Our Consumer business performed well in Q4FY20: Anuj Poddar, Bajaj Electricals

Anuj Poddar, Executive Director, Bajaj Electricals, talks about Q4FY20 results, inventory level and demand and focus areas in the post-COVID era among others during an exclusive interview with Swati Khandelwal, Zee Business. Edited Excerpts:

Q: Results of March quarter of the financial year 2019-20 are weak. Can you let us know about the reason that led to the fall and also quantify the impact of COVID on your business?

A: The numbers you are talking about is a consolidated number and I have always said that our company is engaged in two different business (i) consumer products business and (ii) EPC business. So it is important to have a segmental look at the results. If you have a segmental look that the numbers of consumer product business are very good and is better than the number of the entire industry. The consumer revenue has been flat in the quarter despite the lockdown in March. However, the industry has shown a slowdown and revenue has remained flat in the consumer segment. The EBITDA margin of the consumer segment has grown by 37% from Rs 37 crore last year to Rs 50 crore in Q4FY20. Thus, consumer numbers are very good. As far as EPC Business is concerned then at the start of the year, we said that we know that there will be a slowdown in the EPC segment as we didn’t have a focus on new projects but had a focus on the execution of the current projects. Thus, EPC comparison with the last year’s performance is wrong. So, the slowdown that is visible on the consolidate part occurred just due to EPC business, which on a standalone has moved in accordance to our strategy and plans, while the consumer business has done well. 

Q: Can you brief us about the existing inventory level and the kind of demand you are seeing across segments under Unlock 1.0? What is your outlook in terms of sales?

A: Our inventory level is sufficient. In March, we had enough inventories in our stock and production have started at our factories and that’s why there are issues related to inventory and supplies. As far as demand is concerned then we had almost zero sales in April due to the lockdown. However, the sales started from May 4, 2020, and pick up after more relaxations were granted on May 17, 2020. It has been one month and the sales of May have been better than our expectations. It remained above the expectation because we thought that the entire quarter would be washed out but it is not so and there was a pick up in the sales, which got better in June. If I will talk about the products than our products are basic consumer products and are not counted among the expensive or luxury discretionary products. These products, like fans, lights, toaster, press, cooker among other things, are low-value items and are considered as essential products for homes. It was a summer season, so the sale of the fan was remained well, which was followed by the kitchen appliances sale. Rest of the items has also been good. So, the overall pick-up trend of the demand seems to be a decent one. 

Q: Do you think that there is a product or segment in which you would like to enter and there is an opportunity for product diversification? 

A: Currently, we are not looking towards the new product for diversification but we are focusing on the existing category of products in a way where we can push more the products of basic and essential needs and defocus the premium or luxury products in the same category. But, we don’t have any focus on new products.

Q: How much sales are taking place in online Vs brick and mortar format at this time in percentage terms? What are your terms towards digital push?

A: If you talk in general terms than we all know that the online format has grown well even last year and is growing. We all expect that online sales will grow at a fast pace after the COVID-era and I also expect the same thing. But, we will have a look especially in this one month than the offline sales from the local shops, local electrical appliances, and neighbourhood stores have been better than the online sales. It happened also because as per the government regulations, the local shops were allowed to open earlier than an online platform, who haven’t been permitted to sell non-essential goods in red zones. Thus, online sales haven’t grown in the way that we expected in this one month but I think online sales will pick up at a great speed as things have opened more. 

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Q: Your debt during the last quarter was around Rs 800 Crores. What are the current debt levels and what are the plans to reduce it? Do you have fundraising plans?

A: Earlier, we have talked about P&L and we have had a focus on the balance sheet for the entire year. If I will talk about the balance sheet of a year ago then our debt level in March 2019 stood at Rs 1,585 crore and has come down to Rs 962 crore this year. Thus, we have reduced our debts by around Rs 600 crore in one year. Besides, we also raised a fund through a right issue in March under which we were able to raise Rs 350 crore via shareholders. Our debt-equity ratio which stood at 1.5 in March 2019, has come down to 0.75, which is a great improvement in the balance sheet. At the same time, we also had a focus on the cash flow from operations across the year and it stands at Rs 626 crore in FY20. This is in comparison to FY19 when our cash flow was negative Rs 620 crores.