Shekhar Bajaj, chairman and managing director of Bajaj Electricals Ltd, in an interview with Swati Khandelwal of Zee Business, talks about the growth in consumer durables business, the impact of rising commodity prices and strategy for digital sales.
Consumer durables segment registered a growth in the last quarter. Do you think the growth will continue?
Of course, we will grow by 15-20% in the quarter and this growth will be supported by the distribution network that is available with us. We are also reaping the benefits of the subsidiary that was opened under our expansion plan.
Commodity prices have increased in the recent past. Will this price rise will have an impact on your products?
Yes. Actually, we always try to avoid price rises and can bear it to a certain level. But we will have to increase the prices as the commodities are getting expensive and we will not be able to absorb it. In fact, prices of certain items have been increased and rest will see a hike in the coming two to three months. Engineering, procurement and construction (EPC) will have maximum impact, if there is any hike in commodity prices in the segment, as we cannot pass it on to them due to the availability of several orders of fixed prices. This may have an effect on our margins. However, the pressure on consumer durables will be passed on to the consumers as this hike will have an effect on everyone including me and everyone will look forward at hiking the prices. I can just say that we will pass it on in the market and the consumer will have to bear that.
There was a revenue decline in EPC business in the last quarter. What are your expectations from the business in this quarter?
EPC business has performed well in the second quarter and we are expecting that second-quarter results will help us to fill the gap that was created due to the backlog in the first quarter.
Do you think that EPC business will perform better than the consumer durables segment that overtook the EPC business for the first time in the last quarter?
The consumer durables segment is doing well and I hope that it will continue to perform. Besides, the peak season, October, has started and we will perform in this quarter too.
Do you think that rival Crompton's reduction in the cost of electric heaters by 15-20% will have an impact on your margins?
Crompton's distribution model is different from ours. They have a wholesale model and may go for special discounts to achieve their numbers. But we have closed the system and don't go for discounts or special deals and like to sell our products at a proper margin. We don't have any problem with Crompton and will be satisfied with whatsoever we are able to sell at our prices and margins.
Recently, the company inked an agreement to acquire Nirlep Appliances. Can you tell something about it?
Nirlep was bought two-three months ago and we have decided to sell its products through our distribution channels at more than 1.70 outlets linked to Bajaj Electric. Similarly, the products of Morphy Richards will also be sold through our distribution channel.
What is your strategy for digital sales?
We have a market share of 3-4% in digital space at present but it will grow with time. We will have a digital presence but will continue to grow in other segments like malls and modern format retail (MFR). In fact, all sectors are growing well and we want to balance all sectors to make sure that disturbances are not felt in the market, at least when 85% products of Bajaj Electric are sold through its retail outlets.
