Project business increased the finance cost of the company: Anuj Poddar, Bajaj Electrical

Anuj Poddar, Executive Director, Bajaj Electrical, spoke about the growth drivers for the third quarter, new distribution model and its impact, finance cost and how the budget will impact his business during an interview with Swati Khandelwal, Zee Business. Edited Excerpts: 

Q: Bajaj Electrical has posted good results in the third quarter of FY2018-19. Tell us about the growth drivers of this growth?
A: Our results are quite good and I am confident that investors are happy with it. Our top line has gone up from Rs1,100 crore to about Rs2,100 crore, which is a growth of almost 80 per cent and the bottom line has grown by almost 74 per cent. It is a record for us as this is the first time when our quarterly Profit Before Tax (PBT) has touched the figure of Rs100 crore. 

Both our business segments, consumer products and EPC business, have shown smart growth in the quarter. EPC business is a project business. This business has gained speed in the UP project, which we won last year, that has progressed and got executed in the October-December quarter. EPC business has had a contribution of Rs1,400 crore in our revenues in the quarter and there is a growth in the bottom line. The EBITDA has grown by 90 per cent. 

I am happy to inform that our consumer products, which is a stable, linear and consistent business have also grown by 26 per cent in the third quarter and 44 per cent in the bottom line. This business has also shown strong growth. This is the third quarter where we are showing double-digit growth in the business. In fact, the bottom line has shown more growth than the upper line and there is an expansion in our margins. 

Q: Provide guidance for FY2019-20? Do you think that you will be able to sustain the margins of EPS business?
A: I would like to talk about the two businesses separately. The product business is doing well, and I am confident that we will do well in Q4 and will keep performing in the next financial year. We will try to provide a higher rate of rate when compared with the market competitor. 

In the consumer products segment, the appliances category of the consumer product segment has shown good growth in terms of revenue and collection. I am confident that the growth cycle will continue to grow in the coming quarters. 

Q: The company’s finance cost has gone up. This cost will be brought down by?
A: The project business, where working capital is involved, has increased the finance cost of the company. On comparing the year’s working capital with the previous year you will find that our working capital for the year has gone up by around Rs500 crore. This addition had a direct impact on our interest cost. And, this working capital and interest will continue to grow until the project is on. But it is a factor and part of our costing and that’s why it is going to be a part of our margins. 

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Q: Rural India was a core of announcement in the interim budget. Do you think that the announcements will have an indirect impact on Bajaj Electricals, if yes, then by when? 
A: We are aware that it was an interim budget and that’s why we can’t see a big change in the tax proposals. But, it has two headlines announcements - annual support of Rs6,000 to the farmers and an exemption from income tax to people who are earning up to Rs5 lakh - will bring some money in the hands of people. I think that it may have a small impact on our basic consumer needs product that is sold by us. Having said that I feel that it will not have such a big impact on our business.

We can deliver double-digit growth in the consumer business even in its absence.