Major transition in sales strategy is on: Bajaj Electric CMD

Bajaj Electricals’ weak performance in consumer durable business is likely to take a U-turn with the company’s efforts to change business strategy and enhance the brand value. However, the current journey is painful for the company and will take time to deliver the fruits according to Shekhar Bajaj, Chairman and Managing Director of the company. The 68-year-old veteran shares the company’s plans in detail. Excerpts

How does FY 17 look?

We had targeted ₹5,000- crore revenues in FY17 with equal contribution coming from engineering and projects division (EPC) and consumer durables. We may miss the topline number due to degrowth or flat growth in consumer durables business. However there won’t be a major difference in the bottomline.

When do you see recovery in the consumer durables business?

Recovery in consumer durables will be visible after 3-4 quarters, that is, March 2017 quarter onwards. In FY18, we expect a significant growth in the business.

What are you doing to revive the business?

We are the first company in India to drive the sales of our consumer durables business the FMCG way. 70 per cent of our sales used to come from wholesalers. We are completely eliminating the wholesaler channel and we are directly selling to distributors. This will take some time but it will definitely help, as there will be no discounts and special deals offered. Currently market share is falling but margins are improving.

The next 12-14 months is our transition period. We have just covered around 30 per cent of our outlets under Range Reach Expansion Programme. The rest 70 per cent has to be done State-by-State. Every month 5-10 per cent is being covered under this programme. RREP means that our sales people are evaluated on the basis of how many outlets (reach) and stock keeping units (range) are covered.

Your peers Crompton Greaves and Orient Paper have demerged or plan to demerge their consumer durables business…Do you also have any such plans?

No, we don’t intend to do any such thing. But we have restructured our business by clubbing luminaries and lighting into our EPC and consumer durable businesses respectively to have better focus in implementing our new strategy.

How much do you plan to spend on advertising? What are the plans to enhance brand value?

We plan to spend ₹100 crore on advertising this fiscal compared to ₹80 crore in FY16. We are part of key events like Pro Kabbadi, Rio Olympics and Badminton League. We are the main sponsors for Pinkathon, an all women’s walk / run across 8 cities and many more.

What would you say is your key differentiator among the plethora of brands available in the market?

It’s our after sales service or consumer care. It takes maximum 3-6 months to enter our industry but we are differentiating ourselves through our after sales service. We spent ₹60 crore in FY16 for the same, which is around 3 per cent of our consumer durables sales.

We have built a strong network in after sales service and developed a set-up to service within 72 hours irrespective of where the customer has bought. In FY16, out of 3 crore appliances sold through our franchises, we serviced 19 lakh pieces. We have around 400 service centres and 2,800 service mechanics across the country. My competitors can also match the service but it will take them 2-3 years to build a robust network like ours.

What are the plans on new launches?

We are not launching new range of products. We are consolidating the business and upgrading technology in existing products.

What is your focus on the modern trade or ecommerce platform?

We get some ₹300-crore revenue from modern trade including ecommerce. We also have tie-up with Flipkart, Amazon and Snapdeal, which gave us revenues of ₹50 crore in FY16. Besides this, our own ecommerce sites are pretty robust and we are doing a lot of communication in the social and digital media.

How will margins look like in CD business?

As sales start growing in double digits, margin in our CD business will be better than the current levels and will be better than EPC business, as fixed costs including advertising will be spread out.

Players like Khaitan, Polar and Butterfly are up for sale. Are you interested in acquiring them or open to acquisitions?

Acquisitions in consumer durable business makes sense for foreign players as it gets them entry into the Indian market, brand, manufacturing and distribution set-up. Also their cost of finance is much cheaper.

What’s happening in the EPC business? What are the likely opportunities?

90 per cent of our EPC business comes from the government. However, we do not do business with entities like State electricity boards. We are margin and cash flow-focussed in this business. We aim to cap EPC’s share to 40 per cent in our total revenues. Opportunities mainly come from Bihar, Jharkhand, Madhya Pradesh and North East.

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