Thakral aims to double China network

It wants to increase number of retailers to 8,000-10,000 in 3-4 years

By Angela Tan
Apr 26, 2005
The Business Times

THAKRAL Corp, which generates about 85 per cent of its business from China, aims to more than double its distribution network of 4,200 retailers in the mainland to 10,000 in three to four years, said group managing director Inderbethal Singh Thakral.

Hong Kong-based, Cantonese-speaking Mr Singh, who spent almost three decades with his family-founded high-end consumer electronics distribution group, told BT in Singapore that he is optimistic about the prospects in the mainland following China's entry into the World Trade Organization (WTO).

'Our target is to build the network to 8,000-10,000 in three to four years in China. That will bring us to the optimal level,' Mr Singh said.

'China's entry into the WTO will result in lower tariffs and more sectors opening up in the retail sector. This means more business opportunities as we'll be able to bring in more goods and sell more to retailers,' he explained.

As for the likelihood of a yuan revaluation, Mr Singh believes this spells a stronger yuan which in turn would result in cheaper imports into China - another bonus for the company which also sells home entertainment software and provides contract manufacturing.

He assures investors that Thakral, which was hard-hit in 1999 following a shocking $220 million loss that was then largely blamed on over-hedging against the yen, no longer has such forex exposures.

'Thakral has cleaned up and by June-July 05, will refresh ourselves completely to position ourselves for the future,' he said, adding that the right team has been set up, value-added services added and non-value-added products discontinued.

In fact, Thakral will complete the shift of its operational headquarters from Hong Kong to Shanghai by mid-year to be nearer its core customers and react faster to their demand.

'Three-four years ago, we saw the need to evolve ourselves from a Hong Kong-based distributor to become a global supply chain and brand building specialist,' he said.

'Just being a distributor, buying goods and putting them in your warehouse and selling them, is no longer seen as the flavour...There is a trend where suppliers are going straight to retailers.'

This shift in business strategy proved to be right when the company clinched exclusive distribution rights to Creative Zen in Hong Kong, and Apple's iPod in China, India and Vietnam.

On its loss-making contract manufacturing services, Mr Singh insists that it is a crucial part of Thakral's value chain and there are no plans to hive it off.

'We expect it to break even by next year. Contract manufacturing is important in helping us spot the trend before others jump into it. As a manufacturer, you can see three years ahead. This is not the case as a distributor,' he said.

As for the home entertainment unit, which remains hostage to piracy, Mr Singh plans to merge this into Thakral China, its new China HQ.

Asked about the group's declining margins, management appears to have adopted a 'realistic' stance and is prepared to sacrifice some margins for market share.

Thakral, which sold a 15 per cent stake to property and hotel tycoon Kwek Leng Beng's New York-listed China Yuchai International Limited in February for $30.9 million, is also seriously eyeing expansion in Indochina and Asean.

'Acquisition is not out of the question to accelerate growth into these areas,' Mr Singh said.

What does he hope the China Yuchai partnership will bring?

'I am hoping to be the main supplier of LCD panels and plasma TVs to all their related hotels,' Mr Singh quipped.

Thakral shares last traded at 11.5 cents each.