Reign and decline of HMT limited watches

Introduction:
HMT Limited, short for Hindustan Machine Tools Limited, was established in 1953 in
Bangalore, India, as a state-owned enterprise under the Ministry of Defence. Initially focused
on manufacturing machine tools, HMT quickly diversified into the field of horology. In 1961,
HMT commenced the production of watches, marking a significant milestone in the
company's history.

HMT watches
HMT Limited, a pioneer in watch manufacturing in India since 1961, has a rich history of
producing iconic timepieces that blend quality, reliability, and affordability. The brand offers
a diverse range of watches, each representing a true masterpiece in its class. From
Mechanical Hand wound to Automatic, Quartz, Braille, Skeleton, and Pocket Watches, HMT
timepieces are known for their precision metallic components that ensure accurate
timekeeping and trouble-free performance lasting a lifetime.

The watches from HMT come in a wide range of attractive designs, catering to various tastes
and preferences. They are an exquisite blend of form and function, combining style with
substance to offer customers a perfect balance of elegance and functionality. HMT watches
have been a symbol of national pride and have garnered a loyal following both in India and
internationally. Despite facing challenges in recent years, HMT Limited has made efforts to
revive its presence in the market, continuing its legacy of producing watches that are not just
timepieces but also reflections of craftsmanship, heritage, and innovation.
HMT Limited watches have been known for their unique and diverse range of models, each
with its distinct features and characteristics. Here are some of the notable models:

1. HMT Janata: Known for its simplicity and reliability, the HMT Janata was popular for its
ability to withstand tough conditions while maintaining accurate timekeeping.

2. HMT Pilot: A rugged model favoured by pilots and the military for its durability and
reliable timekeeping in demanding environments.

3. HMT Rajat: Noted for its elegant and classic design, the HMT Rajat was a sought-after
accessory for social events and formal occasions.

4. MT Jawan: Affordable and reliable, the HMT Jawan was a popular choice among young
people and students for its dependable timekeeping.

5. HMT Kohinoor: This model was known for its luxurious and sophisticated design, often
featuring intricate details and craftsmanship.

6. HMT Avinash: This model was popular for its robust and budget-friendly features, making
it accessible to a wide range of consumers.

7. HMT Sport star: Designed for athletes and sports enthusiasts, the HMT Sport star was
known for its durability and water resistance.

8. HMT Kaushal: This model was popular for its sleek and modern design, often featuring
advanced features such as chronographs and date displays.

9. HMT Pocket Watches: These compact timepieces were designed for everyday wear and
were known for their portability and reliability.

10. HMT Leo: This model was popular for its unique and stylish design, often featuring bold
colors and patterns.
News says that HMT limited watches have closed because of
In 1961 a watch-making powerhouse was born in India. That year, Hindustan Machine Tools
(HMT), barely eight years into its business of making machine tools for India’s fledgling
manufacturing sector, tied up with Citizen Watch Company of Japan to set up the country’s
first wristwatch manufacturing enterprise in Bangalore. It turned into a hugely successful
enterprise. The company’s first watch, named Janata, was launched by none other than the
Prime Minister Jawaharlal Nehru.
The demand for watches exploded in the newly independent nation and before long the
Bangalore plant’s capacity ran out, leading to the setting up of multiple new factories across
the country. HMT made the basic hand-wound mechanical watches for the first few decades,
though later automatic watches followed. Through the first four decades of independence
HMT with its apt slogan “Timekeepers to the Nation”, was synonymous with watches, at
times accounting for 90 percent of their sales in the country. It had a few competitors like
Time star, Allwyn, and some imports, but together they added up to less than 10 percent.

In consonance with the spirit of the times the watches were given easily relatable names like
Janata, Tarun, Nutan, Priya, Nishat, and Kohinoor. As features like display of date and day
were added, its watches entered newer market segments and on the eve of liberalization,
HMT was producing nearly seven million watches a year.

But by then the company had begun to lose touch with the demands of a new generation
which was looking for something more from watches than just the ability to keep time.

Enter Titan in 1987 as a joint venture between the Tata Group, and the Tamil Nadu Industrial
Development Corporation (TIDCO). Initially, it didn’t make much of a dent in HMT’s
market share but it correctly estimated the growing demand for quartz watches and started
manufacturing them.

Ironically, at that point, HMT had already been selling quartz watches for over five years but
with initial sales low, partly because of their higher prices, it decided not to push them. But
the world outside India was rapidly adopting quartz technologies and it was just a matter of
time before they became the predominant watch model in India. That happened by 1985-86
as the government also eased import restrictions on the parts needed for quartz watches. It
was the beginning of the end for HMT and the beginning of Titan’s ascendancy.
By this time, HMT’s non-quartz watches too seemed decidedly outdated. The company
hadn’t paid any attention to design and in the new era where a host of international brands
were available to Indians, that was a huge drawback.

By the middle of the 1990s with its market share eroding, the watch business had turned loss
maker for HMT though it continued to struggle for years before it was brought to a merciful
close in 2016 when the government shut down the last plant. By then its accumulated losses
had mounted to Rs 2500 crore.

Ironically, in its afterlife, HMT watches have built a devout following, with clubs and interest
groups on social media where collectors keep looking for older models.
—Sundeep Khanna is a former editor and the co-author of the recently released Azim Premji:
The Man beyond the Billions. Views are personal.
Marketing:
HMT Limited (Company) was incorporated in 1953 to produce machine tools and later it
diversified its activities into the production of watches, lamps, tractors, printing machines, die
casting, dairy machinery, presses and press brakes, plastic injection moulding machines,
homological machinery, food processing machinery and miniature battery for watches. There
was sporadic improvement in the performance of the Company up to 1991-92. The Company,
however, started incurring losses in 1992-93 due to a new industrial policy that aimed at
ushering in a freer economy and welcoming the flow of foreign capital. After taking into
account economic and technological changes and the competition emerging in different
businesses, the Company contemplated a substantial infusion of funds into modernization and
expansion. However, during the early nineties, these efforts did not succeed and the
Committee on Public Undertakings (COPU) directed the Company (October 1996) to keep all
piecemeal proposals in abeyance and submit an overall revival plan for the approval of the
Government. The first comprehensive revival plan was submitted to the Government in June
1998 and the Government of India (GOI) finally approved a Turnaround Plan (TAP) in
August 2000. The Company entered into a Memorandum of Understanding (MOU) with GOI
in August 2000 to implement the TAP. Meanwhile, its loss increased more than tenfold from
Rs.23.94 crore during 1997-98 (before submission of revival plan) to Rs.296.91 crore during
1999-2000 and the accumulated losses went up to Rs.436.51 crore in 1999- 2000 and its net
worth turned negative. 11.1.2 In the MOU, GOI agreed to provide ‘One time, Last time’
support to the Company and in return the Company unequivocally undertook not to seek
further financial support. The MOU broadly envisaged (i) conversion of Machine Tools, 107
Report No.4 of 2005 (PSUs) Watches and Tractor Business groups into subsidiaries for
eventual disinvestment, (ii) closure of five unviable units, (iii) revival of 10 units, (iv)
Voluntary Retirement Scheme (VRS) to reduce surplus manpower (v) GOI guarantee to raise
bonds for making VRS payments and to meet working capital requirements (vi) conversion
of loan into equity and waiver of interest thereon and (vii) infusion of funds in the form of
equity from GOI to settle statutory dues and dues to financial institutions. These measures
envisaged in TAP were to be implemented during the period 2000-01 to 2004-05. A scheme
of arrangement (Scheme) was approved by GOI (March 2001) envisaging the transfer of
assets and liabilities of the Company to its newly formed subsidiaries. 11.2 Scope the
projections made in the TAP, its implementation as per the MOU signed with the GOI, and
the actual performance of the Company and its newly formed subsidiaries during the years
2000-01 to 2003-04 were reviewed in Audit, and resultant observations are included in
succeeding paragraphs. 11.3 Conversion of Business Groups into Subsidiaries 11.3.1 As
envisaged in the TAP, Machine Tool and Watch Business groups and Tractor Division were
converted into four subsidiaries viz. HMT Machine Tools Limited (August 1999), HMT
Watches Limited (August 1999), HMT Chinar Watches Limited (May 2001) and HMT
Tractors Limited (November 1999). As specified in the Scheme, the Company transferred the
assets and liabilities of the units of Machine Tool and Watch Business groups to the
concerned subsidiaries effective from 1 April 2000. However, the Company did not transfer
the Tractor business to HMT Tractors Limited as per the Scheme and applied for closure
(November 2003) of the subsidiary (HMT Tractors Limited), being a non-functioning
company. The Management stated (July 2004) that because of the delay in the disinvestment
process, this subsidiary remained defunct and to avoid additional investment without any
consequential benefits it was decided to close the subsidiary. 11.3.2 Under the Scheme,
certain lands and buildings of the Company located in Bangalore were allocated to HMT
Machine Tools Limited and HMT Watches Limited. Their value was appearing in the books
of these subsidiaries. The sale of some of these assets yielded profits of Rs.15.41 crore and
Rs.37.12 crore during the years 2002-03 and 2003-04 respectively which was retained by the
Company in its books instead of transferring the same to the subsidiaries, which was a clear
violation of the Scheme. The Management stated (July 2004) that it was a considered
decision to record the profits and cash flow from such disposal in the books of the Company
to meet the pressing commitments on account of overdue liabilities and to retain the
profitability of the Company. The action of the Company vitiated the financial performance
of the subsidiaries as they were deprived of funds required for their operations. 11.4
Disinvestment 11.4.1 as per the TAP, the Company was to disinvest up to 74 percent of its
equity in all its new subsidiaries, generating a profit of Rs.180 crore during the year 2001-02.
In 108 Report No.4 of 2005 (PSUs) addition, Computer Numerical Control (CNC) Systems
Division, the profit-making division under HMT Machine Tools Limited, was to be hived off
and Rs.50 crore was projected as income during the year 2001-02. The sale proceeds from
disinvestment were to be used for liquidating bonds issued for working capital requirement,
VRS, up gradation of technology, and capital availability. Expressions of Interest (EOI) were
invited (July 2002) from interested parties for all subsidiaries except HMT Tractors Limited.
No EOI was received for HMT Machine Tools Limited. EOIs received (August 2002) in
respect of the other two companies, viz., HMT Watches Limited and HMT Chinar Watches
Limited were vetted and forwarded to the Ministry for clearance during April 2003. The
valuer appointed (April 2004) for the valuation of assets of HMT Watches Limited submitted
a report on valuation for disinvestment purposes in June 2004. Action to hive off the CNC
Systems Division was yet to be taken (July 2004). 11.4.2 The Management stated (July 2004)
that the delay in disinvestment could not be attributed to the Company as the action taken by
the Company regarding the disinvestment was as per the directives of the Inter-Ministerial
Group appointed by the Government. They further stated that efforts initiated for locating a
joint venture partner for the CNC Systems Division were not successful. It added (November
2004) that there was no further progress in disinvestment and a policy decision was awaited
from the Government. The fact, however, remains that the delay in disinvestment of the
subsidiaries and CNC Division deprived the Company of profits as envisaged under the TAP.
11.5 Closure of unviable units/ Revival of loss-making units 11.5.1 The TAP envisaged
closure of five unviable units viz., Central Metal Forming Institute, Watch Case Unit, Lamp
Factory, all in Hyderabad, Food Processing Machinery Unit (FPA) at Aurangabad and
Miniature Battery Unit at Guwahati. Except for FPA, all unviable units were closed by
December 2000. The Company did not close FPA and instead proposed to manufacture
automotive gears for tractors in the plant, which did not come through due to financial
constraints. FPA had been incurring losses continuously for 11 years and its cumulative loss
was Rs.7.86 crore (August 2000). The key factors affecting FPA’s performance were the low
level of product technology and the saturation of the dairy industry particularly in the co-
operative sector. The reason for the sudden change in the stand of the Company to revive
FPA, which had been chronically running under losses for more than a decade, was not on
record. The Management stated (December 2003) that the issue of closure of FPA had been
pending with the Deputy Labour Commissioner, Aurangabad, and FPA generated revenue to
meet salary requirements of around 88 employees. However, the fact remains that even the
TAP had concluded that the existence of FPA as a separate unit was not feasible and its
closure was approved. FPA continued to incur losses during 2000-01 to 2003-04 also and the
accumulated loss rose to Rs.12.99 crore as on 31 March 2004. 11.5.2 Further, UTI Bank
Limited, which was appointed (December 2003) to identify failures/shortcomings in the
implementation of the TAP and to suggest corrective action, was also entrusted with the
specific task of examining the viability of FPA afresh. The report submitted (May 2004) did
not contain any recommendations on FPA. 109 Report No.4 of 2005 (PSUs) 11.5.3 Watch
Factory, Srinagar, manufacturing only mechanical watches, was a ‘loss-making unit but
capable of revival’ as per the TAP. Its accumulated loss as of 31 March 1999 was Rs.82.53
crore. During 1999-2000, a further loss of Rs.15.57 crore was incurred. Because of the
declining trend of demand for mechanical watches and surplus capacity at the Bangalore unit,
the decision in the TAP to revive and convert the unviable Watch Factory, Srinagar into a
separate subsidiary viz. HMT Chinar Watches Limited and to implementation revival plan
were injudicious. The loss of Rs.52.96 crore incurred from 2000-01 to 2003-04, despite
receipt of a grant of Rs.34.13 crore from GOI to meet the actual cost of wages and salary
was, thus, avoidable. The Management has not offered (July 2004) any remarks on the audit
point. 11.5.4 As per the TAP, Bangalore, and Ranibagh units, manufacturing mechanical
watches, was also proposed to be revived. The installed capacity for manufacture at
Bangalore and Ranibagh was 15 lakh and 20 lakh watches per annum respectively. The
demand for mechanical watches in India has been showing a sharp decline given customers’
preference for technologically improved and reasonably priced quartz watches. The demand
came down to 12.59 lakh watches in 1999-2000 out of which the Company’s share was 70
per cent. This further declined to 1.30 lakh during 2003-04, almost wholly contributed by the
sale of HMT watches. The Company could have met the demand from the Bangalore unit
itself and given the declining demand, could have closed the Ranibagh unit. Therefore, the
decision in the TAP to persist with the Ranibagh unit was not judicious, and further losses to
the tune of Rs.105.28 crore incurred during 2000-01 to 2003-04 were avoidable. The
Management has not offered (July 2004) any remarks on the audit point. 11.6 Projections in
the Turnaround Plan 11.6.1 The projections in the TAP were mainly based on the anticipated
turnaround in the economy, general improvement in sentiment for investment, increased plan
outlay for Defence, Agriculture and allied activities in the Union Budget for 1999-2000 and
the opportunities envisaged in the expansion proposals/ additional investment outlay of some
major customers like Bajaj Auto, TVS Suzuki, Punjab Tractors, Railways etc. The
projections in the TAP were overly optimistic and were not supported by actual trends
preceding the period covered in the TAP and concrete action plans to achieve them. The
Management accepted (July 2004) that the TAP, among other things, had not addressed the
effect of economic liberalization measures of the Government of India and contingencies of
likely changes in the business environment. 11.6.2 The Company’s projections for sales in
July 1998 and February 1999 for the year 1999-2000 were Rs.1316.40 crore and Rs.1158.60
crore, respectively. However, actual sales which were Rs.956.79 crore in 1996-97, came
down to Rs.752.38 crore in 1999-2000 and further reduced to Rs.384.46 crore in 2003-04. All
three business groups showed a declining trend during the same period. Actual sales of
machine tools, tractors, and watches which were Rs.331.29 crore, Rs.408.82 crore, and
Rs.193.40 crore in 1996- 97 respectively, came down to Rs.262.73 crore, Rs.386.39 crore,
and Rs.92.94 crore in 1999-2000 respectively. There was a steep decline in domestic sales of
mechanical 110 Report No.4 of 2005 (PSUs) watches from 22.87 lakhs in 1998-99 to 12.59
lakh in 1999-2000 in which the Company had a 70 percent market share. Despite these
declining trends, the Company did not revise its projections for 2000-01 and onwards, based
on actuals of 1999-2000. 11.6.3, the sales projections of Rs.1001.51 crore for 2000-01, with a
projected increase to Rs.1515.41 crore in 2004-05, and resultant contributions and Profit
before tax (PBT) in the TAP were not realistic and should not have been taken as the basis for
approval of the TAP in August 2000 for implementation. The Management stated (July 2004)
that the projections in the TAP were arrived at after taking into account the market conditions
prevailing at that time and projections were vetted by M/s. A. F. Ferguson (consultants). The
reply of the Management contradicts its statement (refer to para 11.6.1) that the TAP did not
consider the effect of economic liberalization measures of the Government on the operations
of the Company and the contingencies of likely changes in the business environment. Further,
the reply is not tenable as the projections of the consultant were subject to the following: (i)
The Company would need to invest and increase its ability to meet demands for improved
technology in machine tools. (ii) The actual performance of tractors would need to be linked
to the agricultural sector and aggressive marketing and extensive service support would have
to be undertaken. (iii) The Company was to be able to meet the sales projections for watches,
based on inputs of much-needed working capital. The other key inputs required to achieve the
projection were aggressive marketing and brand building. However, the Company did not
take any action to address the above issues. 11.6.4 Further, the TAP mainly focused on the
closure of unviable units, subsidiarisation of business groups, assistance from GOI towards
equity, waiver of loans, etc. The immediate aim of the TAP was to ensure that the Company
was kept out of the purview of the Board for Industrial and Financial Reconstruction (BIFR)
by financial restructuring with assistance from GOI. A similar view was expressed (April
1999) by the Controller General of Accounts (CGA) (Ministry of Finance) in an appraisal of
the TAP that the unwritten objective of the entire subsidiarisation process was to avoid a
reference to the BIFR, which would have the effect of damaging the brand equity of HMT
and render its business prospects even more difficult. The Management stated (July 2004)
that the reasons for the TAP were primarily to give focus and disinvest the individual
business groups of HMT viz., Machine Tools, Watches, and Tractors. The Management’s
reply underscores the fact that the focus of the TAP mainly was to restructure the business
and not to turn around the fortunes of the Company. Even the stated primary objective of the
TAP was not achieved as the subsidiarisation of the Tractors Division did not happen and
disinvestment in other subsidiaries did not materialize
What happened in the last fiscal year?

HMT Watches faced significant challenges in the last fiscal year that
contributed to its operational difficulties. The major challenges encountered by HMT
Watches during that period included financial losses, the need for closure, and the inability to
adapt to changing market dynamics and technological advancements.
Financial Losses: HMT Watches experienced financial losses, which impacted its overall
financial health. The company reported losses during the last fiscal year, indicating financial
instability and operational challenges.
Closure Approval: HMT Watches and subsidiaries like HMT Chinar Watches Limited and
HMT Bearings Limited received the Cabinet Committee on Economic Affairs (CCEA)
approval for closure. The closure process for these entities was underway, highlighting the
significant decision to shut down these divisions due to their financial struggles and
operational inefficiencies.
Inability to Adapt: HMT Watches, once a market leader in mechanical watches, faced
challenges in adapting to rapid technological changes. The company struggled to keep pace
with advancements in the watch industry, losing competitiveness and relevance in the market.
These challenges, including financial losses, closure approval, and the inability to adapt to
technological changes, posed significant obstacles for HMT Watches in the last fiscal year,
ultimately impacting its operations and future prospects.
Competitors:

In the last fiscal year, HMT Watches Ltd faced competition from several key players in the
watch industry. The major competitors of HMT Watches Ltd during that period included:

1. Titan Company Limited: Titan is a prominent Indian watch brand known for its innovative
designs, diverse product range, and strong market presence. Titan's watch business reported
significant sales, highlighting its competitive position in the market

2. Allwyn Watches: Allwyn, in collaboration with Seiko, entered the market with modern
designs and production techniques, posing a challenge to established players like HMT
Watches Ltd. The introduction of new designs and technologies by Allwyn impacted the
competitive landscape of the watch industry.

3. Citizen Watch Company: HMT Watches Ltd collaborated with Citizen Watch, a Japanese
company, for its watch manufacturing operations. Citizen's expertise in watchmaking and
technological advancements may have posed competition to HMT Watches Ltd in terms of
product offerings and market positioning.

These competitors, including Titan Company Limited, Allwyn Watches, and Citizen Watch
Company, played a significant role in challenging HMT Watches Ltd.’s market position and
influencing its performance in the last fiscal year.
Sales figure

- In the financial year 2012-13, HMT Limited (the parent company) reported revenues of
only ₹11 crore, while its losses amounted to ₹242 crore. This suggests that HMT Watches
Ltd.’s sales were likely a significant portion of the overall revenue for HMT Limited in the
years leading up to the last fiscal year.

- Competitor Titan's watch business achieved sales of ₹1,675 crore during the same period as
HMT Limited's ₹11 crore revenue. This highlights the significant gap in sales performance
between HMT Watches Ltd and its competitors, which may have contributed to HMT
Watches Ltd.’s challenges in the market.

- HMT Watches Ltd faced financial losses and operational difficulties in the last fiscal year,
leading to the approval for closure of the company and its subsidiaries. The sales figure of
₹32.10 crore, when considered in the context of these challenges, suggests that HMT
Watches Ltd.’s sales were not sufficient to sustain its operations and profitability.

While more detailed sales figures are not available, the limited information provided
indicates that HMT Watches Ltd.’s sales performance in the last fiscal year was relatively
low compared to its competitors and insufficient to maintain its financial viability in the
watch industry.
Price trend of HMT watches:

The price trend of HMT Limited watches during the year of significant losses is not explicitly
mentioned in the search results. However, we can infer some information about the
company's financial performance and the impact on its watch business.

In the financial year 2012-13, HMT Limited reported losses of ₹242 crore on revenues of
only ₹11 crore. This substantial loss, along with the company's inability to adapt to changing
market dynamics and competition from newer brands like Titan, suggests that HMT's watch
business may have faced significant challenges during this period.

The search results also mention that HMT Watches Limited, a wholly owned subsidiary of
HMT Limited, was approved for closure by the Cabinet Committee on Economic Affairs
(CCEA) in September 2014, along with HMT Chinar Watches Limited and HMT Bearings
Limited. These companies incurred losses of Rs 24,248 lakh, Rs 5,266 lakh, and Rs 1,598
lakh respectively in 2013-14.
While the exact price trend of HMT Limited watches during the year of loss is not provided,
it is reasonable to assume that the company's financial struggles and eventual closure of its
watch division likely hurt the price of its watches. The loss-making performance and inability
to compete effectively in the market may have led to a decline in the value of HMT watches
during this period.

Demand:

Unfortunately, the provided search results do not contain any graphs or charts specifically
showing the demand for HMT Limited watches over time. The results focus more on the
company's financial performance, share price, and corporate announcements.

However, we can infer some insights about the demand for HMT watches based on the
information available:

1. HMT Limited faced significant financial losses in recent years, reporting losses of ₹242
crore on revenues of only ₹11 crore in the financial year 2012-13[1]. This suggests that the
demand for HMT watches was not sufficient to sustain the company's operations during this
period.
2. The Cabinet Committee on Economic Affairs (CCEA) approved the closure of HMT
Watches Ltd, along with its subsidiaries, due to heavy losses incurred by these entities in the
fiscal year 2013-14[2]. The decision to shut down the watch division indicates a decline in
demand for HMT watches.

3. HMT Limited's inability to adapt to changing market dynamics and competition from
newer brands like Titan, which reported much higher sales figures, likely contributed to the
declining demand for HMT watches

While a graph showing the demand trend is not available, the information provided suggests
that the demand for HMT watches faced challenges in recent years, ultimately leading to the
closure of the company's watch division due to financial losses and an inability to compete
effectively in the market.
Reasons for the loss of HMT Limited:

Lack of Innovation: HMT failed to innovate and adapt to changing consumer preferences,
especially in design and technology, leading to its watches becoming outdated compared to
competitors like Titan

The downfall of HMT watches was significantly influenced by a lack of innovation, which
played a crucial role in the company's decline. Despite being a pioneer in the Indian watch
industry and having a strong foundation with skilled engineers and good technology, HMT
failed to adapt to changing consumer preferences and market trends.

1. Innovation Gap: HMT's failure to innovate and keep up with evolving consumer demands,
especially in terms of design and technology, led to its watches becoming outdated compared
to competitors like Titan

2. Focus on Mechanical Watches: While HMT did introduce quartz watches in the 1970s, it
did not capitalize on their potential due to initial low sales and instead continued to focus on
producing more mechanical watches, missing the shift towards quartz technology that
eventually dominated the market

3. Lack of Aesthetics: HMT's watches were perceived as chunky and outdated, lacking the
sleek and fashionable designs that were becoming increasingly important to consumers who
viewed watches as fashion accessories

4. Slow Response to Market Changes: HMT's slow reaction to changes in the Indian
economy and consumer preferences, coupled with a failure to understand the shift towards
watches as fashion statements, contributed to its loss of market share and iconic status to
competitors like Titan

5. Missed Opportunities: Despite having the potential to reposition itself as a classic watch
manufacturer catering to mature and older consumers, HMT did not seize the opportunity to
revitalize its brand image and appeal to a new generation of watch buyers
In essence, the lack of innovation in product design, technology adaptation, and marketing
strategies significantly hampered HMT's ability to compete effectively in a rapidly evolving
watch market, ultimately leading to its downfall and the eventual shutdown of its watch
business in 2016

Late Entry into Quartz Market: Although HMT started producing quartz watches in the
1990s, it was too late to compete effectively with brands that had already established
themselves in the quartz watch market

HMT's late entry into the quartz watch market significantly impacted its downfall. Despite
being the first to introduce quartz watches in India in the 1970s under sub-brands like Sona
and Vijay, HMT faced challenges due to consumer reluctance towards high-priced quartz
watches at that time.

1. Missed Consumer Acceptance: HMT's initial foray into quartz watches faced resistance
from consumers who were not ready to embrace the higher prices of these watches, leading
the company to revert its focus to mechanical watches, missing the opportunity to capitalize
on the emerging quartz technology trend.

2. Titan's Success with Quartz: Titan's successful introduction of quartz watches in 1987
highlighted HMT's underestimation of the market shift towards quartz technology. Titan's
strategic focus on quartz watches, in contrast to HMT's continued emphasis on mechanical
watches, further exacerbated HMT's late entry into the quartz market.

3. Delayed Transition: HMT's realization of the importance of quartz watches came too late
in the early 1990s when it started allocating a portion of its production to quartz watches.
However, by then, the market dynamics had shifted significantly, and HMT struggled to
catch up with competitors like Titan who had already established themselves in the quartz
watch segment.

4. Market Saturation: The delayed entry into the quartz market coincided with the opening up
of the Indian economy to international brands, leading to a flood of foreign watchmakers
offering a variety of watches at different price points. This intensified competition made it
challenging for HMT to regain its market share and iconic status in the face of changing
consumer preferences and increased options available to buyers.

In essence, HMT's late response to the growing demand for quartz watches, coupled with a
lack of consumer understanding and market agility, contributed significantly to its inability to
compete effectively in the evolving watch industry landscape, ultimately leading to its
decline and eventual shutdown of its watch business in 2016

Loss of hot limited:

Faced with growing dominance of rivals, it went into losses for the first time in
1994. Since then it never recovered. Table.1 gives insight to growth story of HMT
Watches Ltd in the post 2000-01. The dismal performance of HMT is visibly clear.
Its sales revenue went on to decline from Rs.108.64 crore in 2000-01 to a mere
Rs.11.06 crore in 2012-13. More worryingly, even per capita sales revenue of an
Employee declined sharply during the same period of time from Rs.0.03 crore toRs.
0.01crore. the loss incurred by the HMT as reported in its annual report, was
Rs.59.18 crore in 2000-01, while it climbed to a mammoth Rs.242.47 crore by
2012-13. Ever-depleting current assets and mounting liabilities jeopardized its
Financial position. A paucity of working capital and erosion of working capital-
The turnover ratio in HMT have hammered the last nail to its coffin.
The financial performance of HMT remains unimpressive even in the financial year
2013-14. it continued to incur losses and the loss is estimated at Rs.233 crore. Its sales
Revenue slid further to Rs.7.48 crore, while its watch production was worth only
Rs.4.70 crore.
The contemporary Indian watch market, Titan, has more than 65 percent share
In the watch market is the biggest player followed by Timex and others such as
Citizen, Sonata, etc. At the premier level Tissot, Omega, and Rolex are the popular
Brands. Titan sells about 7 million wristwatches annually in India. Another
Prominent competitor Timex sells nearly 1.2 million watches annually. While the
The rest of the companies (including HMT) sell 0.5 million watches annually. Hence
From these data, it is evident that after 53 years of its inception, HMT watches have
Almost disappeared from the market.
Time to Introspect
A look back and overview of the different growth stages of HMT watches provide
Some glimpses on the possible causes for its failure. It is widely believed that its
Failure was its own doing. HMT was the first to introduce quartz watches in India in
The early 1980s but due to its non-acceptability in the market soon went back again
To focus on mechanical watches. However, Titan, the newborn child of the watch
Industry picked up the automatic quartz watches from where HMT stopped and re-
Introduced to the market in 1987 with an overwhelming response from the customers. In
No time Titan became the market leader of quartz watches and HMT lost out to its own
Quartz watches.
HMT has also suffered because of poor decision-making. It introduced automatic
Quartz watches to the market without assessing the customer's needs and expectations.
It was the right decision at the wrong time. Later, when Titan entered successfully
With quartz watches, HMT management went ahead with decision to open more
Mechanical watch manufacturing units rather than quartz watch units. It was a
Wrong decision at the right time.
Another prominent factor leading to its downfall was complacency. As already
As stated, the enactment of FERA has restricted foreign brands in India. No domestic
The company was strong enough to challenge HMT watches either. This absence of
Competition for a long period made HMT lethargic. Consequent upon that,
There was no drive for innovation, product diversification, technological
Upgradation, quality improvement, cost reduction etc. Since the entry of Titan quartz
Watches in 1987 and with the opening of the Indian economy, HMT’s complacency was
Exposed. Several global giants and domestic watchmakers flooded varieties of
Watches in the Indian market. Being complacent during the protected era, HMT was not
Prepared to face the stiff competition of rivals. Bhaskar Bhat, Managing Director of
Titan’s Ltd rightly observes the under-preparation of HMT and its
Lack of foresightedness. He says HMT failed to understand that “a watch was no
Longer a time-keeping machine. It was becoming a fashion accessory for both men
And women. Consumers wanted a well-designed product to match their style.
Aesthetics play an important role in marketing” (quoted in Mahesh Kulkarni, 2014).
Insufficient emphasis on research & development and design engineering has
Allowed competitors to successfully exploit the lifestyle segmentation.
The growth of HMT in the reform era was marred, again, by slow decision-making
Which is due to red-tapism. Hence, it could not respond quickly to market changes.
HMT’s problems were compounded further when the retailers refused to sell its watches
Due to lower retail profit margin than the competitors. HMT opened its own retail
Outlets rather taking retailers in to confidence, convince them and win their trust.
HMT’s retail outlets are not widely accessible to customers, leading to slowdown in
Sales.
Time for Action
Deterred by the continuous losses, several attempts were made to revive this PSU.
HMT underwent restructuring in organization and operations in 1998-99. In yet
Another attempt HMT Watches Ltd, a business group of HMT Ltd, was converted
Into a new subsidiary company. However, these initial revival strategies were mere
Futile exercise and continued to incur losses. HMT woke up very late to respond to
The challenges of the competitors. Another revival plan was mooted and it was
Approved by the Board for Reconstruction of Public Sector Enterprises (BRPSE) in
2006. But the Ministry of Finance and Planning Commission did not accept the
Revival plan and directed the Company to get the revival plan vetted by a Consultant
Concerning marketing, product diversification and technology. M/s ICRA
Management Consultancy Services Ltd was appointed as a Consultant. Based on the
Report of the Consultant the Company prepared the revised revival proposal and also
Mooted the idea of joint venture formation.
In a bid to reduce costs and thereby keep the Company alive and viable, the number
Of employees has been drastically brought down from 4120 in 2000-01 to 1105 in
2013-14. In order to tide over financial crisis of HMT watches, the Government
Made repeated efforts of capital infusion. The budgetary allocation for capital
Infusion as on March 2012 was Rs.694.52 crore. However, these attempts did not
Help the Company to raise the bar. A high degree of political intervention at all
Levels of the Company also affected its functioning.
Time to Bid Farewell
As several revival plans could not address the problems of HMT watches, it
Continued to incur loss and the cumulative losses are estimated to be around Rs.
1,600 crore. This has made the then UPA Government to refer HMT Watches Ltd to
The Board for Financial and Industrial Reconstruction (BFIR) to look into the
Matters related to its revival. As the Company is chronically sick, the Board felt that
The unit is not capable of revival and recommended its closure. Though the Board
Submitted the report during UPA regime, it shied away from taking any decision.
The newly formed NDA Government has decided to shut down the once
Unquestionable ruler of the Indian watch market as per the recommendations of
BFIR. The Government has begun the process of closure and decided to make a
One-time settlement proposal of VRS for 1105 employees. From now HMT is no
Longer “keeping time to the nation”.
Comparison of hmt in aspect to other companies:

Based on the additional search results provided, here are more details on the following
aspects of HMT watches:

Competition and Market Share

- HMT faced stiff competition from local rival Titan as well as international brands like
Citizen, Casio, Timex, Swatch, Rolex, etc. as the Indian economy opened up.

- Titan, in particular, was a major competitor that poached top talent from HMT and focused
on modern, fashionable quartz watches that were more in line with changing consumer
preferences.

- HMT's market share steadily decreased from the 1990s onwards as it lost ground to these
competitors.

- By the 1990s, Titan had captured 65% of the Indian watch market, becoming the biggest
player followed by Timex and other international brands.
Failure to Adapt and Innovate

- HMT was slow to react to changes in the Indian economy and consumer preferences,
sticking to its basic mechanical watch designs for too long[1][5].

- While HMT introduced quartz watches in the 1970s, they were not popular due to their
relatively high prices.

- HMT only realized its mistake in the early 1990s and started focusing on quartz watches,
but it was already too late to catch up to Titan and other competitors.
Financial Struggles and Closure

- HMT incurred heavy losses from the early 2000s onwards, amounting to around $3.6
million in 2013.

- The company had been enduring almost continual annual losses since the early 2000s.

- The Indian government finally shut down HMT's watch business in May 2016 due to its
financial struggles.
Resurgence in Demand after Closure

- The news of HMT's watch business shutdown created a surge in demand for its timepieces
among collectors, especially in India.

- Inventory on HMT's website started selling out, and online and offline retailers saw
increased demand for HMT watches.

- This renewed interest highlighted the iconic status and nostalgia associated with the HMT
brand, despite its eventual decline.

In summary, the key factors that led to the downfall of HMT watches were its inability to
innovate and adapt to changing market dynamics, the rise of competitors like Titan, and its
eventual financial struggles that resulted in the closure of its watch business by the Indian
government.
Conclusion

The case of HMT Watches serves as a cautionary tale about the perils of complacency and
the failure to adapt in a rapidly evolving market. Once an iconic brand synonymous with
watches in India, HMT's watches division enjoyed a near-monopoly for decades, becoming
the quintessential gift for major milestones. However, its inability to innovate, diversify, and
respond to changing consumer preferences ultimately led to its downfall.

The entry of competitors like Titan, which quickly gained popularity with its fashionable
quartz watches, exposed HMT's weaknesses. Titan's agility and focus on meeting evolving
customer demands allowed it to capture a significant market share, surpassing HMT within
just a few years. In contrast, HMT remained stuck in its ways, relying on outdated
mechanical watch designs and failing to introduce new models and features.

As losses mounted and its financial struggles intensified, HMT's watches division became a
burden on the parent company. The Indian government's decision to shut down the business
in 2016 was a painful but necessary step, marking the end of an era for a once-iconic brand.
The closure highlighted the importance of strategic management, innovation, and adaptability
in sustaining long-term success in a competitive market landscape.

The lessons from HMT's decline extend beyond the watches sector. They serve as a reminder
to all businesses about the need to continuously evolve, innovate, and stay attuned to
changing customer preferences. Complacency and a failure to adapt can quickly erode even
the strongest market positions, as HMT's experience so vividly demonstrates. By learning
from HMT's mistakes, other companies can better position themselves to thrive in an
increasingly dynamic and competitive business environment.
Future plans’;

Based on the information provided in the sources, here are the future plans for HMT Limited:

1. Expansion and Diversification:

- HMT plans to invest Rs 200 crore to expand its tractor capacity, and engine production,
and launch premium watches to reach a turnover of Rs 3,000 crore in the next five years.

- The company intends to triple its tractor manufacturing capacity from 10,000 units per
annum to 30,000 units per annum in the next two years.

- HMT also aims to target the youth segment and institutions with new watch models,
planning to achieve sales of Rs 50 crore soon.

2. Financial Restructuring:

- HMT has sought a Rs 450 crore package from the government for debt restructuring and
capital expenditure to support its expansion plans.

- The company has long-term debt amounting to Rs 130 crore and is looking to achieve
group sales of Rs 3,000 crore, with significant contributions from tractors, machine tools, and
watches.

3. Operational Focus

- HMT Machine Tools Limited continues to manufacture industrial machines and tools,
serving India's defense, government, and educational institutions.

- The company has subsidiaries like HMT International Limited and holds a majority stake
in Praga Tools Limited, focusing on machine tools and CNC machines.

4. Strategic Alliances and Global Expansion:

- HMT seeks strategic alliances with global leaders to leverage its strengths and expand its
presence in the global engineering market.
 - The company aims to emerge as a global engineering conglomerate by capitalizing on
opportunities in the new millennium.

In conclusion, HMT Limited's plans revolve around expansion, diversification, financial

restructuring, operational focus, and global expansion through strategic alliances. The
company aims to revitalize its business, particularly in the tractors, machine tools, and
watches segments, by investing in capacity enhancement, product innovation, and strategic
partnerships to drive growth and competitiveness in the evolving market landscape.