The move is aimed at enabling Videocon to establish a greater presence for its consumer durables in Europe. VIL chairman and managing director VN Dhoot told The Financial Express that the Italian subsidiary will now be called Videocon Compressor of Italy.

VIL has bought out the local joint venture partner, one Mr JM Bakeria, from Necci group to up its stake to 84 per cent. Mr Dhoot said that VIL has raised the funds for the majority control through internal accruals.

According to Mr Dhoot, the Italian subsidiary will be used as a base that will cater to the European market for the consumer durables. Videocon's gameplan is to use Videocon Compressor of Italy as a gateway to "fortress Europe".

Necci has been supplying compressors to VIL's Indian subsidiary Aplicom India Ltd for it to manufacture motors for refrigerators. These motors were being exported to Italy. Now, VIL plans to export kits comprising all the consumer products manufactured in India in a semi-knocked down form to Italy where these can be assembled and sold.

Says Mr Dhoot: "With most of the manufacturing done in India, Necci in Italy will be able to get a `Made in Italy' tag on their products and still sell them at Korean prices. We plan to sell the products in Europe under our brand name with the `Made in Europe' label. The company hopes that this will provide its products the required marketing edge to sell the products in markets like the US."

VIL had acquired a 50 per cent stake in Necci in 1996. Since then Necci has been supplying 5 million compressors for refrigerators to VIL in India. Mr Dhoot adds: "In this case, the Rs 1,200 crore Necci is looking at the criteria of low labour cost in India and VIL is looking at the availability of technology from Necci. In Italy the cost of labour per annum is Rs 18 lakh whereas in India it is just Rs 36,000."

Mr Dhoot adds: "The European markets will be catered to by the company's plant in Italy. The company intends to take the original equipment manufacturer (OEM) supplier route in Europe to begin with. VIL has exported 2,500 washing machines and 15,000 refrigerators to Italy so far." The export turnover of VIL is estimated at Rs 350 crore for the current fiscal. Mr Dhoot said that he expects the export turnover to increase to Rs 1,000 crore in three years.