How 146-year-old Crompton managed to stay afloat

Crompton has manufacturing plants in Gujarat (pictured), Goa, Maharashtra and Himachal Pradesh

INWhen Colonel REB Crompton founded Crompton in 1878, few people would have guessed that the brand would survive 146 years and become a household name in the 21st century.

It all began in 1947, when industrialist Karamchand Thapar of the Thapar Group—known for taking over businesses that the British could not sustain during World War II—took over Crompton. The family business became a success, putting India on the world map with numerous acquisitions and rapid expansion.

But things started going downhill after 2013. With most new acquisitions being financed through debt, the capital-intensive businesses began to decline, with borrowings rising to ₹7,500 crore by March 2014. The company soon found itself on the brink of bankruptcy under third-generation Gautam Thapar. He put Crompton Greaves up for sale to settle mounting debts and spun off its consumer electrical, power and industrial solutions businesses.

The consumer business — which accounts for more than a fifth of Crompton Greaves’ total revenues through products such as fans, pumps and lighting — also supported the B2B businesses. It found a buyer in April 2015 when private equity investors Advent International and Temasek bought a 34.37 per cent stake in the consumer electronics business for ₹2,000 crore. After a series of promoters, the newly formed Crompton Greaves Consumer Electricals Limited (CGCEL) was in the hands of professionals.

The brand was losing its shine as it had been under-invested for years. Competition was growing, and companies like Havells were climbing the ranks. “Although Crompton had a strong brand image, its market leadership eventually began to erode. It had built a lot of trust and equity with its retailers and distributors, which remained intact. It was also still profitable, but it needed a makeover,” says Mathew Job, who joined the new board as CEO in 2015 and left last year after seven years in the job.

The new management focused on innovation, premiumizing the existing portfolio, adding more products and, most importantly, saving costs. They managed to establish a strong position in the premium fan market and increased its share from 7 to 20 percent in four years. To catch up in the LED segment, they sold them at affordable prices. In the case of household appliances, the focus was on water heaters and air coolers.

“In the first five years, we saved ₹1,000 crore in costs, which helped us go from being the fifth most profitable company in the industry to being the most profitable company in the industry,” Job adds. In FY16, Crompton’s consolidated revenue from operations was ₹1,868 crore and net profit ₹106 crore. Eight years later, in FY24, they reported revenue of ₹7,312 crore with net profit ₹441 crore.

The Mumbai-headquartered company operates across four core business segments: fans, lighting, pumps and appliances. The electrical consumer durables (ECD) category, which includes fans, pumps and appliances, accounted for 84 per cent of revenue in the first nine months of 2024, while lighting accounted for 16 per cent, as per Crisil analysis. Their strong distribution network and steady pace of product launches have led to them maintaining market share across all categories over the last two years, with fans at 28 per cent, pumps at 18 per cent, geysers at 13 per cent, LED lighting at 8 per cent and water coolers at 8 per cent. Their manufacturing plants are located in Goa, Gujarat, Maharashtra and Himachal Pradesh.

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When it comes to performance, Crompton clearly outperforms its competitors, says Natasha Jain, Principal Research Analyst, Consumer Durables and Electricals, Nirmal Bang. Jain recently visited 11 states to get a feel for the market and found that while the feedback about Crompton was positive, there was stiff competition brewing. “While their brand presence is good, competitors are not far behind. The high level of competition is expected to keep Crompton’s market share in check in the short and medium term.”

Crompton maintains a leading position in the domestic fans and residential pumps segments. It is the fourth largest lighting company in India. Competition in the consumer durables sector has intensified over the last few years, with brands establishing a rapport with consumers and brand recall. Crompton faces stiff competition from players in both organised and unorganised segments, although the price gap in the unorganised sector has narrowed since the introduction of the Goods and Services Tax.

“We don’t compete to be the cheapest. That’s not sustainable. We grew faster than the market last year, and our margins are high, even though we’re still investing,” says Promeet Ghosh, an investment banker turned managing director and CEO who joined Crompton full-time last year after leaving Temasek. Ghosh has been on the board since 2016.

Crompton does not have a secret promoter and 100 per cent of the shares are in the hands of the public after Advent and Temasek sold their shares worth ₹1,275 crore in 2019. According to analysts, the lack of a strong promoter is always a big problem for these companies and they miss out on the opportunity to command premium valuations like their competitors. On the other hand, Ghosh sees an advantage in this and believes that the most successful companies globally and in India are those that do not have an identifiable promoter. They are professionally managed and heavily regulated.

After the 2015 demerger, the next big thing came in March 2022 when Crompton acquired a 75 per cent stake for ₹2,076 crore in Chennai-based home appliance maker Butterfly Gandhimathi Appliances. Crompton already had a presence in home appliances, but the acquisition was aimed at achieving its long-term goal of becoming a leading player in the segment with a complete portfolio of small kitchen appliances. Last year in March, when Crompton announced its merger with Butterfly, the latter’s shareholders rejected it, leaving the entities free to continue operating independently. On a larger scale, the company is also struggling to make the most of the deal. Butterfly is well-known in South India, but is yet to make a mark on the national stage.

“We’ve never heard of a case where a company couldn’t take the remaining minority stake after a buyout,” says an analyst on condition of anonymity. “Butterfly’s results haven’t been up to par, even after promising such a high valuation. These things paint a bad picture of the caliber of management.”

Crompton and Butterfly have unique identities, says Ghosh, citing that the kitchen appliance market is poised for growth in the coming years and the company is focused on growing this segment. “With a market share of 6-8 per cent, we are the third largest player in the kitchen appliance space. Right now, we don’t expect one brand to swallow the other. There are several benefits for consumers who see Butterfly as part of the overall Crompton structure.”

Overall, the company has focused on premium products as there is limited room for growth in the mass and affordable segment. “They are taking the right steps to grow their premium portfolio. Their stock is also doing well. Multiples have improved to earlier levels. Demand has picked up on a lower base,” the analyst quoted earlier added.

In business, it’s not just about top line and margins, but also about cash flow, says Ghosh. “And it’s no coincidence that we have strong cash flow.” Crompton plans to add more products to the portfolio in the future. “Our strong moats come from brand image, scale and go-to-market strategy. We’ll leverage that to enter some decent categories soon.”