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    Can Bajaj Electricals margin inch towards 9.5-10% now? Anuj Poddar answers

    Synopsis

    “The good news is that we continue to gain market share. We are confident about our product rollouts. We continue to roll out several new products. And in that process, we are very much on our premiumisation journey. So both from a direction of the brand and products, we are clearly coming up the curve. ”

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    “I am pleased with the performance of our company in the last quarter. There are a few headlines from our perspective, our sales are up 12.5%, of which our consumer business is up 9.5%. Our overall EBITDA is up about 10%. PBT is up about 25%. The other couple of metrics that we track, our cash flow continues to be extremely positive. It is about Rs 197 crore of cash generated in this quarter,” says Anuj Poddar, MD & CEO, Bajaj Electricals

    Walk us through your numbers for the quarter gone by. The margins are stable, EBITDA is up. PAT is up. Now, the quarter has gone by. When we spoke to you, you said business was okay but the numbers are not bad.
    Actually, the market is extremely difficult right now. The demand situation is fairly muted. One can see that commentary across all consumption related stocks. Again, there is some news in this morning's paper also that I read. People are not buying soaps and toothpaste and shampoo. That said, I always say our job as management is to continue to navigate these challenges.

    In that context, I would say that I am pleased with the performance of our company in the last quarter. There are a few headlines from our perspective, our sales are up 12.5%, of which our consumer business is up 9.5%. Our overall EBITDA is up about 10%. PBT is up about 25%. The other couple of metrics that we track, our cash flow continues to be extremely positive. It is about Rs 197 crore of cash generated in this quarter.

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    Our overall strategic direction in terms of EPC coming back to break even, that continues. Our market shares, we continue to defend or grow fans in particular, I know you will probably ask me because we have the star rating. Fans, we have had very strong growth at about 64% and have grown market share in that. All in all, it is a good performance in a very tough environment.

    One number which everybody looks forward to are margins. Now for the quarter gone by, I am looking at the EBIT margins. In a tough environment, they are not bad, 6.3 becoming 6.7. But in FY22, it was closer to 10. Now that inflationary pressures are kicking in, are you likely to start inching towards that 9.5% to 10% mark?
    Yes, but before that, I will just explain the margins. I want to get to a segmental margin. Our consumer margin is about 7.5% and that is after the impact of some three levers. Our portfolio mix this year in Q3 is very different. Typically, Q3 is strong on appliances, led by the heating category, which is high margin. This time, winter onset has been late. Heating appliances’ demand did not kick in and therefore, we have not got the benefit of those margins. On the other hand, because of fans doing very well for us, those are a lower margin product category for us. So that has done well for us but that has brought down the blended margin for us. That is point one.

    Point two, we have had a fair amount of discounting to offer for offsetting some of the consumption and muted demand situation. That is making into the numbers.

    Point three we have upped our brand spends significantly in this quarter, almost by 1% impact. If we roll that all back in, our margin performance is also good. Coming back to your question, the future outlook, while we do not give a guidance on a specific number, we are confident that we will continue to expand our margins.

    What is the good news for you? What is the bad news for you?
    The good news is that we continue to gain market share. We are confident about our product rollouts. We continue to roll out several new products. And in that process, we are very much on our premiumisation journey. So both from a direction of the brand and products, we are clearly coming up the curve. We have been at that for the past couple of years. We are starting to see traction on that. It is baked into our composition of our revenues.


    Fans was a category that we used to lag in. We are gaining market share there. And yes, one more segment is the lighting solution segment. That is starting to come into good shape for the second quarter on a running since the time we have carved that out, our margins in that expanded very sharply. Next year, we see us driving good revenue growth also, which will exponentially grow our margins in that business.



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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