Mr. Anant Bajaj, Joint MD, Bajaj Electricals Ltd.
“We are hopeful of staging a comeback in the Engineering & Projects segment in the second half of FY13.”
Mr. Anant Bajaj, Joint MD, Bajaj Electricals Ltd. as Project Co-ordinator in the year 1999 and was responsible for setting up the Rs. 450mn High Mast Manufacturing and Galvanizing Plant for the Company at Ranjangaon, near Pune. As an acknowledgement of his growing understanding of the intricacies of managerial duties, he was appointed General Manager, Special Assignments, in 2005. Through his vision and determination his exports arm, Bajaj International Pvt. Ltd. soon made successful forays into businesses as diverse as IT and Solar products. In February 2006, Mr. Bajaj was appointed to the Board of Bajaj Electricals Ltd. as Executive Director. Presently, he is also on the Board of Directors of Hind Lamps Ltd., Hind Musafir Ltd. and Bachhraj Factories Ltd. Mr. Bajaj’s degree in Commerce from HR College laid the foundation for a career in business. Subsequently, a Post Graduate diploma from S.P. Jain Institute of Management Studies equipped him to handle the responsibilities to develop his innate entrepreneurial abilities. Currently, Mr. Bajaj is pursuing OPM (Owner President Management) Program at the prestigious Harvard Business School to be completed by 2013. His multidimensional personality draws enrichment from interests as varied as music, sports, travelling and networking. Affable and outgoing, Mr. Bajaj is as passionate about wildlife conservation as he is about Information Technology. His love of adventure sports has taken him where few but the very brave would venture. Mr. Bajaj is very much a man of his times – dynamic and forward thinking; yet he is firmly rooted in time tested Indian traditions and values.
Bajaj Electricals Limited (BEL), a 74 Year old trusted company with a turnover of ~Rs. 31bn, is a part of the US$7 billion (over Rs 380bn) "Bajaj Group". Bajaj Electricals Limited has six strategic business units – Engineering and Projects, Appliances, Fans, Luminaires, Lighting and Morphy Richards. Bajaj Electricals has 19 branch offices spread in different parts of the country besides being supported by a chain of about 1000 distributors, 4000 authorized dealers, over 4,00,000 retail outlets and over 282 Customer Care centers. Bajaj Electricals Limited is well established in a wide range of products such as lamps, tubelights, CFLs, luminaires, small household appliances, ceiling fans and table fans as well as turnkey engineering services. The company is also into Transmission Line Towers manufacturing and Rural Electrification. Bajaj Electricals Limited has received various accolades and awards for its Brand and advertising campaigns, one of them being the Gold Award for Reader’s Digest - Most Trusted Brands Awards received by Bajaj Lighting.
Speaking with Hemant P. Maradia of IIFL, Mr. Anant Bajaj says, “We are hopeful of staging a comeback in the Engineering & Projects segment in the second half of FY13.”
Could you take us through the main highlights of Q1 FY13 results?
We have registered a good increase in our topline during the first quarter, with net sales up by 22.4% to Rs. 6.66bn. However, the bottomline has been muted. PBT stood at Rs 182.5mn versus Rs 170.6mn clocked in the same period last year. The net profit for the period under review has gone up by ~8%, from Rs 110.8mn in Q1 FY12 to Rs 119.8mn this year.
We have had a very solid growth as far as Consumer Durables segment is concerned, especially in the Appliances. Products like Induction Cookers and other new products have had a big impact.
We had issues with sales of Fans due to an unusually mild summer. That had an adverse effect on margins.
As far as Engineering Projects is concerned, the sales growth was very nominal. Although we have had some cross correction in Q1 FY13 by closing project sites, etc the actual results will start showing only in Q3 and Q4.
First quarter tends to be tepid for the Engineering Projects division, but this year’s performance is slightly better than last year. There has been a loss of Rs 70mn in the segment during Q1 FY13 compared to a loss of Rs 76mn in the year-ago period.
We are hopeful of staging a comeback in this segment in the second half of FY13.
In the Lighting segment, the sales have seen good growth but the margins have compressed.
What is the outlook going forward?
As a company we have taken a few initiatives that will stand us in good stead in the future. We have started working on the domestic production of Glassline Water Heaters with the help of our vendors. So far, we have been importing these products from China. This will help us improve margins because the exchange rate impact will reduce dramatically.
Also, Induction Cookers have been a roaring success. In the last 18 months, this product line has moved from zero to Rs 1bn in sales. We are also planning to launch Industrial Induction Cookers. We aim to cater to the institutions such as hotels with our range of Industrial Induction Cookers.
We are also going to launch a product called as Air Fryers, which have become a rage in the market lately. This is basically oil-free frying of foods. Our competitors are selling them right now at a premium. We plan to offer the same product at a competitive rate.
What will be the key growth drivers going forward?
We are planning to set up a new R&D centre soon. At the moment product development is done by various divisions in an independent manner. The new R&D centre will take care of the requirements of all the divisions. This will also reduce the duplication of work. We intend to synergise our in-house R&D strengths and scale it up in a big way.
The restructuring that we undertook in the earlier part of the year has certainly started paying some dividends. We split the company into two parts – B2B and B2C. Appliances, Fans, Lighting and Murphy Richards fall under B2C while the Luminaires and Engineering Projects fall into B2B.
It is a 1-2-3 kind of situation. There is one company called Bajaj Electricals. There are two verticals – B2B and B2C. Then there are three segments – Engineering Projects, Lighting and Consumer Durables.
We had the best first quarter in the history of the company. Even the January to March quarter of FY12 was the best fourth quarter. Synergies have started kicking in. We have taken steps to improve customer service. To make it even better, we are implementing a project called “Theory of Constraints”.
The focus is getting shifted from primary sales to secondary sales. This is a big mindset change for the company. We are already starting to see some success in a very short span of time. Some areas of operations will still take some time to adjust. But, overall we are on the right track and the benefits are already started to show. We expect to see even more benefits, which will make the company even stronger.
We already have a very sound Oracle ERP system, which we put in place couple of years back. That has also shown its own benefits. The Theory of Constraints will only add to it. Our R&D initiatives will also enhance our products with new innovations based on customer feedback.
What prospects do you see for the Engineering Projects division?
In the Power Transmission lines business, Bajaj Electricals wasn’t there 10 years ago. We entered this business in 2002. We have learnt pretty quickly, considering the industry standards. We hope to come back strongly in the Engineering Projects segment. We are sitting on an order book of Rs 7bn. We are expecting good order inflows.
Another significant development took place at the start of April, when we started our exports and imports through Bajaj Electricals. Earlier, it used to happen via Bajaj International Pvt. Ltd. That has also started showing results, with the company attaining Rs 130mn of exports in the first quarter of FY13.
How do you see the overall consumer demand in the country?
Consumer demand is sluggish; it is not growing at a pace it was couple of years back. Consumers will come back if inflation recedes and the overall sentiment improves.
What is happening right now is that stores are getting a lot of footfalls, but the same is not getting translated to sales. Diwali will be the right time to ascertain the consumer sentiment. Even now, we have Ramzan going on and Onam is also round the corner. Onam will also give a clearer indication of consumer sentiment because it is a very important time of year in South India.
With the rains falling short of the average mark this year in many parts of the country, the rural demand could be affected. Government policies in the coming months will also play an important role in shaping consumer sentiment.
For our products, at least the consumers don’t have to think too much to buy. If a person wants to buy a CFL, he/she will go ahead and purchase it, recession or no recession. But the situation could be different in case of an Induction Cooker, which is a slightly expensive product. Still, we are lucky that most of our products are not too costly. Most of our B2C products are up to a range of Rs 3,000 to Rs. 5,000. Most of them are very much affordable.
Institutional demand for consumer products, including that from the Government side, is a different ball game.
I’m optimistic that the Indian consumer will come back strongly. May be they actually want to spend but are worried about inflation rising further. Even for essential items, the consumers are probably thinking twice before spending.
Have you revised prices lately?
Yes, we have increased prices of some B2C segment products in July. There may be another round of price hikes soon. We should be able to improve margins with these price increases.
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India Infoline Research Team / 10:47, Aug 24, 2015
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