BAJAJELECNSEQ4FY22May 20, 2022

Bajaj Electricals Limited

7,186words
91turns
14analyst exchanges
3executives
Management on call
Anuj Poddar
EXECUTIVE DIRECTOR.
E. C. Prasad
CHIEF FINANCIAL OFFICER.
Dhruv Jain
AMBIT CAPITAL
Key numbers — 40 extracted
Rs. 260 crore
good cash from operations. We have done that over 12 quarters consecutively. In Q4, we have had Rs. 260 crores of positive cash from operations. On an annual basis, this year it has been over Rs. 900 crores
Rs. 900 crore
Rs. 260 crores of positive cash from operations. On an annual basis, this year it has been over Rs. 900 crores of cash from operations. Coming specifically to the revenues, on an overall basis, we have had a
6%
Coming specifically to the revenues, on an overall basis, we have had a revenue in Q4 of about 6%. Within that, the consumer business has grown at about 6.4%. This is the third consecutive quarte
6.4%
s, we have had a revenue in Q4 of about 6%. Within that, the consumer business has grown at about 6.4%. This is the third consecutive quarter for us of over Rs. 1000 crores of revenue being clocked in
Rs. 1000 crore
e consumer business has grown at about 6.4%. This is the third consecutive quarter for us of over Rs. 1000 crores of revenue being clocked in our consumer business. If I further dissect - and this you may have
20%
in which is fans and lighting, we started gathering pace on that. Fans category has grown by over 20% for the quarter as well as on a per annum basis as well as lighting has grown by over 32% in Q4.
32%
by over 20% for the quarter as well as on a per annum basis as well as lighting has grown by over 32% in Q4. Happy to talk about both of this going forward. Appliances has high base effect. Last ye
5%
base effect. Last year Q4 was continuously due to pent up demand. So, that has de-grown by about 5% but on a 2-year CAGR basis, appliances have grown by about 14%. On the other side of
14%
d. So, that has de-grown by about 5% but on a 2-year CAGR basis, appliances have grown by about 14%. On the other side of the business, the EPC on an overall basis has broken even, report
16%
business continues to drive growth for us. On a full year basis, illumination has grown at about 16% at the time when the industry overall in that business has actually de-grown which means we have
30%
, I am just wondering the fans growth and the lighting growth that we are seeing which is 20% and 30% plus, this would have been higher had things would have been normalized even on the rural side.
Rs. 1,100
es. While there is a significant improvement in the balance sheet, receivables are still at about Rs. 1,100 odd crores. Can you help just decipher what exactly is sitting over here? How much is from EPC? Ca
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Guidance — 20 items
Anuj Poddar
opening
“We are ahead of guidance on that because our guidance was to achieve that by end of this fiscal on a standalone Bajaj Electricals basis and then take a few more months to do that on a consolidated basis but we have achieved that on a consolidated basis.”
Anuj Poddar
opening
“Happy to talk about both of this going forward.”
Anuj Poddar
opening
“So, that has de-grown by about 5% but on a 2-year CAGR basis, appliances have grown by about 14%.”
Anuj Poddar
opening
“Rural demand continues to be soft, relatively in this entire fiscal, but going forward, from anecdotal information that I gather, hopefully, we see in FY23 in a few months from now, rural demand should also pick up.”
Anuj Poddar
qa
“To that extent, that will be a headwind for us in a weak rural economy, but I think, like I said, going forward, I do expect the rural economy to pick up and therefore that should come back to us.”
Anuj Poddar
qa
“Rahul, I vaguely remember Cisco one but that was I think a project-specific tie-up.”
Chetan Gindodia
qa
“Going ahead, how do you see the consumer segment margins in the medium-term basis?”
Anuj Poddar
qa
“In terms of the future, while we can’t share our projections on margins, etc., going forward, we do think FY22 has been an aberration in terms of commodity costs and therefore margins, and as these cool off, we hope that at least the latter half if not all of FY23 will come back to normalized margins or normalized margin expansion program.”
Anuj Poddar
qa
“We may going forward, once the demerger happens, do that, but I will just tell you it is in single digit positive zone.”
Rajesh Kothari
qa
“Just trying to understand a little bit more about the degrowth in appliances, you briefly touched upon the rural slowdown, but I think it will be great if you can give a little bit more color because at times it becomes very difficult to understand such a stark difference between the performance of various companies.”
Risks & concerns — 8 flagged
It has been and continues to be a tough business environment, particularly due to supply chain disruptions and commodity cost pressure.
— Anuj Poddar
To that extent, that will be a headwind for us in a weak rural economy, but I think, like I said, going forward, I do expect the rural economy to pick up and therefore that should come back to us.
— Anuj Poddar
Just trying to understand a little bit more about the degrowth in appliances, you briefly touched upon the rural slowdown, but I think it will be great if you can give a little bit more color because at times it becomes very difficult to understand such a stark difference between the performance of various companies.
— Rajesh Kothari
This quarter, like you said, I have seen more fluctuation in topline performance and on comparing to the best player, our growth is not the same, but the other players have had a decline in overall revenue.
— Anuj Poddar
I think that will give us that flexibility to do that in a risk calibrated manner.
— Anuj Poddar
It used to be higher, but this year, as I said, e-commerce has seen a certain slowdown in their growth as a platform not to do with Bajaj Electrials particularly.
— Anuj Poddar
So, Morphy Richards firstly yes it has been a disappointing performance through this financial year for two, three reasons not to be defensive last year was an exceptional performance so there is a high base effect, but I do not think that good enough reason for us to decline this year.
— Anuj Poddar
So, maybe in FY24 you may see start seeing the impact of product roll out in Morphy.
— Anuj Poddar
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Q&A — 14 exchanges
Q
I have got a couple of questions. You touched on some of that when you said rural has impacted the growth. Is there any way you can give us a sense how much is rural ultimately contributing to the overall ECD business? because we have seen strong growth coming from the fans and lighting business. I am just wondering whether it is appliances which is actually dragging largely by rural or what is happening over here when you break up the ECD business.
Anuj Poddar
Rahul, as you know, we don't publish the mix or specific slicing of data between rural and urban for various reasons including the accuracy question on that. It’s more anecdotal or direction, but rural continues to be soft and our exposure to rural is significantly higher than competition, a few times that are higher from the numbers that at least other than I spoken about that have picked up here. To that extent, that will be a headwind for us in a weak rural economy, but I think, like I said, going forward, I do expect the rural economy to pick up and therefore that should come back to us. D
Q
Just wanted to understand on the consumer segment. Margins for the consumer segment were impacted because of the RM inflation. So, what kind of price hike have we taken in Q1 already and will this price hike cover for the RM inflation of 200 basis points that we saw in this quarter? Going ahead, how do you see the consumer segment margins in the medium-term basis?
Anuj Poddar
Chetan, the price hike we have taken is about 5% average in April for most product categories led by fans. We had planned another price hike into Q1 but now we are waiting and watching on that for 2 things, both to see some competition action - some of them have announced the price hike in May but I don't think that is fully implemented as well as we are starting to see in the last 1- or 2-weeks certain softening in commodity pricing trends. Based on both of these aspects, we will decide in the near future a second hike whether we take that in this quarter or not. So, far, we have taken about
Q
Just trying to understand a little bit more about the degrowth in appliances, you briefly touched upon the rural slowdown, but I think it will be great if you can give a little bit more color because at times it becomes very difficult to understand such a stark difference between the performance of various companies. 1) So, can you elaborate a little bit more? 2) While the market upturn/downturn all these things do continue, what is our strategy in terms of the new product launches and the responding to the market? What is the average decline in rural? what is our decline in rural? Have we don
Anuj Poddar
On your second question first, based on the research that we get in third-party research data that we have, we have not dropped market share either rural or urban. If anything, we have grown a little bit of market share in the urban India, not dropped in rural. While our aggregate growth may not be as good as the best player. When you cut that between rural and urban, we are holding market share. This quarter, like you said, I have seen more fluctuation in topline performance and on comparing to the best player, our growth is not the same, but the other players have had a decline in overall re
Q
What I wanted to check was, is it possible to give some color in terms of price hike in some of the key categories in the entire full year FY22 - say fans, appliances, lighting?
Anuj Poddar
Achal, I don't remember each category, but overall we have taken in the range of 12% to 17% in the calendar year from January until about August 2021. Post August 2021, we have not taken any price hikes - August or September 2021. The next price hike that we have taken is in April 2022. The next question I had was with respect to the status of the UP project. Where are we in terms of the closure and how do we see the momentum in the EPC business? Do you think it will be maintained at the current levels or you think it could see some increase? because I think the order book for TLT has at least
Q
Just a couple of questions. Regarding e-commerce, we just wanted to understand like what is the share of e-commerce in your sales if the company is mapping it platform-wise? And any significant change in strategy post-Covid for focusing on e-commerce? My second question is regarding BAJEL. We just wanted to understand whether it will be a separate carve out and is the company looking at illumination, distribution, transmission, the same mix of projects or something beyond that?
Anuj Poddar
The e-commerce share on a full-year basis is about between 11% and 12% of our total sales. It used to be higher, but this year, as I said, e-commerce has seen a certain slowdown in their growth as a platform not to do with Bajaj Electrials particularly. In terms of focus, yes, it very much remains the focus. We expect to continue to drive the growth in that going forward. Covid has only accelerated that, but irrespective of Covid, we expect that to remain a growth channel for us. I do believe it will come back to higher growth rates than other channels very soon. In terms of Bajel carve out, t
Q
In our conversations, we used to speak 1 year back I think we had a strong road map to reaching double digit margins in the consumer business, especially by targeting a lot of low- hanging fruits. Just wanted to get a sense on where we are when we think about that trajectory, and if you could just remind us again what are the low-hanging fruits that we can target to kind of at least get to double-digit margins in the consumer business?
Anuj Poddar
Vihang, to be honest, there are no low-hanging fruits, not in this environment. We are in a tough environment. Had it not been for this last 1 year the unprecedented commodity price hikes, etc. To be honest there are no low hanging fruits not in this environment we are in a tough environment and it has not been for this last one-year unprecedented commodity price hikes, etc., a cost hike we would have been in a double digit hopefully in FY22 which is why I am hopeful that FY23 assuming these things start cooling off at least second half of the year we should be getting back to normalized margi
Q
My first question was on fan so you have done extremely well in overall fan. I just want to know what kind of market share we would have gained this year and second where are we in terms of profitability? I remember that our overall fans profitability was well below the overall consumer product division margin, so how are we tracking there?
Anuj Poddar
First question on fan we do not publish a top market share, but I will give a sense internally I think we would have gained about 2% to 3% points on market share, but from a rank is what we are looking at and that is what we have spoken on in my past where we used to be a number five rank player I think as of date we will be a number four players we moved one rank above. We will continue to try and improve our rank in the fans category. Sorry your second questions on the margins I did not fully hear that. So, our fans margins were relatively lower compared to our overall say consumer product d
Q
I had just one question remaining in this result I see there is an enabling revolutions to rate for Rs. 300 crore I wonder, can you just throw some light on that especially given your balance sheet has improved so much, what is this?
Anuj Poddar
Rahul we did not need a debt, we do not have any immediate plans to raise debt. It is purely enabling as the resolution says for two reasons if in a future for any reason, but you want to raise debt this would have access to that I will bring EC and just finish comment on it and also because more from this access to market credit rating, etc., we may choose to sometimes this has some effect of it from a treasury operations so we active in the CPM debt market while maintaining cash. So, that is more from being active and having the enabling opportunity should be required, but the reason to have
Q
I just wanted to check in terms of preparedness for the energy change norms with respect to fans portfolio where are we, how do we see that impacting us as well as the industry and what kind of cost impact this BLDC change could have on a per fan basis if there is any unit?
Anuj Poddar
Achal from a development standpoint we are prepared for that just as of Thursday or Friday the government has published the gazette notification for the new star rating that said along with the gazette notification there is a second part which is a regulation and rules for the transition that was due to be published anytime this week we are waiting for that, what that will determine the exact transition plan is to when one can manufacture and sell the non-star rated fans basis that we will have to decide a production and supply and go to market timing. When I say we I mean that is comment to a
Q
Sir can you give me the number of year-on-year growth on Morphy Richard and fans business compared to FY21?
Anuj Poddar
Morphy has degrown on a full year basis Morphy has degrowth about4.6%. And appliance business sir? Appliance has grown 13.5% full year basis fan is grown 20.9% and lighting has grown 9.8% is all whole year number.
Q
Sir my question was on lighting portfolio so in last few concall you have said that lot of work needs to be done for lighting side, so I just wanted to get an update where are we in terms of that and what kind of outlook you share on overall lighting segment?
Anuj Poddar
In the earlier quarters I have been saying that from FY23 you will start seeing better performance from us on consumer lighting, but you got a sampler of that in this quarter itself Q4 where you are seeing that it is in the back of more product launches and also product launches in the space of backends and panels, etc., which traditionally we have not been strong and if that continuous we will keep rolling out more products in the coming in this ongoing FY23 fiscal and as that happens our share or revenue continue to grow and a margin should also continue to improve because these are higher v
Q
One question regarding Starlite Lighting Limited merger could you elaborate on it a bit and once merged is it going to significantly add to your sourcing requirements let us have significant impact, will it ease your sourcing or it is not going to have a significant impact let us say 5% or 2%, 10%, what is the sourcing that you will receive from that number?
Anuj Poddar
So, the next steps on the Starlite Lighting is 31st of May we have a shareholder meeting for approval of the merger post that I think we should have a visibility on the merger actually taking place. In terms of the sources so that sourcing respect to this corporate actions, sourcing we have been doing from Starlite any which way we have historically been sourcing from the water heaters, Starlite capacity of water heaters has been increasing therefore to that extent sourcing from them for water heaters has been increasing. The other product category that in the last I think 18 months in the set
Q
Sir you shared my question is pertains to the inventory level of the consumer product category recently we have seen substantial rise in the inventory level of most of the consumer companies either due to because of significant price rise or building up the inventory larger to cover up the upcoming demands and due to supply disruptions provide the supply disruptions and all, but for our case I believe there is kind of a flattish inventory in the consumer product category, so is it change in any strategy building up the inventory in the company side or anything else how can we read this is my f
Anuj Poddar
To be honest I think it may be relatively flattish because March 21 and 22, but I think March 21 probably was much higher than March 20 was if I remember correct for at least March 19 for sure. I would just say March 21 itself for the slightly elevated inventory therefore to that extent I think this is elevated by yard sticks we would want it ideally to be lesser than this, but we are not fully able to do that because like you said COVID disruptions etcetera. So, we have to sometimes keeps some buffer to maintain what supply you get when, it is not easy now a days to plan that accurately as we
Q
Thank you very much and thanks everyone for joining us. We believe that in a tough environment we have had a good reasonably good quarter both on set on the milestones that we hit on the P&L basis and most important the milestone that we hit on a balance sheet which is being three years in the making we are happy with that. Going forward I think the big driver for us this year will be the demerger that we will see through in coming years in Calendar Year 2023 onwards we look forward to driving growth across all these businesses in that two independent entities.
Management
Speaking time
Anuj Poddar
36
Moderator
16
Chirag Lodaya
8
Achal Lohade
7
Rahul Gajare
5
E. C. Prasad
4
Rajesh Kothari
3
Manjiri Bapat
3
Chetan Gindodia
2
Vihang Subramanian
2
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Opening remarks
Dhruv Jain
Good evening everyone. Welcome to Bajaj Electricals 4QFY22 Earnings Call. From the management side, today we have with us Mr. Anuj Poddar - Executive Director and Mr. E. C. Prasad – CFO. Thank you and over to you, sir, for your opening remarks.
Anuj Poddar
Good evening everyone. I thank you for joining our Investor Call today. I will just share quick opening comments. Hopefully, you have all seen the Financial Results as well as the Investor Deck Presentation which we started publishing from the last quarter to give you a little more texture and qualitative information around the results. It has been and continues to be a tough business environment, particularly due to supply chain disruptions and commodity cost pressure. That said, in that environment, we believe we have had a good quarter. The good news from our side as you have seen the single-digit milestone that we have working towards the last 3 years is achieving a net debt-free status. We are ahead of guidance on that because our guidance was to achieve that by end of this fiscal on a standalone Bajaj Electricals basis and then take a few more months to do that on a consolidated basis but we have achieved that on a consolidated basis. This is on the back of continued good cash fr
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