Business

Samsung India’s profit declines sharply even as revenue touches $10 billion

Samsung’s business across product categories has seen a dramatic decline in China in recent years. Having learned a few lessons, the company has been cautious not to let a similar debacle happen in India so far. It has been aggressively fighting Chinese rivals on many fronts to retain its dominance in the vast Indian market.

Despite its best efforts, Samsung’s performance in India appears to be a mixed bag going by the latest regulatory filings made by the company. According to these official documents, Samsung India’s net profit declined by a whopping 58% to Rs 1,540.5 crore in 2018-19. Last year, the company posted a net profit of Rs 3,712.8 crore in the country.

On the bright side, Samsung India’s total revenue went up by 20% from Rs 61,065.6 in FY18 to Rs 73,085.9 crore in 2018-19, making it a $10 billion firm. Revenue from operations rose to Rs 70,627.7 crore, up 19% from Rs 59,370.9 crore posted in the previous fiscal. The company’s total expenses have also gone up from Rs 55,283.8 crore to Rs 70,227.8 crore during the same period.

Mobile phones account for 60% of the revenue

It’s not difficult to understand why Samsung India’s profit tanked even as the total revenue touched $10 billion. More than 60% (Rs 43,087.98 crore) of its revenue from operations came from mobile phones, a category where the company has been sacrificing profit margins to fight low-cost Chinese competitors like Xiaomi, OnePlus, Realme, etc.

Naturally, the company has made less profit despite posting higher revenue. Making things worse, Samsung’s strategy hasn’t been very effective in containing the growth of Chinese brands in India. Many of them have managed to make a dent in the Indian smartphone market and continue to post impressive growth numbers. Xiaomi, in particular, has seen a meteoric rise and emerged as the largest smartphone vendor in the country, dethroning Samsung.

Samsung India’s revenue from the audio-visual category in FY19 stood at 5,015.7 crore, while home appliances accounted for Rs 7,408.2 crore during the same period. These product categories don’t suffer the same level of competition as mobile phones, allowing Samsung relatively more freedom to charge higher prices and improve profitability.

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