got in professionalism into the company going beyond his relationships.”

To make some sense, their disaffection needs to be seen in the context of Onida’s performance, which isn’t really rocking at the moment. It’s barely managing to stay afloat in a treacherous environment of thin margins, high promotional costs and fierce competition from South Korea’s global consumer durable behemoths LG and Samsung. Onida’s state is best reflected in its performance on the bourses and in its market cap, which is barely Rs 340 crore. However, it appears the company is seeking a valuation of Rs 600-800 crore. Though it boasts of being the third largest CTV brand in the country, it holds just 10 per cent market share. In such a scenario, selling out while some value is still intact in the company can always be an option.

Onida’s growth appears stunted when compared to those of rivals like Videocon that has transformed itself into a multi-billion dollar global conglomerate with interest in sectors as diverse as consumer durables, colour picture tubes (CPT), CPT glass, oil and gas and more recently steel and power. In CPT and CPT glass, Videocon is a global leader with production units across the globe. Closer home, it has cornered nearly 24 per cent of the CTV market through its brands like Videocon, Akai, Sansui and Hyundai.

But according to industry watchers, rivals and even the Onida chairman, things may not be so bad after all. Says Gulu Mirchandani: “Onida has withstood the onslaught of every major brand in the country. We have in the last couple of years extended the product portfolio to include DVDs, washing machines, airconditioners and microwave ovens. These products have been well received by the consumers.”

Gulu’s optimism is shared by Rajeev Karwal, an old industry hand as well as Founder-CEO of Milagrow Solutions, a consulting firm. “Despite big players, Indian market would be able to sustain smaller players that have a huge difference in their pricing. Even Onida, which has top-end products, would be able to do well primarily because it has served its customers with quality products over a period of time.”