WeP targets growth through the manufacturing route

WeP Peripherals has successfully transformed itself from a products company to one with a focus on product-related services. Akhtar Pasha finds that WeP is counting on manufacturing networking and communications products to drive growth

Ram Agarwal says WeP has definite plans of going public in 2004-05, after becoming a Rs 100 crore manufacturing enterprise

WeP Peripherals, formerly known as Wipro ePeripherals when it commenced operations in 1986 as the peripherals division of the Wipro Group, is a leading IT peripherals manufacturer offering products, solutions and services. Since the group was focusing primarily on systems integration and software solutions, sales of printers contributed only a small part of Wipro’s earnings. In September 2000, Wipro spun off its peripherals division and WeP became an independent corporate entity.

During this period, WeP faced market pressures due to the economic downturn. The IT hardware industry was going through its worst period with decelerating growth and increased pressure on margins. To meet this challenge the company wanted to make a speedy realignment. Ram Agarwal, managing director & CEO, WeP Peripherals says, "After the separation from the Wipro Group we saw a possibility of growing the product business and transforming WeP into a profitable manufacturing organisation by adding value to our existing offerings and expanding into new business areas."

Initial challenges

Finding its place in the market was a difficult task for WeP. There were three areas of concern in 2000-01. WeP’s impact printer business, including dot matrix printers (DMP) and line matrix printers (LMP), contributed 86 percent of its revenues (Rs 28.5 crore), but it was not profitable. The remaining 14 percent (Rs 4.7 crore) came from non-impact printers—laser and inkjet printers. Secondly, the company wanted to increase its revenues from the non-impact printer business and add new product lines and services to its offerings to improve profitability and add customers. Lastly, WeP had to establish its brand in the market.

Strategic areas of growth

WeP identified five strategic areas and new products that would provide exponential growth through the manufacturing route. The areas included after-market (manufacturing printer heads and ribbons), storage, networking and communication products, including NICs (Network Interface Cards), modems and switches, print and save services, and DMP and UPS exports. Power conditioning (UPS) products and laser printers were the new products. (See business transformation chart).

Quick and proactive transformation and realignment of its business helped WeP expand value delivery. During difficult times, the company grew faster than the rest of the industry at 16 percent per annum. Its revenues grew from Rs 33.2 crore in 2000-01 to Rs 38.7 in 2001-02. WeP reported Rs 44 crore in 2002-03. It has been able to almost double its revenues from strategic areas such as UPS systems, lasers and communication products that accounted for 14.9 percent (Rs 6.5 crore) of its total revenues in 2002. After-market products contributed Rs 4.6 crore while the Print and Save services business has added another Rs 30 lakh during the same year. The remaining Rs 29 crore came from impact printers and another Rs 3.2 crore came from exports of DMPs.

Agarwal says, "Our strategy is to make WeP a valuable manufacturing enterprise and we have aggressive plans of becoming a Rs 100 crore manufacturing enterprise by 2004-05." The recent acquisition of Select Technologies has given the impetus for future growth. Select Technologies president, Byju Pillai says, "WeP was lacking in the systems integration (SI) capability required for its foray into network storage and network communication. We have an SI-oriented approach and our existing offering includes network communication products [Select markets the Ace brand of modems and switches], network security solution [Nokia Security Appliance, IDS] and network storage."

WeP has a unique educational policy where the company sponsors employees interested in higher studies, says Dependra Mathur

Organisational structure

Currently the company has 348 employees across 17 offices in India. Of these, 34 employees work in R&D, 107 in sales and marketing, 80 in engineering and production and the rest (127) are in information systems, HR and customer support. Says Mathur, "We realign and restructure employees and their roles every six to nine months to achieve business goals." He adds that WeP has a unique educational policy where the company sponsors employees interested in higher studies. For the first time in 2003, WeP will be focusing on taking diploma, BSc, BCom and BA students as it finds potential leaders and skill-sets from students with these qualifications.

From products to services

Many nationalised banks such as SBI, Bank of India, Corporation Bank and several co-operative banks use passbook printers. S Nagarjuna, general manager-Marketing at WeP Peripherals says, "We have an installed base of 20,000 passbook printers in India." In the DMP category, WeP competes with the likes of Epson and TVS-E. DMPs are widely used for applications such as billing, invoicing as well as for printing cheques and demand drafts, transactional documents, labels and barcodes. DMPs are priced in the range of Rs 6,600 to Rs 30,000 and come in 140 different variants catering to a wide range of markets—domestic and overseas. WeP’s customers for DMP products include Indian Railways, the Indian Army and enterprises such as LIC, BEL, BSNL, HLL, Asian Paints, Goodlass Nerolac Paints, and Bank of India.

LMPs are priced in the range of Rs 1.4 lakh at the entry-level printer to Rs 9 lakh for high-end models. These printers cater to the corporate segment, primarily to the banking and financial sector. WeP’s fastest Indian DMP printer, the LQ5400, can print 450 CPS (characters per second). These machines are exported to overseas markets such as Germany, France, Italy, Poland, Romania, Turkey, Sri Lanka and Bangladesh. The company plans to enter South Africa, Thailand and Malaysia in the current fiscal. Nagarjuna says, "We earned Rs 17 crore from our exports in 2002. ‘CE’ certification for our products is helping us export to Europe."

The company has started manufacturing 600 VA UPSs that can be used to provide backup power to two PCs with 19-inch monitors; these are priced at Rs 4,200 for Indian buyers. Nagarjuna adds that WeP has had inquires from the overseas market for this product mainly from the SAARC region.

Services

WeP’s ‘Print and Save’ service is based on the pay-as-you-use concept. It helps customers do their printing without actually owning laser printers. End-customers are freed of the burden of maintaining printers and protected from technology obsolescence. WeP started this service in three cities—Bangalore, Mumbai and Chennai on an experimental basis in August 2002. It has expanded the reach of its services business to five more locations, namely Delhi, Ahmedabad, Pune and Kolkata. Today WeP caters to over 300 customers and has an installed base of 650 laser printers. IDBI and ICICI bank and manufacturing companies such as Coats India, Arvind Mills, Eureka Forbes, Wipro Fluid Power, St Marks Hotel and Gokuldas Images are WeP customers using Print and Save. Raghavendra Prakash S, chief marketing officer for WeP Smart at WeP Peripherals says, "The services business is expected to contribute Rs 8 to 10 crore by the end of fiscal 2004-05."

According to S Nagarjuna, WeP earned Rs 17 crore from exports in 2002

Future plans

WeP plans to manufacture a range of networking and communications products such as Network Interface Cards (NICs), internal and external modems. Pillai of Select says, "We are planning to manufacture 1,20,000 internal modems, 15,000 external modems and 1,20,000 NICs at our Mysore plant by December 2003. We have aggressively priced our products to compete with D-Link and Dax." WeP’s internal and external modems are priced at Rs 550 and Rs 2,100 respectively while its NICs are priced at Rs 400. It’s target segment will be SOHO and SMEs, the products will be sold through a two-tier distribution model and through OEMs. WeP has formed OEM alliances with Zenith and Wipro to supply modems and NICs. The company is in talks with other MNC OEMs for similar alliances.

WeP plans to start manufacturing switches that will be priced at Rs 2,500 for an 8-port switch going up to Rs 12,000 for a 24-port switch. Again these will be in production by December 2003. WeP intends to manufacture mid-range NAS boxes with a 1 TB capacity. Pillai says, "We are in talks to acquire technology to manufacture NAS boxes and a final decision will be taken on this by Q3 2003-04." Currently WeP distributes Network Appliance, Exabyte, Qualstar, Legato and TapeWare storage solutions.

IPO

The company postponed its Initial Public Offering (IPO) originally slated for December 2002. Agarwal says, "Though we had announced our IPO plans last year, we had to hold it because the market conditions were not favourable. We have definite plans of going public in 2004-05 after achieving our Rs 100 crore milestone. The fund raised by the IPO will help create liquidity for our shareholders, increase our market capitalisation and help us in our acquisition plans—we want to make one acquisition per year."

Product revenue breakup in Rs crore