‘Uniross buy will give Eveready a base in China’

Eveready Industries is ready for the charge again. The dry cell major, which is back in the black, is acquiring France-based Uniross SA, one of the leading companies in the rechargeables market. It is also looking at revving up sales from the non-battery segment in a major way. Deepak Khaitan, vice chairman, Eveready Industries, spoke to DNA on the company’s plans and strategies. Excerpts from the interview:

This is your first overseas acquisition, do you think this is the right time?
Yes, we always aspired to go in for a global acquisition and this is Eveready’s first. Last week our group company McNally Bharat went in for an acquisition in Germany. If we had to go in for an acquisition in Europe, we had to do in nine months. The costs still are reasonable enough and we have to shell out around 70 crore for an 80% stake in Uniross. We have inked a term-sheet with France-based CG Holding through which the company will invest up to euros 7-10 million in an overseas JV by issuance of fresh capital. This company, in turn, would acquire a substantial controlling stake in the French company. There is never a right time, rather it an opportune time I would say.

Are you funding it from the proceeds of the HDIL deal you received recently?
No, we used the amount received from HDIL for transfer of our leasehold premises at Navi Mumbai to pay off our debts to some extent. We are funding this acquisition through our internal accruals and debt. We will be awaiting regulatory approvals in France and other countries and hope to complete formalities by end-June. Uniross has a turnover of euro 40 million and about 300 people and they would continue with their own brand in the companies where it operates.

What edge do you get through this buy?
Rechargeable batteries are doing well and will gradually replace alkaline batteries. Moreover, we were since long sourcing these from China. With this acquisition, we will have manufacturing facility in China through Uniross. We would look into marketing Uniross batteries in India.

Compared with other FMCG companies, aren’t you highly leveraged?
Perhaps that is a thing which we are bothered about at times. We have an outstanding debt of Rs 300 crore, including Rs 120 crore of working capital. We should reduce it by around Rs 100 crore subsequently. We think for a company like ours we can carry a debt of Rs 200 crore so I don’t think that this acquisition is a burden for us.

As a company, your turnaround over the last one year from a net loss to gain has been impressive...
Yes, a net loss of 19.32 crore in 2007-08 has turned into a net profit of Rs 19.40 crore, which is a 200% positive change. The price of zinc has had a substantial influence on input costs which had been easing over the last few quarters. Moreover, the year was one of cost cutting and consolidation. We shut the Hyderabad factory which helped us save around Rs 6-7 crore.

Was it necessary to close down the Hyderabad factory?
The plant was getting unremunerative as the volumes of D-size batteries had dropped. With price increases, there was consumer resistance and demand started slowing. The de-growth of 10% was very pronounced in D-size batteries which is sold in rural areas and is generally price sensitive.  Our Kashipur factory in Kolkata is shut and we are negotiating with labour to reopen the plant.

What kind of growth do you estimate this year and do you have enough capacities to take care of this?
Eveready is on a growth path. We are looking at 10-20% growth in the current year and we see significant revenue and profitability. We have sufficient spare capacities in our other units in Delhi, Hyderabad, Chennai and Haridwar to take care of any additional capacity needs.

What is your break-up in battery and non-battery business and which segments are you bullish on?
The turnover from battery in three years will drop to 45% from 70% at present. Both compact fluorescent lamps (CFL) general lighting service (GLS) lamps will be the key focus this year.  Both these should bring in Rs 100 crore. Other businesses like tea and repellants will add to the turnover.

Are you planning any new brands?
We just launched high-technology batteries under the Ultima series. We expect to increase the share of this in urban high-end outlets. We are also planning a huge campaign around some of the brands which could see ad marketing spends of around Rs 45 crore.