Havells India grew at 13 percent in the first half of current fiscal. Considering the satisfactory growth rate in the current quarter, Anil Rai Gupta, Chairman and Managing Director Of Havells India.
The company is currently looking at opportunities for strategic acquisition.
Below is the verbatim transcript of Anil Rai Gupta’s interview to Latha Venkatesh & Sonia Shenoy on CNBC-TV18.
Sonia: Your topline growth rate has slowed down to about 9 percent this time around. Do you expect this kind of growth rate for the next couple of quarters as well?
A: In fact the first half if you see it is about 13 percent and this first quarter which was about 17 percent was on account of a lower base of last year. The growth rate in this particular quarter is satisfactory on couple of counts. One the consumer segment has grown by more than 20 percent. Lighting sector ex CFL which is the transitional change which is happening in the industry, ex CFL is almost 22-23 percent.
The rest of the sectors which obviously are a little bit hurt by the non pick-up in the residential sector that is growing by about 5 percent or even cables and wires on volume terms is growing by 8-10 percent. Overall on mixed basis, we do expect that we will be bettering the growth in this next half.
Latha: Can you give some numbers on how the festive demand looks?
A: It is very early to say, we just closed the September quarter. Generally, speaking the things that we are expecting in this particular quarter should be a better festive demand but it is too early to say. With this October month going out we will be coming to know. More the affected parts are the consumer durables and lighting part for us and I think we will know by the middle of November.
Sonia: When you said you will better the growth in the second half it means that you will do better than 13 percent that you did in the first half of FY17?
A: I meant better than the second quarter, but overall first half is about 13 percent.
Sonia: Also on the margins it has been an EBITDA miss this time at least lower than analyst expectations perhaps because of the higher advertisement spends that you had to incur? What do you see as the ad spends as the percentage of overall sales going on ahead?
A: We will be maintaining these ad spends. If you recall we have always mentioned in the past as well that we will continue to invest on brand building as well as expansion of channel and expansion of channel is happening because of the increased foot print that we are putting there in tier II, tier III towns. All these are things which we consider as investments.
As the market picks up in the next one or two years will definitely start seeing results of that. The increased investment will continue to be there. It will be supported by better cost efficiencies which are reflecting in the margins improvement, contribution margins for product category.
Latha: We get repeatedly buzz from the market that small players like Lloyds are looking for buyers are you speaking with them? Will you look at inorganic moves?
A: I can’t speak anything on market speculations at this moment. We have always maintained that we have a healthy balance sheet and we would be continuously looking for some acquisitions in future. However, I don’t want to comment anything on particular about market speculations.
Latha: You would look for what kind of sizes of acquisition?
A: As I said the balance sheet looks healthy right now and we would try and do some meaningful sizes only which would get the benefit of scale. We have always maintained anything which adds to the product category or to the geography or to our channel these are the kind of strategic acquisitions that we will be opened to.
Latha: You have not denied the Lloyds news?
A: I would not like to comment on any market speculations.
Sonia: Coming back to that growth in the switchgear segments which has slowed down quite a bit to 5 percent what can we expect over the next couple of quarters?
A: Right now we are not seeing a major uptick both in the industrial demand as well as residential demand. We are definitely hoping that things should improve with, we are focusing on exports as well and things should better from here. We would be sceptical about committing to any number here.
Latha: Your cash went down by Rs 220 crore if you looked at it quarter on quarter.
A: It was more of a cautious effort to put it in to working capital because of the festive demand coming in. Also smoothening our own production for the upcoming summer season for fans as well. So, more of it was a conscious decision and hence we can’t look at it on a quarter on quarter basis. Normally, it smoothens out over the year.
Sonia: Give and take everything are you still looking at double digit volume growth for the full year?
A: We should be expecting, we will be looking at a these kind of numbers. We still have another six months to go. The company is putting in the right investments and we should definitely take advantage of that given the market scenario. Though sluggish at this moment, but we will expect it to do better from here.
Latha: If you took the festive season from Onam now you must have seen about 6-7 weeks of the festive season does it look better than last festive season?
A: As I said too early to say, the major thing will come because of Puja and Diwali. Onam is very specific to a particular state but we will wait for a few days to comment on that.