The Hindu Business Line : `We'll take a final call on capacity expansion by 2006-end'

BIFURCATION of Eveready Industries India Ltd, the flagship company of Mr B.M. Khaitan, which was being discussed for long, is finally over. While Eveready Industries would concentrate on battery, torch light and packet tea business, the newly created McLeod Russel Ltd will take over the bulk tea operations. Delisting of the earlier Eveready scrip would start soon.

By the end of June, this year, equity shares of the two companies would be listed in bourses.

Eveready Industries is set to start with an approximate turnover of Rs 650 crore, a net profit of Rs 30 crore (approximate) and a debt burden of Rs 450 crore roughly. On the other hand, McLeod Russel's turnover would be around Rs 350 crore and a debt burden of Rs 250 crore (approximate).

In this crucial phase of transformation, Mr Deepak Khaitan, Vice-Chairman and Managing Director of Eveready Industries India Ltd, spoke to Business Line on the future of the company.

The demerger is over. Eveready Industries now has a better balance sheet. Where do you wish to take Eveready Industries from here?

We are not looking beyond a three-year horizon because looking beyond that time period might not be realistic and would end up only as a dream. In the battery market, we are holding a 46 per cent market share. We are eyeing a compounded annual growth rate (CAGR) of 25 per cent. The battery industry's average annual growth rate is 10 per cent. In some sectors like AA and AAA, it is even higher. In every sector, our growth has outpaced the average industry growth.

In terms of numbers we crossed the one-billion mark in 2003-04. In the current financial year, we are likely to end with 1.2 billion battery sales. During the next three years time, we might be ending around 1.6 billion batteries by conservative estimates. Internally we have targeted to reach the two-billion mark within the next four years, but for that we would have to boost our exports too.

To reach the two-billion mark, Eveready would have to increase its production capacity too. What are your plans on this aspect?

Yes, to touch the two-billion mark we would have to do a lot of internal activities. At present, we are finalising those plans and it is likely to be ready within the next two weeks. We would be placing it at the first board meeting of the demerged Eveready Industries on March 22. It would be a rolling plan and an ongoing exercise. At present, our capacity is 1.3 billion batteries per annum. I feel that there is still scope for improvement in the efficiencies by almost 10 per cent. We would take a final call on capacity expansion at the end of 2006.

Do you have any plan to acquire any capacity?

No, we do not have any plan to acquire any factory. We may outsource capacity. It may be either India or outside.

For quite some time, Eveready was contemplating acquiring a factory in China. What is the latest development on this front?

We are still open on the Chinese proposition but not in the short term. We are eyeing it only in the medium and long term because we have found that Chinese companies are also facing problems.

There is a labour problem and power shortages too. These two factors are really holding us back.

What about the packet tea business of Eveready Industries?

We are set to end the current financial year with 6,000 tonnes. We are new in the packet tea business but we have stabilised our operations.

We are trying to increase our packet tea business. Plans for it would be prepared accordingly.

The Eveready brand has reached its 100th year. How do you think the brand has helped the company? What are your plans for the 100th year?

Regarding the centenary celebrations of the Eveready brand we must say that it has already started and we would have some activity or other all throughout the year.

In Eveready, we understand the brand plays a significant role. In fact, it is one of the four pillars of the company's success. The other three pillars are distribution, people and the quality of our products.

One my part, I have decided to spend 80 per cent of time in strengthening these pillars. Daily sales, targets and other activities are looked after by the sales team. I would just be overseeing those activities.

The Big B (Amitabh Bachchan) is promoting the Eveready brand. How is the response? Would you continue with him?

Yes, we have received a good response from the market by roping in Mr Bachchan.

We are hopeful that the move would bear even better results during the current year.

We would study the impact of Mr Bachchan's endorsement in the third quarter of 2005. We would then take a final decision on this matter.

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