Homegrown smartphone and wearables brand Lava is looking to increase its local value addition in smartphones by at least 4-5% every year from the current levels of 15-20%, the company’s chief manufacturing officer Sanjeev Agarwal told FE in an interaction.
The company is banking on the government’s push for localisation of electronics components with the upcoming incentive scheme focused on domestic manufacturing of components.
Lava, however, is currently evaluating whether it will go directly into components manufacturing once the new scheme is announced, or increase local sourcing of components from other players to up its domestic value addition.
“We are leading the localisation efforts. So in terms of feature phones, 35% of our BOM (bill of material) value is localised and in smartphones, 15-20% is localised,” Agarwal said.
“On smartphones, because earlier our volumes were smaller, we were not able to do more localisation. But as our volumes are growing, we will definitely work on increasing localisation,” Agarwal said, adding that the company’s focus has been on the finished product manufacturing, and it will decide on components manufacturing only if that adds value.
Currently, cost of raw materials and components consumed is at Rs 1,780 crore, which is 50% of Lava’s revenue at from operations of Rs 3,646 crore, as of FY24. The company’s import bill or CIF (Cost, Insurance, and Freight) value stood at Rs 1,311 crore in FY24, compared to Rs 1,236 crore in FY23.
Similarly, the company exported mobile phones worth Rs 52 crore in FY24, according to its free on board (FOB) value of exports. In FY23, the same was at Rs 41.5 crore.
“We see a lot of opportunity in doing exports from India. Localisation will also help us in increasing our exports,” Agarwal said, adding that there is no plan to spin off the manufacturing unit into a separate entity.
Lava is also planning to export its products to African countries in the current financial year.
The company is also a participant in the production-linked incentive (PLI) scheme for smartphones, but has not been able to claim any incentives so far. One of the reasons, for the same, according to Lava, is that the targets for PLI are higher than its rate of growth.
When asked if smartphone PLI is a missed opportunity for Lava, Agarwal said, “As of now, it is like that only for us. If we are able to attract some contract manufacturing, then definitely, there is still a possibility to achieve PLI incentives for the remaining years.”
The company has been trying to get success in the electronics manufacturing services (EMS) play but has not been able to close any major deals from global smartphone makers. One of the concerns of smartphone makers of not going ahead with companies like Lava, to get their phones manufactured at their facilities, is that Lava itself is a competition to those smartphone brands.
At present, Lava does designing and manufacturing for Motorola feature phones and manufactures around 200,000 units of such phones per month.
With regards to the production of its own devices, the firm manufactures around 1.5 million feature phones, 200,000 smartphones, and 100,000 wearables and audio products per month.
The manufacturing facility is currently operating at a 60-70% capacity. The company is exporting about 10-15% of the products manufactured.
On the market share target, Agarwal said the company is aiming to achieve a market share of 5% by FY26, up from the existing 2%. Lava will continue to focus on the below Rs 30,000 smartphone segment and is not looking to launch phones in the premium segment at the moment, and it will follow a step-by-step approach on that, he added.
