The Makeover Gamble

Xenitis stormed the Indian PC market with its sub-10k brand in
March last year. This was coupled with the Rs 10,999 variety. While a little
investigation conducted by Dataquest at Nehru Place in New Delhi did not quite yield the most satisfactory
results in terms of availability of the low cost Amar PCs, but that is a
different story and we will not go into it. That Xenitis made big news one year
back is an undebated fact. this little known Kolkata-based company also forced
the big daddy of the Indian PC market to have relook at its market strategy.

Revisiting the Past

A name that was nearly non-existent in the industry till last year, Xenitis
Infotech was established in 2000 in a small room at Salt Lake City in Kolkata,
now the hub of the throbbing IT industry in Kolkata. The next four years the
company assembled PCs under the brand name of Indus Computer that failed to make
any significant news. In 2004, Shantanu Ghosh and Tathagata Dutta, the two
founders of the company, decided to change gears and look at a brand new
strategy and positioning of their PC and the company. The outcome was the launch
of the Amar PC in May 2005. Since its launch in Kolkata as Amar PC, Xenitis has
gone national with Aamchi PC in the West, Apna PC in the North, and Namma PC in
the South.

The Xenitis office at Kolkata

Beyond the Cost Proposition

It's been nearly a year since Amar PC was launched and Xenitis is now
looking to revise its strategy for the PC business. For once, Ghosh and Dutta
wanted to rub off the low-cost image of Xenitis and go for a value-for-money
branding. Says Tathagata Dutta, managing director of Xenitis Group, "We
have around seven to eight products in our offerings, but we are only identified
with the sub-10K brand." The problem was that the entire marketing strategy
was at fault. Admits Dutta, "Our marketing strategy was planned in a rather
haphazard manner and only promoted the sub-10K and the Rs 10,990 PC
models." So now, Xenitis wants to bring the arch light on its high range PC
offerings. Says Sarkar, "We would like to move up the value and quality
chain as a PC vendor, but would like to retain our value-for-money
proposition."

Today Xenitis Infotech is larger than just a low-cost PC vendor
and that's the message, the management is keen to send out. Last December,
Xenitis launched its Celeron and Centrino-based laptop range under the Xuva tag.
Then there are servers (rack-based optimized servers, Xeon performance servers
and P4P/DCP utility servers) as well under the brand Xion.

Towards a Makeover

It was all of the above factors that drove Xenitis to embark on a huge
re-branding exercise. The re-branding exercise was named 'Mission 90' with
the objective of completing the entire exercise within a period of 90 days. In
December last year, O&M was given the task of putting together a whole new
advertising and marketing campaign to re-launch Xenitis.

The serpentine mouse, the rising laptop and the server depicting Goddess Kali are all part of the brand new advertising campaign made by O&M. The message is loud and clear: Xenitis represents anything and everything Indian

The O&M team suggested that Xenitis should start its
makeover right from scratch. The advertising campaign was created around the
concept of 'Everything about us is Indian' with inspiration drawn from
Indian folklore, religion, and mythology. The campaign cost Xenitis a whopping
Rs 1.5 crore. Says Dutta, "We wanted to retain the 'Made in India'
branding that was used, while creating the Amar PC brand and its regional
counterparts."

On the lines of the Sony World retail outlets. Xenitis Infotech
would go retail for the first time with 'Zone Xenitis'. There are plans of
81 such outlets across India. In addition, Iris Computers has been recently
appointed as the national distributor of Xenitis.

"We have around seven to eight products in our offerings, but we are only identified with the sub-10k brand." -Tathagata Dutta, managing director, Xenitis Group

"We put a lot of thought to establish the regional connect with our product" Indrajit Sarkar, country manager, Product and R&D, Xenitis Infotech, the IT arm of the Xenitis Group

Betting Big on Manufacturing

Last August, Xenitis inaugurated its component manufacturing plant at
Sugandha in the Hoogly district of West Bengal. The manufacturing plant is the
first-of-its-kind in India. The inauguration saw the culmination of big names
such as Dayanidhi Maran, the Union Minister for IT & Telecommunications, the
West Bengal chief minister Buddhadeb Bhattacharya, and the state's IT minister
Manab Mukherjee. Built in joint collaboration between Xenitis Group and Unitek
Company of China, the plant is spread over 1,40,000 sq ft of production area.

Ghosh, Dutta, and team want the factory to be the hub for
manufacturing computer cases, keyboard, mouse, power supply, speakers, and home
theatres. The total investment for the project is planned at Rs 200 crore to be
implemented in a phased manner over a period of one year. Says Sarkar, "We
see ourselves as a matured OEM supplier in future," adds Dutta.

Most vendors import components from China and there have been no
component manufacturing in India in the last 10-15 years. Take the example of
casings. The average freight charge is around $1100. In addition to the cost of
the case imported, an OEM has to also take into account the transit time, which
is roughly around four weeks as well as keep a buffer of a week. This implies
maintaining an inventory on a regular basis. Just maintaining an inventory of
cases, which on an average works out to be anything between 40,000-50,000 units
for a player such as HCL Infosystems implies huge capital blockage.
Manufacturing these cases in India (at Hoogly) would bring down the transit time
including the buffer to around a week. There is one disadvantage and that is
production cost. Says Sarkar, "Initially we were comparing production cost
with China, which was working out to be far higher. The solution to the problem
came from out target customers." Even at a higher production cost, the
overall costing was working out to be far lower. The result is that the OEMs do
not mind the extra production cost. The only challenge at present is the skill
set, where India lags considerably when compared to China. Dutta, however, sees
this differential to gradually erode over the next couple of years.

The Xenitis component manufacturing facility at Sugandha in the Hoogly district of Bengal has a current production capacity of 20,000 units a month, but has the potential to take this up to 1000,000 a month

The current production is at about 20,000 cases per month, is
only in the starting phase. The plant would be moving into full commercial
production of about 100,000 cases per month by the end of the next two quarters.
Xenitis is also eyeing the Middle East markets for its components and
participated at Gitex, which the largest IT exhibition in the Gulf region held
in Dubai, this year. A monitor factory is also in the pipeline and is currently
at the project stage.

On a Diversification Spree

If Xenitis Infotech has gone head on for a makeover, Xenitis Group has also
looked at newer pastures for growth. What is extremely interesting is the
strategy that the group has taken to expand and grow. Global Automobiles, the
automobile arm of the Xenitis Group, tied up with Guangzhou Motors, China to set
up a two-wheeler manufacturing factory in West Bengal, where Guangzhou Motors
will provide Global Automobiles with technical support for setting up of
assembly line, production process, and service network for Indian customers and
assist the Indian counterpart in product strategy of control, marketing, and
selling. Xenitis Group has also launched its 24-hour Bengali news channel
recently.

A study by KPMG commissioned by Xenitis Group had identified
automobile and regional electronic media as two of the biggest sectors for
growth. Automobile for example, is a high volume market and even a 5% market
share means huge revenue. Similarly, there are 11 crore audience that were
waiting to be tapped and only a single player in the Bengali electronic media-the
Star and ABP combine Star Ananda, when Kolkata TV was being planned. In the next
couple of years, Dutta expects the Infotech arm to contribute around 35% to the
overall revenue of the group.

Xenitis Group has also announced an IPO towards the end of this
year for Xenitis Infotech.

It's exciting times, no doubt, for Xenitis. While the PC
business has bagged some significant corporate bookings in the last couple of
months. Export opportunities in PCs are coming from Bangladesh, Nepal, and
Africa. Topline at the close of last fiscal was around Rs 513 crore for Xenitis
Infotech and should close at around Rs 600 crore in the current fiscal. The
automobile venture and Kolkata TV forms the icing on the cake.

There's one concern, nevertheless. Xenitis has too many eggs
in its basket and every egg is a whole new ballgame altogether.

-Bhaswati
Chakravorty