Bajaj Electricals wants to keep product prices constant
Bajaj Electricals stays unfazed by the heavy discounts of up to 15 percent offered by competition to boost sales.
In its post-earnings investor call, Shekhar Bajaj, Chairman and Managing Director, Bajaj Electricals said, “We are not bothered about what competition does in pricing. We are aware that several players have slashed prices. However, we don’t play the price game.”
An increase in the customs duty, depreciation of the rupee and higher fuel prices had forced most companies to raise prices leading to a hit on sales. They are now trying to revive sales by offering discounts.
Bajaj, however, is following a concept of value engineering to keep the prices constant.
“Our competition is never with other players, but with ourselves. We are clear that irrespective of customer purchase behaviour, we will not give any special deals,” he added.
Better than peers
Bajaj Electricals posted a 79.5 percent year-on-year (YoY) rise in its September quarter net profit at Rs 34.08 crore on a 70 percent YoY increase in gross sales.
Gross sales of the electrical goods company rose to Rs 1,583.3 crore in the quarter. Of this, consumer products revenue grew 25 percent YoY to Rs 642.2 crore.
Among its peers, Lloyd Consumer, part of electrical goods company Havells, posted a decline of 9.6 percent year-on-year (YoY) in profit before tax at Rs 47.62 crore for the September quarter. The revenue was down 4.4 percent YoY at Rs 257.85 crore in Q2FY19 as unseasonal rains hurt air-conditioner sales.
At Cromton Greaves Consumer Electricals, electric consumer durables saw a 14.6 percent YoY growth in revenue at Rs 712.82 crore.
A report by broking firm Motilal Oswal expects the sector to grow 10-15 percent YoY this festive season.
At the Bajaj Electricals call, analysts raised queries about the discount strategy prevalent in the industry and what would be Bajaj Electricals business plans around this aspect.
To this, Bajaj said their strategy is to expand distribution footprint and cut down manufacturing cost so that the finished goods price remains constant.
“We purchase at lower cost so we avoid price increase and maintain margins. But if there is a price increase necessary, we will do it. But we do not believe in deals or discounts. Retailers also have expressed that they do not prefer an unnecessary increase or decrease in the prices,” he added.
While he did not give out numbers of the festive season sales, Bajaj said October sales have been ‘satisfactory’.
Rising pressures from rupee, fuel price
The depreciation of the Indian rupee against the US dollar led to an increase in manufacturing costs for appliance makers.
The high fuel prices led to transportation costs of raw materials going up by almost 15-20 percent in the consumer durables sector.To offset these costs, companies were forced to raise prices multiple times between July and October. Due to this, the festive season sales for the industry have been marginally lower than the previous years. To have a positive revenue growth, most players have adopted a strategy of special offers for the months of October and November.