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Shekhar Bajaj, CMD, Bajaj Electricals
Apr 18, 2019 | Source: Economic Times
On possible slowdown in consumer discretionary market: Mr. Bajaj, CMD of Bajaj Electricals said the company is not facing much of a slowdown as they have been growing at 22-23% in consumer durable and even faster in appliances and fans category. However there is a bit of a slowdown in the lighting. Regards the channel, he mentioned that some bit of slowdown is observed in the military canteen segment. But otherwise, as far as the trade is concerned, it is more than 25% growth. He further added that every quarter Bajaj Electricals have grown by over 25% and he is expecting it to continue at 20-25% in the future as penetration levels in India are very low and the demand in rural markets is seen to be very high and the company is well placed to leverage out of this situation due to its strong distribution network in the rural markets.
On competitive scenario and market share dynamics post new listing of Polycab, having been ahead of the market in terms of market share growth in tier-2 and rural markets: Even if the listing of Polycab IPO happens, competition will remain in the industry as every year new players keep coming. But Mr. Shekhar Bajaj thinks the only entry barrier is the distribution strategy which the company has been working on for the last 2-3 years. Most of the players who enter the market give their products to whole-sellers for distribution over the country whereas Bajaj Electricals makes an effort to go to all of the 200,000 outlets on a weekly basis to offer its range of products which is possible for it given it’s strong distribution reach and an extensive supply chain that take care of the 200,000 outlets which it has build over the years which has enabled it to remain fairly ahead of competition and also capture market share in Tier-II and Rural markets. This is a significant moat the company has built for itself which is difficult for any new player to set up.
On long term strategy and SKUs: Bajaj Electrical’s long term strategy is to develop new products and product upgrades rather to increase the number of SKUs so that consumers have a choice and is not confused and so limited choice of products helps. With this strategy, Bajaj Electricals reduced its total number of SKUs from 1200 to 600 within 3 years. He said while, limited choice is good it is also important to have a full range of a product to fulfill the requirements of a consumer for example a fan should be available in 56 inch, 48 inch, 36 inch and 24 inch models to fit in a consumer’s bedroom, drawing room, kitchen etc. But at the same time having 20 different types of fans does not really help as the consumer wants to have a choice within new features of products. Bajaj Electricals are the pioneers in India for the anti-bacterial fan which is called the ‘Bye-Bye Dust’ fan which kills any bacteria that gets in touch with the fan. This new product offering was only recently introduced by the company and thus expects demand to sustain for many years going forward. The company has also introduced four new mixer grinders for the southern market where it is weak at present.
On impact of commodity prices and currency volatility on margins: The CMD said that during last year commodity prices were going up continuously in Q3 which hurt their margins. However, during Q4FY19 commodity prices have been under control especially in EPC business. In EPC business a lot of aluminium is being used and since the prices of aluminium have fallen the margin pressure has reduced as the contracts are fixed price contracts. He further added that cash flow timing becomes a very important aspect in EPC business as it depends on the speed of project completion and supplies and getting the payment based on that. However in the case of Bajaj Electricals trade business, cash flows are assured as they get the payment immediately on their sales.