Expect LED biz to go from 7% to 20% by next year: Eveready

Sonia: Your overall revenues, you have not seen too much of a growth this time around, because as your mentioned in your press release, the consumer demand has been quite muted, particularly in the rural segment. Can you just take us through what the breakup has been in the batteries and the flashlights and in the LED segment which has been your highest growth generator, what kind of revenues have you seen in all three segments? And also going ahead, where do you see growth emerge from?

A: The battery segment was flattish this quarter. One reason obviously being the dumping from China and the price increase being implemented. So, we think batteries should go back to single digit growth starting from Q4 onwards. The growth rate should go over 10 percent once the dumping duties are imposed on the category. Flashlights has seen the larger de-growth of around 15 percent. This is the true impact of a second year in running poor monsoon. And we are very hopeful that with projections for monsoon being positive next year, this should improve and the company has also taken cost reduction plans in its flashlight business and has reduced MRPs to spur demand. 

But, the real exciting growth for us has been in LEDs in which we have clocked Rs 25 crore in Q3. And I am very happy to mention that our first initiative of taking part in the government tender business of LED bulbs opened on Friday where Eveready actually came out as a second lowest bidder by only 25 paise. The lowest bidder was at Rs 64.41. We will be matching that price and as being the L2 which is the second lowest bidder, we expect to get an order of around seven million LED bulbs to be executed in the first half of next year.

To put into perspective, the company, this year has sold approximately five million for the full year. This tender, one single tender alone will be generating demand for seven million bulbs which we will supply. And this will be supplied out of our dedicated vendor in Hyderabad which is being set up today. So, with this one single order, our plant will be full capacity.

Anuj: And what would that mean for your consolidated EBITDA and your net profit? How much of your overall numbers will start coming in from LED going forward?

A: This year, we think LED business will clock about Rs 100 crore. The traditional distributed LED business should grow from Rs 100 crore to at least Rs 150-160 crore next year and we expect another Rs 100-150 crore of LED business to come through this tender. So, we would see LED as a share of business going from 7 percent of total topline to maybe around 20 percent. But, more importantly, what this will do is it will add economies of scale for the company and thereby improve EBITDA margins in the traditional LED business from around 10 percent today to around 13-14 percent going forward.

Sonia: So, what would that do to your overall revenues? In the nine months ended FY16, you did about Rs 1,040 crore of operating income, what is the expectation as we head into the end of FY16 and in FY117 as well?

A: We do not give out forward guidance on the revenue, but all I can say is that this year has been more muted due to the two core categories being flattish. We think that will get reversed next year and with the new initiatives being taken by the company in LED as well as our venture into getting into more and more appliances, the company should be looking at a much higher double digit growth in terms of topline which would compensate the bottomline very handsomely.