'Being power surplus is just one part of business plan'
Lighting and a comfortable ambience are the basic building blocks of most business operations, except perhaps a factory. Bajaj Electricals, part of the Rs 33,000-crore Bajaj Group, has been in the business of making and selling fans, luminaries, bulbs etc. for 75 years.
Lighting and a comfortable ambience are the basic building blocks of most business operations, except perhaps a factory. Bajaj Electricals, part of the Rs 33,000-crore Bajaj Group, has been in the business of making and selling fans, luminaries, bulbs etc. for 75 years.
The Rs 4,000-crore company has been profitable for most of its history, though it has now seen two consecutive quarterly losses, something that its executive director, consumer businesses, PS Tandon, dismisses as a one-off thing but refuses to divulge further. The company has also entered into an arrangement with UK-based appliances brand, Morphy Richards, where both gain through each other's strength in terms of reach and better targeting.
HT brings you excerpts from a conversation with Tandon and Morphy Richards business head, Vivek Sharma, on the sidelines of a dealer meet in the city to mark 75 years of the Bajaj Electrical's business in India, held here.
HT: What is your view on business potential in the region, especially Chandigarh?
Tandon: We are betting big here as this is one of the best cities to live in and we hope to increase our turnover. A proposal is afoot to open another of our flagship store, Bajaj World, in the region. Currently, our sales in Punjab, J&K, Haryana and Himachal are at Rs 180 crore, which is roughly 5% of our national sales of around Rs 4,000-crore.
HT: What are the new products you are offering?
Tandon: We have forayed into making of non-electrical appliances, which we believe is a good area, though there is intense competition here with big names already settled. We sell pressure cookers, non-stick cookware etc. We are innovating and targeting our fans for customer segments such as a Disney character or designs on the blades of fans for a child's room etc.
HT: Your business depends on power availability and quality. Do you buy Punjab's claim that it is power-surplus now? What is your feedback on this?
Sharma: Yes, in power availability per capita, Punjab ranks fifth in the country. Yet, as most of it is supplied to agriculture - mostly free - our business is constrained to that extent. We want power availability to increase, but we have then innovated to offer products that can withstand poor power quality
Tandon: I don't know. The issue is a huge impediment for us. Across the country, my sense is that we have power shortages of up to 40%. As a counter measure, we want to diversify. Power is more of a broad macroeconomic issue.
HT: Any light on why the loss over last year?
Tandon: It was a one-time hit. I can assure our investors and stock holders that we still have good margins in our business. By the next quarter, we will be back in black. Our scrip also continues to trade well.
HT: Any plans to hike prices of your products?
Tandon: No such plans as yet, we are doing fine.
HT: What is the penetration of your product range in these northern states?
Sharma: In terms of ground to cover, we have a long way to go. You will perhaps be surprised to know that only these two products, irons and mixer grinders, make up to 40% of our revenues. Less than 10% of kitchens across this region have any other product in kitchen appliances.
Tandon: Bajaj is a fairly well-known group. Our fans and lighting are doing well and now we offer LED lighting too. Our diversification into non-electrical kitchen appliances should do well but we face strong competition in the segment.
HT: Tell us more about the business arrangement between Bajaj and Morphy Richards?
Sharma: It is a win-win situation where we try (Morphy Richards) and position ourself as a premium offering, though we remain a separate company. They gain by our name and expertise; we tend to gain by their local connect. Though, none of our distributors is allowed to sell Bajaj products.
HT: What about expansion plans?
Tandon: We have expanded out Mathura plant and added certain new equipment at a cost of around `12 crore to manufacture more tubes.
Sharma: All our products are imported.
HT: Did the mid-year rupee fall hit your margins?
Tandon: The important raw materials in our business are copper and aluminium, so yes there was some impact. However, we do hedge against such currency fluctuations in a sense that supply is tied to a particular price for a specified time. Also, not all our commodities are imported.