Japanese air conditioner major, Fujitsu General, is holding negotiations with the $1.3 billion ETA Ascon group for an equity stake in ETA General Private Ltd, Chennai. This is confirmed by Mr. Tsuguo Yagi, president, Fujitsu General, who says that negotiations are on with the ETA Ascon group in this regard.

The ETA Ascon group has its major operations in the Middle East, where it is involved in a range of businesses like family entertainment centres, retailing, jewllery, real estate, electronics and construction. It also has a joint venture with Mitsubishi Electric to sell elevators in the Middle East.

In India the group has interests in electrical contracting, real estate development, automobile dealerships and education. It has several engineering and polytechnic colleges under its fold and is planning to open a medical college.

ETA General, promoted by ETA Engineering Private Ltd, Chennai, manufactures the famed O General brand air conditioners sourcing completely knocked down kits and technology from Fujitsu General.

It is learnt that the Indian group wishes to retain majority control in the company. However, whether the Japanese company would agree to that is doubtful, as the Indian group is dependent on Fujitsu General technology, the differentiating factor in a competitive scenario.

Mr. Yagi was here to inaugurate ETA General's Rs 30 crore, 60,000 units per annum plant in Pondicherry and formally launch the air conditioner in India. The ETA group plans to invest similar amount in the second phase and gradually scale up the capacity to 2.5 lakh per annum, in five years time.

Speaking about the localisation efforts of the company Mr. M. M. Mohuiddin, group executive director, ETA remarks, "nearly 55 per cent of the components would be localised soon."

On an aggressive note

Even before the formal launch, ETA General had already started selling its two models - window and split air conditioners - in 1.5 and 2 ton capacities on an aggressive note.

The aggressive pitch is the 5-year warranty on the compressor, which can be extended by another five years on payment of Rs 1,990. ETA General guarantees replacement of the compressor if it fails within 10 years of purchase.

According to Mr. C. R. Menon, chief executive officer, the company has already sold around 800 air conditioners by assembling the imported CKD kits. He further adds, "the organised sector in India sells around 4.5 lakh units per annum and the small scale units sell around 1.25 lakh units. The industry, since 1996, is growing at an annual rate of 20 per cent and ETA General hopes to garner a 10 per cent market share by 2002."

Interestingly for ETA General, apart from fighting other players at the market place, has to compete with grey market imports of the O General brand.

Grey market channels in India import around 40,000 O General air conditioners. But Mr. Menon is not perturbed. "We are going to establish around 400 sales and service dealers all over India. And why should a buyer go to the grey market that offers no warranty and after sales service that are available if the product is purchased from our dealers," he poses.

Mr. Menon is confident that the company's premium positioning of the product would succeed despite the availability of grey market supplies and Korean air conditioners at a cheaper price. "It is quality that counts. O General, even in extreme climes where temperatures go up to 52 degree celsius, works efficiently without giving any complaints. The brand is always positioned as a premium brand," he remarks.