BPL Ltd has struck a deal giving the rights to use brand BPL, across seven categories in consumer electrnonics and durables including colour televisions, to Bangalore-based Reach Distributors India Pvt Ltd in return for royalty payment.

The five-year arrangement, running until FY14, is part of BPL's strategy to look beyond its traditional business, and focus its resources on three future markets identified in healthcare, energy and smart homes - a strategy put in place months ago to reinvent itself.

BPL, which once ruled India's fragmented colour television industry with over 25% market share, lost leadership to the rampaging chaebols like LG and Samsung who dominate the market currently.

Interestingly, Reach India's promoter group is headed by Ricky Gosain, who was a senior executive with BPL in the past. Sources directly familiar with the development said, the start-up distribution house would take BPL to the semi-urban and rural markets initially, and would tap the urban centres only after building a critical size.

Reach would be positioning BPL at a price between Videocon and LG, and could target revenue of Rs 200-300 crore by FY14, sources added. It would be sourcing products from vendors both in India as well as China.

BPL Chairman & Managing Director Ajit Nambiar's office sought more time to respond to an email sent on Thursday last week. However, a senior official involved in the royalty deal with Reach confirmed the development.

The share prices of BPL Ltd closed at Rs 35.40 today, down by nearly 1%.

It is not clear who are the other shareholders of Reach India, and if any member of the TPG Nambiar family, which controls BPL, are shareholders in their personal capacity. One source said, Reach was fully funded for the time being, but could explore growth capital   fundraising next year.

The development, sources said, stemmed from BPL's decision not to play in the mainstream consumer durables market directly. BPL is in the midst of creating a new brand identity - 'Happier Living Everyday' - in healthcare, energy and smart home sectors. BPL promoters have stayed away from investing behind the consumer electronics business since its equal joint venture with Japan's Sanyo Electric wound up.

In 2006, Sanyo was saved from bankruptcy by Goldman sachs, Daiwa Securities and Sumitomo Mitsui which went on to control 70% stake in the Japanese conglomerate. After protracted discussions, a bigger rival Panasonic decided to acquire Sanyo, a process which was completed in July this year.

Reach would be hoping to leverage on BPL's residual brand equity, especially in the southern markets. BPL was the leading brand in colour television besides having respectable market shares in refrigerator and washing machines through the 90s. However, playing in the cut throat consumer electronics and durables space require strong cash flows and equity backing, especially when placing a bet on the latent equity of a yesteryear brand.

The total size of consumer durables and electronic industry is around Rs 30,000 crore, according to  Consumer Electronics and Appliances Manufacturers Association (CEAMA), and the consumer durables market is growing at 30%. More than a majority of the market continues to be dominated by South Korean and Japanese players like LG, Samsung, Sony and Panasonic.

The Indian presence in the market is flagged by Videocon and Onida, which once challenged BPL. Rising income levels, double-income families, increasing consumer awareness and penetration into the rural markets are helping this sector grow.

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