Structural changes underway; growth to pick in Q3: Havells

Sluggishness in industrial and residential demand led to a subdued June quarter earnings, Anil Rai Gupta, CMD of Havells India said. The company's total income decreased 0.8 percent to Rs 1,267 crore and revenue fell 4.2 percent in the quarter gone by. The company saw reduction in its switchgear, lightning and cables & wires revenues. One-off expenses led to below expectation numbers, he said adding that the company is undergoing structural changes in sales and marketing initiatives.

In an interview with CNBC-TV18, Gupta said though revenues have fallen, margins are positive except in the lighting segment. He expects further improvement in lighting segment with reduction in raw material cost. Gupta expects better growth in the second half of the year with pick-up in demand. “Industrial growth, generally, picks-up first than the resedential demand,” he said.  Below is the transcript of Anil Rai Gupta's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Latha: Both sequentially and on a year-on-year (Y-o-Y) basis, we have seen softness in the revenues and in the profitability, you don’t see any improvement on the ground?A: I think the sequential basis is not a comparison. The way we need to look at it is that the sluggishness in the overall macroeconomic scenario both on the industrial and the residential side started sometime in October and the revenues are the same that of October to December quarter. Last year, Q1 and Q2 were very strong quarters and on that because of the base effect, Q1 shows muted growth or flat growth. The major degrowth has happened in the industrial demand and the residential demand remaining flat as well as some consumer demand has grown. So overall net-net, we have not seen any growth in this quarter but this was something which was on the expected lines because we have always maintained that on the macroeconomic side, things do not seem to be seem to be looking up at this stage both on the industrial side as well as residential side.Sonia: Despite the softness in the commodity prices, after three quarters your margins have gone back to sub13 percent levels. What led to this weakness in operational performance?A: I think on the margin side, we have maintained margins, they are similar. In fact the contribution margins in all businesses have shown a positive improvement except in the case of lighting. Otherwise there is a positive change towards that. A lot of structural changes have been made and we are seeing the benefit of that. Raw material prices have also seen some impact and it has come down which is all a positive for on the margin side. I think the more and more the demand side of the things improve, things will be definitely better on the profit before tax (PBT) basis. We have kept investing on the brand and promotion side where again we have 3.7 percent of our overall revenues. We are quite satisfied on the margin front. I think the concern will be when the growth thing start coming up in the infrastructure, in the residential and in the industrial side.