Companies

Another round of price hike inevitable as raw material costs remain high: Bajaj Electricals

Abishek Law | | Updated on: Nov 16, 2021
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Demand not strong as last year: Poddar

The festival season witnessed firm sales numbers, but the demand was not as strong as last year, primarily in the small appliances segment, according to Bajaj Electricals Executive Director Anuj Poddar.

The price of white goods and small appliances has seen a 15 per cent surge so far this year, the highest in recent times and another round of increase is expected to take number to 20 per cent, he hinted. The rise in raw material costs, especially key items such as copper wire, is likely to lead to a 4-5 per cent increase in price by November-end or early-December.

Push for sales

According to Poddar, post the lockdown, which is second quarter, there was good off-take, but September was slightly sluggish. In the festival season too, people held back purchases and a lot of push was required to drive sales, he said adding: “When I say sluggishness or dip, or that demand was not as strong as last year, I mean that we have to fight for the demand and sales. Things weren’t just going off the shelves on their own, like the year before. So, there was a lot of push happening.”

E-commerce fared relatively better than traditional brick-and-mortar channels, Poddar said.

Consumer product segment revenues — spread across brands like Bajaj and Morphy Richards — were up nearly 31 per cent to ₹1,035 crore year-on-year, while the segment EBIT increased 10 per cent to ₹103 crore. The still loss-making EPC (the engineering, procurement and construction division) segment was down 37 per cent to ₹267 crore.

Buying sentiment hit

Impact of the second wave of Covid infections in rural areas and sub-urban towns had hit buying sentiments and was visible “to some extent”. Bajaj Electricals and other players had to increase prices this year, due to commodity price pressures. Resistance to such price increase is visible now.

“So far, till about July, price hikes were accepted. Another round of hike was initiated in August and post that we saw some reaction or resistance. Now, with the peak festival demand over and the cost of raw materials refusing to go down , another price hike is inevitable,” he added.

The 4-5 per cent rise is expected on winter offerings such as geysers, water heaters, immersion rods or even popular appliances like electric kettle. Post-Diwali, there has been some pick up in winter SKUs which may perhaps not taper down following the price hike.

For Bajaj Electricals, rural to urban growth has been at 1:1 with both growing in tandem. Plans are afoot to strengthen presence in urban markets, he said. On the margins front, Poddar said the company’s standard guidance remains at double digit for FY23. Operating margins grew 22 per cent and restored to double digit in Q2. Cash flow from operations were ₹476 crore. Bajaj Electricals brought down its net debt by ₹419 crore to ₹237 crore. Its net debt, post acquisition of JV firm, Starlite Lighting, stood at ₹650 crore at the beginning of the quarter.

Published on November 16, 2021

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