The Rs 3,000-crore TTK Group, which spans 30 product categories across seven group companies, hopes the new government will accelerate growth and usher in labour reforms. The maker of consumer durables, pharmaceuticals, supplements and bio-medical devices, among other things, also expects modern retail to drive growth for it. Group chairman TT Jagannathan, in a conversation with Anand J, talks about the importance of labour relations and expansion into Europe.Excerpts

TTK Group has more than 10 manufacturing units in India. What?s the reason for having so many factories?

Indis?s labour laws are antiquated. The bigger the factory becomes and the higher the salary gets, the lower the productivity is. At the Hosur factory, I get 19 cookers per worker per day and my cost is R32,000 per worker. In Coimbatore, I pay R15,000 per month and I get 34 cookers per day per worker. The younger guys work harder. That is why we need multiple factories for the same product. I have cooker, pressure cooker and condom factories as well, and visiting all these factories makes my job harder.

Labour unrest has become increasingly common. How do

you manage?

It is not easy, but we have good industrial relations (IR) in the company. Though we would rather be concentrating on HR, we have a large IR discipline. I would like to have a younger workforce. And, unfortunately, expansion happens in new locations rather than old factories because it is more economical. This business is not rocket science. Productivity matters the most and our competitors are also selling at roughly the same price. And if you don?t have any new product for three years, you are out of the game.

Prestige has been your flagship kitchen appliance brand. Do you plan to make it a pan-India brand?

There are certain products, such as grinders, that sell largely in South India, but we have grown and are well established in the north now. The market for induction cookers is bigger in the north.

The southern market has contracted in the last two years and, that is why, it looks like we have expanded in the north, where the market grew. In the past two years, the share of Tamil Nadu in our sales has come down from 35% to 25%. If other markets hadn’t grown as they did, we would have been in big trouble. Our sales for FY14 were R1,294 crore. They were R1,359 crore the year before. At the group level, we have grown compared to the previous year, but the Prestige brand has dropped. We lost R200 crore on account of lower induction sales last fiscal.

How has retail expansion helped you improve margins?

We are doing about 100 stores a quarter and have more than 530 exclusive stores. My biggest sellers are mom-and-pop utensils outlets and not appliance outlets. We make less money ? the margin is around 1% lower ? from our own outlets. We make a profit of about 12%, pre-tax. Our sales breakup is like this: 22% from own stores, 19% from the modern format and 59% from mom-and-pop stores. Sales at mom-and-pop stores grow by 10% while at our own stores they grow by 15%.

How many new categories do you plan to enter?

We will get into many new categories. For instance, we launched a water purifier this year. With big players already in the market, we will take three years to establish the product. You can?t go too fast in too many categories. My capital to launch a product might be R10 crore, but the marketing might cost R250 crore. Most of the categories are already crowded and companies have seen success.

What about expansion in Europe and other territories?

We own the Prestige brand only in India. We need to export as we import a lot of things and make our revenue dependent on exchange rate fluctuations. But now I am using somebody else?s brand to export. I can?t afford to be in 10 markets and I want to buy a brand in Europe so I get better margins. I don’t want a factory. I don’t want a R1,000-crore brand, but I want to be in the R300-400 crore range.

How is your pharma and condom business doing?

We launched a brand called Skore, which got 9% market share in 4-5 months. Unfortunately, our competitors are Durex and Kohinoor brands, which were launched 40 years back. Our pharma business is doing very well, and it will be leading our growth for the next 10 years. Currently, we

do R200 crore annually. But the

recent controversies in the sector have affected business.