Q1 will shed light on rest of year trend: Bajaj Electricals

Anant Bajaj, executive director of Bajaj Electricals told CNBC-TV18 that the company’s fourth quarter earnings were a “little difficult”, but he expects the first quarter of FY14 will to see growth.

“The starting has already been very good, in April and May and we had a good growth, thus in Q1 the results will be much better,” he said. According to him, Q1 will be an indicator of how well the company can do for rest of the year. Also read: Bajaj Electricals Q4 net down 99%; eyes 20% sales growth Below is the verbatim transcript of his interview to CNBC-TV18 Q: Let me begin by speaking about the Q4 numbers. It is a set of numbers that will spark a bit of trepidation. We are seeing a fairly big drop in margins. How do you expect things to pan out in the first half of the current year, while revenues were higher especially in the lighting segment? A: We have had a Q4, which was a little difficult. We as you know throughout the year have been taking specific strategic sort of call on the Engineering & Projects (E&P) side for completing and closing and taking the hits on lot of the long overrun kind of projects. Also, at the same time our appliance and fans, basically the consumer durables there has been an overall good sale. However, we also took corrective action in those areas wherever they were required. Essentially, as you know Q1 is always the season time for some of the seasonal products. So, we really wanted to make a bigger sort of write-offs or whatever that is required in the financial year itself before the new one starts. Clearly the starting has already been very good, in April and May. We have had a good growth. Later in Q1 the results will be much better because basically our clean up of lot of the old issues have taken whatever hit had to be taken. So, to that extent we are in a position to actually give a correct situation. To get the top-line growth is not a difficulty at all. The thing is how one makes sure the other aspects, including the cost overruns in the projects. Overall sentiment of the market can actually allow the product to get the right price. Q: You had I think negative Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margin in the E&P segment. You are making a provision of Rs 44 crore. What can market expect in FY14? A: The Rs 44 crore which you talk about is actually we have taken a little bit more provision. We have a specific guideline from the board that if certain things are of certain timeline you need to take that write-off. However, we expect some of it could probably come back. The main thing is that lot of the important corrections have been done. So, clearly from Q2 onwards you should see a very different E&P sector that is engineering, procurement and construction (EPC) business. The important thing is we have order book in hand and at good margins. So, to that extent the whole way of working has been altered very positively. So, to that extent you will see a good growth in both top-line and bottom-line in that sector. The other two also being the very heavy season time have clearly got a good Q1’s happening. There are good products, which we have actually introduced and will come in towards the end of this quarter. In June, we are introducing it. So, I think Q2 will see very good numbers. But the main thing is EPC business that is E&P business has actually taken all the corrective actions. So, there still might be some minor impact of write-offs remaining in the Q1 and Q2.  Clearly, we will not have any more of those hits like what we saw last year in Q3 and Q4. So, to that extent we will come back. Q: Can you guide us a little bit on the margins as well? A: In the consumer durable, for example which on the year went down from 10.1 to 9.5 percent. We expect it will be backed by upto one and a half to two percent. So, this will be back in that level of 10.5-11 percent. Lighting which also fell by about one percent from 7.6 to 6.6 percent should come back to about a 7-7.2 percent level. EPC business, which ofcourse had a major negative, we are looking at making it back to atleast a zero-zero level. This means it will atleast not be any further negative coming from there. Q: Give us some numbers, in FY14 would you atleast go back to FY12 level? A: That is what we are aiming to go towards, certainly. Q: Any number if you can give us like Rs 11.9 was your FY12 EPS, so would that be a number that the market can look for? A: It is early to say. Once our Q1 numbers are through, that time we can give a little more accurate picture. Right now it is just towards the beginning of the financial year. So, it is little early to say how much we can do. However, I think Q1 will be a good indicator of how well we can do for rest of the year. Q: Monsoons have barely begun, but is there any kind of improvement at all in rural India in terms of demand? A: On the contrary our consumer durable segment as well as lighting is growing very well. They are already growing at level better than last year. So, we are expecting it should give us a good thing because in our case atleast it is probably a better distribution and reach to the end consumer which is making the difference. Due to the three segments which are so vast in reach and that has clearly given us opportunity to reach out better than probably lot of our competition. We have ofcourse as a brand also been around much longer than many. So, that also does help in knowing which market is strong and which is not. We have kind of made correction on which market to concentrate as well. Clearly all markets cannot give me the same results. Q: For other stocks probably like broadcast companies would your ad spends be another Rs 75 crore this year as well? A: We have never done Rs 75 crore before. Infact, we last year did Rs 34 crore and we intend to do about Rs 75 crore spend this year because it is our 75th year as well.