Orient Electric will invest around Rs 150-170 crore in the Hyderabad unit: Rakesh Khanna, MD & CEO

Rakesh Khanna, MD & CEO, Orient Electric, speaks about the Q4FY21 numbers, demand amid ongoing lockdowns in many states, price hike plans and Greenfield unit in South India among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts: 

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Q: Q4FY21 numbers are strong with good revenue growth across the segments but we see the margins did not expand as per the expectations. So, please share the highlights of the quarter? Also, going forward, how are you gearing up for the situation that is panning out?

A: Our results are good but you will have to see that it is based on a low base. Last year, the lockdown was implemented in the last week of March due to which there was a negative growth for us as well as our industry. So, if you keep that in mind and see the results then it is a reasonable number, it is around 25% growth on the year before last, which on an aggregate basis is around 12% growth, which is good growth. Overall profit has also improved there has been a significant control on the cost due to which our profits have improved a bit. So, that’s the overall look of the business.

Q: But going forward, situations seem to be quite uncertain and lockdowns are being enforced in different states. So, how April and May have been for you and what is your outlook for the first quarter?

A: April was fine because lockdown was enforced at very few places in April and business was fine. But towards the end of April, there has been a situation similar to the national lockdown. But, one thing is sure that products like the fan, light are necessary products and are not discretion products. So, whoever needs a fan, needs a fan, maybe he is sick or is at home. It is a basic necessity. So, I don’t think that demand for products like fans and lights and other basic home appliances like mixer will fall a lot. Because, currently, the governments are not implementing complete lockdown, they opt for lockdown but for a small-time but also opens it for some time, during which the consumer comes and buy the material. So, I personally hope that the demand for these products will be there and they will not fall a lot but see how the whole situations unwind. Currently, the situation is quite unpredictable. 

Q: Have you taken any price hike in the last three months and is there any possibility for a price hike, if yes, what can be the quantum on which you are working?

A: Cost has increased a lot. If seen honestly, the prices of steel and copper have increased by 40% since October. ABS has almost doubled in this period. So, a lot of cost increases have been there. To some extent, we have increased the prices and we have absorbed it in the margins. But, going forward, if the material cost will continue to increase strongly, then the price increase is bound to be taken, it will be necessary. But as far as possible, we will control it, cost of rest of the things is being controlled and passing as much less as possible but for the final survival, we will have to pass on the cost. 

Q: What can be the quantum of increase and what are the timelines for the same?

A: We are taking consistently a price increase. We took a 5% price increase back in the fourth quarter, then took a 2% increase and now have announced a 5% price increase. Still, the margin is under pressure. So, looking at the situation, we will continue to make a decision. We expected the prices will stabilize but it doesn’t seem. Prices have increased a lot between March and May. So the situation, as I said, is quite unpredictable and we will continue to take decision time-to-time. 

Q: The company has planned a Greenfield unit in South India. Tell us more about it and what would be the CapEX and how will you fund it? Also, tell us about your expansion plans?

A: As of now plan, which is a unit of Hyderabad, we will have an investment of about 150-170 crores, and have not decided on how we will fund it. Right now, we are cash surplus and we will take its decision depending on the time. In terms of capacity, sufficient capacity is available with us and fortunately, we are not a very heavy CapEx industry. We are constantly working on productivity and automation due to which the productivity of our current plant and current lines is getting enhanced constantly. So, as of now, there is no capacity constraint. But the plant we are setting is a Greenfield is completely greenfield because, in the long term, we are seeing the quality, total growth of the business and the level of the international business and keeping the same in view, we have planned related to south. And, we will definitely increase our capacity there.