The Hindu Business Line : Biz recast, Chinese strategy brighten Bajaj Electricals

"WHEN everyone was worried that cheap imports from China will drive Indian products out (of the market), we realised the benefits of China's mass production capability and used it to our advantage," says Mr Shekhar Bajaj, Chairman and Managing Director, Bajaj Electricals, makers of consumer electrical products.

The Chinese strategy coupled with the restructuring of business has helped the Rs 550-crore company come back strongly on the growth track after trudging slippery terrain for over a year. The company has reported Rs 11.36 crore profit-after-tax for the year ended March 31, 2004, as compared with the loss of Rs 10 crore in the previous year.

Mr Bajaj, the unassuming boss at Bajaj Electricals, attributes the turnaround of the company to a multi-pronged strategy that includes cost-cutting, exiting non-core business and enhancing market share. The Chinese strategy also helped, said Mr Bajaj in an informal chat with Business Line.

Bajaj started looking at Chinese products in 2000 when they started flooding the local market. They were cheaper but of low quality. But the company saw the Chinese potential in manufacturing.

Wasting no time, Bajaj put in place a China outsourcing strategy. And the company also tied up with one of the largest fan manufactures in China - GD Midea Holding Company - for joint branding of products for the Indian market. Today Bajaj outsources several products such as steam iron, toasters, microwave ovens, sandwich toasters, room-heaters etc.

"Chinese have the advantage of scale. But you have to be careful when dealing with Chinese manufacturers. There are plenty of low quality products," said Mr Bajaj.

The company currently has a market share of 10 per cent in lighting, 15-20 per cent in appliances, 17 per cent in luminaries and 55 per cent in high-mast lighting.

"The company has improved its market share in almost all segments such as fans, appliances, luminaries and engineering and projects," said Mr Ramakrishnan, President and Chief Operating Officer, Bajaj Electricals.

"We took a 365 degree view to achieving excellence in the key areas of operations, including sourcing, distribution, cost management and customer care," said Mr Ramakrishnan.

In lighting and fans, Bajaj hopes to grab the unorganised sector's market share. This will also help gullible customers who are deceived by suppliers of fake and low quality products, said Mr Bajaj.

He said the business restructuring that begun two years ago started yielding results last year. The company had initiated a transformation process that led to the introduction of strategic business unit structure in Bajaj Electricals.

Today the company runs its business under five strategic units (SBUs): Lighting, luminaries, appliances, fans, and engineering and projects.

"Our focus was on achieving a turnaround in performance by aiming for sustainable growth. We achieved good revenue growth while controlling expenses and improving margins," said Mr Bajaj.

He expects the company to bring in revenues of more than Rs 600 crore in the current financial year. Last fiscal, the company reported a turnover of Rs 503 crore. The engineering and projects business is expected to contribute the major part of the increase in the turnover. The company's Ranjangaon plant that makes transmission lines and telecom towers is expected to show revenues of Rs 100 crore this year, he said.

More Stories on : Performance | Strategy | Restructuring | Electrical Goods

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