With 4G phones, tablets, Karbonn plans to raise the crescendo

Like many other Indian mobile phone brands, Karbonn came out of nowhere over two years back and captured 3% market share in terms of revenues. In 2010 the company grew 25% and is slowly consolidating its positions in southern markets like Andhra Pradesh and Karnataka. Sudhir Hasija, chairman, Karbonn Mobiles tells DNA Indian brands are beating the well entrenched MNC rivals by squeezing model turnaround time, which is a major cost saver. Excerpts:
 
In the last two-and-a-half years, Karbonn has aggressively expanded in India and other emerging markets…
We are in Sri Lanka, Nepal and Bangladesh. Last month we went to Singapore. This month we will go to West Africa. In the next two months we should be in Nigeria and Kenya.

Which is the segment that you are betting on?
Till now, we have been up to the lower and mid-segment. Now we are launching our Android 2.2 phone. With that, we are trying our luck in the high-end market.

We’ve heard it will be priced at Rs6,000. Isn’t that the mid-segment?
It is priced at Rs7,000. So far we have been in categories up to Rs5,000. Till about six months back we were in Rs3,000 -4,000 price bracket. Then, we launched our touch feature phones at Rs5,000. They have been accepted very well. Now, we are taking a leap to Rs7,000.

What is the strategy behind setting up a manufacturing plant in India?
Right now, we have a design house. We design our products and use the OEMs (original equipment manufacturers) in Taiwan, Korea and China to manufacture them. For instance, Taiwan is good for high-end like Android phones. Korea is best for sliders and flip and touch phones while China for low end. We use all of them. Now, we plan to start our own assembly line - either in Chennai and Bangalore We will start with a capacity of 5 lakh phones per month. We want to do it very fast as our volumes have become big so we need our own manufacturing.

Karbonn has followed a very aggressive pricing policy. Are you compromising on margins to chase market share?
The main thing that has kept our prices low is our model turnaround time. See I am able to launch a model in two months’ time. At the most, it takes three months. So my overheads are very less. Also, Indians are very good at software and hardware designing. Companies like Nokia take 9-10 months to launch a model. They are also trying to bring down their time because when you have longer turnaround time, your resources are held up for that much longer for just one model. This adds to your costs. I am able to churn out a new model in three months so my cost is low.  That is one big advantage.

How are you taking on the established players?
My forte is distribution. Before I started my own business, I was the distributor for Nokia. At the same time, I was distributing Alcatel; from 2002 to 2008 I was all-India exclusive distributor for Samsung. So, we have learned distribution from these MNCs. We know the channel requirement. Their confidence in us was already there because of my background. We could enter all the markets because I know the distributors personally in every nook and corner of the country. So, when we started our own brand we chose the best ones. While is very important, customers should also like the product. If he doesn’t like the model then nobody can force him to buy it.

Do you offer incentives to channel to push your brand?
In fact, what we give is the least incentive that a company can give.

So, what is making distributors back your brand?
Today, I will say we have reached the stage where customers are also asking for our products. Earlier they (distributors) were pushing now the brand also has a pull. I have spent big fortunes over the last 2-3 years in building the Karbonn brand. We sponsored major events in the country and we are continuing to do that.

How much funds have you raised up till now and what are your future funding plans?
I have not raised single paisa till now. Whatever we have done is with our own reserve funds. I have already spent Rs250 crore in brand building. It is all our money. We have not borrowed any money from anyone.  Yes, we are in talks with a couple of private equity firms to raise funds.

Have you broken even?
We broke even in the first year itself.

What are you raising the funds for?
For R&D. A large part of the raised money will go for it. I am eying a design house. It’s a Korean firm. I am looking at it because I want to go for 3G, Android and 4G phones. I also want to come out with tablets. My guys are very good with 2G, which is the current market. Now 3G has come. Of course, at the moment 3G market is very, very small because the operators have not put 3G network in place so far. When they do that the devices have to be ready. Unless the device is ready these guys will not be able to launch their services.

By when will your tablets hit the market?
Tablet is my next product. Luckily, Apple is making quite a noise. We are targeting to launch Karbonn K-pad before the end of this year. We want to bring out three models - 7 inches, 9 inches and 10 inches.

What will be your distribution and pricing strategies for tablets? Will you follow the same strategy of undercutting your competitors?
We don’t undercut. Don’t say that.  Our pricing will be aggressive and I will use my own channel along with channels for consumer products and devices like computers and laptops.

What are you betting on now?
I will bet on new segments. All my products will be 3G, Android, tablets and I’m now bringing in vibrant colours. I have tied up Disney. We have just launched our Disney phones. This phone has been designed and approved by Disney. We have exclusive rights for it. We will be launching our accessories with Disney. There are two more tie-ups that will target the youth segment. I can’t give you the name.

By when do you think you will be able to overtake your bigger rivals?
They are big brands from so many years. I am very small player but yes my next target is that I must touch one million phones a month by this Diwali.  We are nearing that target. Today, we are doing about 7-lakh-plus phones every month.