Bajaj says the company is targeting an 18-20% growth in the lighting segment and a 20-22% growth in consumer durables. He further says they have not lost market share in lighting or consumer durables sector. In fact, he expects a 100 bps improvement in consumer durables margins.
In FY14, the company is targeting Rs 4,200 cr revenues and 20-25% growth.
Also Read: PM, industry leaders to discuss rupee fall on July 29
Below is the edited transcript of Shekhar Bajaj's interview on CNBC-TV18
Q: What is your total import content and how much do your raw material prices rise because of the rupee depreciation?
A: In consumer durables in Morphy Richards, 40 percent of our total turnover is imported products. In case of Bajaj Appliances it is about 20 percent. In case of fans and lighting it is about 10 percent. Therefore it is important that in case of Morphy Richards we need to pass on the rupee depreciation immediately because otherwise it is difficult to absorb it because 40 percent of 10 percent approximate depreciation would be 4 percent hit on the bottom-line of Morphy Richards. So there the increase which we have done partly in April and now we are doing it in July would be anything from 5-6 percent.
In case of appliances, because 20 percent of our total content is imports, there will be anything between 4-5 percent. And in case of fans it may be 2-3 percent and lighting also 2-3 percent is what we expect to increase. Volatility of the rupee is such that between yesterday and today the rupee has appreciated by almost 2 percent. So normally when we increase our prices we take into account that it should be something which we don't have to keep increasing and decreasing.
Q: This 3-5 percent that you have already hiked are for which products, should we expect more on fans and other products which you may not have. For which products have you already done the increase?
A: We have done increases in things like microwave ovens. In case of induction cooker, steam iron, prices have either have been raised in April or will be done in July. In fans because of competition and since the total impact is only 10 percent is imports so therefore even if we absorb a part of it, the total impact is only going to come 1 percent on the total fan business. So we may not do that at all.
Also in fans, July onwards it is offseason, it also depends on seasons. While in appliances the season is around the corner. So if we absorb it then there is too much of a hit in the season time and therefore normally in items which come from August onwards, September the season starts for appliances. So there the increase may be one more increase which we will take in September but just 2-3 percent, not more because we are seeing that some of the vendors who are supplying to us from China have agreed to give us a 2-3 percent reduction and also some value engineering which we are doing partly, we will be absorbing also.
Basically it is a matter of competition. If we increase it and others don't then you lose your market share. Therefore, we keep watching what others are doing and accordingly we decide. In fans, the competition is much more and our impact is less. So therefore 2-3 percent is sufficient.
Q: We are seeing a slowdown in consumer demand as well. So given the fact that you all have raised product prices across all your categories whether it is Morphy Richards and to a smaller extent even in the fans and lighting, are you expecting any kind of impact perhaps on the volumes there because customers might not be able to absorb the price increase. What would be your volume estimate for FY14?
A: What we are looking at value wise because that includes price increase also. In FY14, in the lighting segment, we are looking at about 18-20 percent, in consumer durable 20-22 percent and in our project business we are looking at a growth of 50 percent because we have got a very good order book and therefore as a company from Rs 3,400 crore, we are looking at Rs 4,200 crore plus. That is a growth of about 25 percent total.
Q: The street is also a little concerned about the losses in your E&P segment. In FY13 the loss in that segment stood at about Rs 124 crore. Could you provide us with some help, how will the E&P segment perform in FY14?
A: I had mentioned earlier also that there was some specific write-off which we did in the year 2012-13 which will not take place so therefore in the current year not that the working has improved but the write-off will not take place and to that extent there will be substantial improvement in 2013-14 and that is why for the year the company's performance should be very good.
Q: Is this the division where you say you have got orders?
A: Yes we have got orders over Rs 1,000 crore over there and that is why we are expecting Rs 680 crore, we are hoping to cross Rs 1,000 crore turnover in E&P. Of that most of the orders had good pricing. So even a certain amount of old write-offs are still pending. Overall, we are looking at a positive EBITDA against last years Rs 125 crore negative EBITDA, we are looking at a positive EBITDA for the current year.
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