Kolkata-based Xenitis Infotech will move out of the branded business and stop fresh investment in its Amar PC low-cost personal computers, which were launched with fanfare in 2005.
Xenitis will now lay stress on contract manufacturing of components and final products instead of investing in building up its own brand. Xenitis PC brands, which have different names in different parts of the country, will in the next two years contribute less than 2% to the company’s business as against 5-6% at present.
Santanu Ghosh, chairman and managing director of Xenitis group, said the company was in the hardcore IT component manufacturing business, and supplied products like cabinets, keyboards and SMPS to major Indian PC brands.
“We have taken a conscious decision to manufacture components and products for branded companies and build our business on the concept of contract manufacturing,” said Ghosh.
Xenitis, which according to Ghosh, had achieved revenues of around Rs 1000 crore in the last financial year, on Tuesday announced an additional investment of Rs 430 crore in the next six months. Part of the investment will be used for setting up a mobile handset manufacturing factory, in the existing motorcycle factory and capacity expansion of its PC component unit.
Vinnie Mehta, executive director of MAIT, the country’s hardware association, said contract manufacturing would have significant presence in the country with the increase in IT consumption.
Though according to Mehta, there was no major Indian electronic contract manufacturer that could match the size of global companies like Tyco, Molex and Flextronics, Indian companies were trying to build their own scales and niche areas. “One of the areas is design. ODMs [original design manufacturers] like OEMs are becoming an important constituent of contract manufacturing.”
Mehta believes that contract manufacturing is a thin margin and high volume business. “Unless Indian contract manufacturs have a highly efficient production process in place, the business may not be profitable.”
On Xenitis’ proposed investment of around Rs 250 crore in mobile handset manufacturing, industry sources said if that happened, it would be a decent amount for creating a mobile assembly line.
“But the flip side is that leading mobile brands always opt for contract deals for low-margin handsets. Handsets having higher margins are always manufactured by the brands themselves,” said a source.