How the 146-year-old Crompton has managed to stay afloat
The company has seen a series of mergers, demergers, acquisitions and exits over its life of nearly a century and a half. Here's how the company that was founded in 1878 became a household name in the 21st century
Crompton has manufacturing plants in Gujarat (pictured here), Goa, Maharashtra and Himachal Pradesh
When Colonel REB Crompton established Crompton in 1878, little did anyone imagine that the brand would survive for 146 years to become a household name in the 21st century.
It all began in 1947, when industrialist Karamchand Thapar of the Thapar Group—known for acquiring businesses the British couldn’t sustain during World War II—took over Crompton. The family-owned business succeeded in putting India on the global map with multiple acquisitions and quick expansion.
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The consumer business—contributing more than one-fifth of Crompton Greaves’ combined revenue with products like fans, pumps, and lighting—was also supporting the B2B businesses. It found a suitor in April 2015. Private equity players Advent International and Temasek bought a 34.37 percent share of the consumer electricals business for ₹2,000 crore. Multiple promoters later, the newly formed Crompton Greaves Consumer Electricals Limited (CGCEL) was now in the hands of professionals.
The brand was losing its sheen because it had been underinvested for years. Competition was intensifying, and companies like Havells were climbing up the ladder. “Although Crompton had a strong brand image, market leadership started eroding eventually. The company built a lot of trust and equity among its channel of retailers and distributors, which remained intact. Plus, it was still profitable but needed transformation,” says Mathew Job, who joined the new board as CEO in 2015 and quit last year after serving for seven years. The new management focussed on innovation, premiumisation of the existing portfolio, adding more products, and, most importantly, cost-saving. They managed to create a strong position in the premium fan market and increase its share from 7 percent to 20 percent in four years. To catch up with the late entry in the LED segment, they sold them at affordable rates. In appliances, the focus was on water heaters and air coolers.
“During the first five years, we saved ₹1,000 crore in costs, and that helped us go from number five in terms of profitability to being the most profitable company in the industry,” adds Job. In FY16, Crompton’s consolidated revenue from operations was ₹1,868 crore, with a net profit of ₹106 crore. Eight years later, in FY24, they posted ₹7,312 crore revenue with a ₹441 crore net profit.
The Mumbai-based company operates in four key business segments: Fans, lighting, pumps, and appliances. The electric consumer durables (ECD) category, comprising fans, pumps, and appliances, accounted for 84 percent of the revenue in the first nine months of 2024, while lighting constituted 16 percent, as per Crisil analysis. Their strong distribution network and steady pace of product launches led to sustained market share across categories in the last two years, with fans at 28 percent, pumps at 18 percent, geysers at 13 percent, LED lights at 8 percent, and water coolers at 8 percent. Their manufacturing plants are located in Goa, Gujarat, Maharashtra, and Himachal Pradesh.
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In terms of performance, Crompton is definitely better than its peers, says Natasha Jain, lead research analyst, consumer durables and electricals sector, at Nirmal Bang. Recently, Jain visited 11 states to get a sense of the market on the ground, and discovered that while feedback on Crompton was positive, there’s stiff competition brewing. “Although their brand presence is good, the competitors are not lagging behind. High competitive intensity is expected to keep Crompton’s market share under check in the near-to-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 past few years, with brands establishing consumer connection and brand recall. Crompton faces tough competition from players in the organised and unorganised segments, though the price difference enjoyed by the unorganised sector has reduced since the goods and services tax came in.
“We are not competing to be the cheapest. That is not sustainable. In the past year, we have grown faster than the market, and our margin is strong despite the fact that we have continued to invest,” says investment banker-turned-MD and CEO Promeet Ghosh, who joined Crompton full-time last year after moving on from Temasek. Ghosh has been on the board since 2016.
Crompton does not have a classified promoter, and 100 percent of the shareholding is with the public after Advent and Temasek sold their shares worth ₹1,275 crore in 2019. According to analysts, not having a strong promoter is always a big issue with these companies, and they miss out on getting premium valuations like their peers do. Conversely, Ghosh sees an advantage in this and thinks the most successful companies globally and in India are ones without an identifiable promoter. They’re professionally managed and strongly governed.
After the demerger in 2015, the next big moment came in March 2022 when Crompton acquired a 75 percent stake for ₹2,076 crore in Chennai-based kitchen appliance maker Butterfly Gandhimathi Appliances. Crompton was already into kitchen appliances, but the purpose of this acquisition was to achieve its long-term goal of becoming a leading player in the segment through a complete small kitchen appliance portfolio. Last year, in March, when Crompton announced a merger with Butterfly, shareholders of the latter rejected it, leaving the entities to continue operating independently. On a larger level, it’s also struggling to make the most of this deal. Butterfly is well-established in South India but has yet to make its mark on a national level.
“We have never heard of any instance where, after buying out, the company is unable to get hold of the remaining minority stake,” says an analyst on condition of anonymity. “Butterfly’s performance is also not up to par, even after they promised such a high valuation. These things paint a poor image of the management’s calibre.”
Crompton and Butterfly have unique identities, says Ghosh, citing that the kitchen appliances market is poised to grow in the coming years and the company is focussed on developing this segment. “With 6–8 percent market share, we’re the third largest player in the kitchen appliance business. We currently don’t expect that one brand name will subsume itself in the other. There are several benefits to consumers seeing Butterfly as a part of the overall Crompton superstructure.”
Overall, the company’s focus has come back to premium products because the room for growth in the mass and affordable segment is limited. “They are taking the right steps towards developing the premium portfolio. Their stock is also doing well. The multiples have improved to the earlier levels. The demand has picked up for them on a lower base,” adds the analyst quoted earlier.
It’s not only the top line and margins that matter in business, but also the cash flows, says Ghosh. “And it’s not an accident that we have strong cash flows.” Crompton plans to keep adding more products to the portfolio in the future. “Our strong moats come from brand image, scale, and go-to market strategy. We will leverage this to enter some decent categories soon.”
