The electrical goods company saw a 127 percent YoY revenue growth in EPC segment in Q2
Electrical goods company Bajaj Electricals that posted a 79.5 percent rise in its September quarter net profits is betting big on the Engineering, Procurement and Construction (EPC) orders from Uttar Pradesh to boost revenue growth. In an interaction with Moneycontrol, Anant Purandare, Chief Financial Officer at Bajaj Electricals talks about the business growth and future prospects:
Q: The company’s sales saw an almost 71 percent YoY growth in Q2. What are the factors that drove this growth?
A: The rise in sales is because of the execution of projects in Uttar Pradesh in the EPC segment. We had received this order in April 2018. In the first quarter, we took the time to establish the vendor base and now things have started moving.
Q: How do you expect the festive season to perform? Has the distribution footprint gone up?
A: The festive season is panning out well. We are expecting a good rate of growth. The consumer product segment is performing well and could see an overall growth of 30-35 percent.
The Range and Reach Expansion Programme (RREP) is reaching 170,000 retail counters. Also, the sales have been positive in the Canteen Stores Department (CSD) and Modern Retail Formats (MFR).
Q: Have factors like rupee depreciation and commodity price hike impacted margins?
A: Rupee depreciation and commodity price hike has impacted the margins in Q2. However, through a 2.5-3 percent price increase in October and in the latter part of the year, we will be able to cover it up. The price increase has already been absorbed in the market.
Q: Has the company started reaping rewards from the Nirlep acquisition?
A: We have started distributing Nirlep products in a full-fledged manner and are primarily selling in the West and East India. We are ramping up the production. Once we go pan-India, its impact will be seen in our books.
Among the other products, we have introduced new models in fans and mixer-grinders. But product development is a continuous activity.
Q: Is there any other acquisition on the cards?
A: While we are not actively pursuing any acquisition, we are open to looking at anything in the consumer space where we can leverage the distribution. We are open to proposals if it matches our scheme of thinking.
Q: On the EPC front, are there any other major projects on the anvil?
A: We are not actively bidding for new big projects. We are taking small projects in areas like illumination. In the power distribution space, we already have Rs 5,800 crore order pending (in Uttar Pradesh) which we have to complete.
Q: Has the exposure in Starlite Lighting come down?
A: The board has approved a corporate guarantee to the lenders of Starlite Lighting Limited (SLL), a joint venture of the Company, for SLL's proposed issue of non-convertible debentures of Rs 60 crore.
With this, the total amount of corporate guarantees given by the company on behalf of SLL stands at Rs 242 crore. But the overall exposure is not increasing.Starlite was set as a JV for manufacturing for CFL lights. Since there is a decline in the market for CFL bulbs, there are losses in the company. But the infrastructure is now being used for manufacturing other products for Bajaj Electricals.