Electronics major Bajaj Electricals’ ₹ 1,000-crore partnership with Mahindra Logistics has been impacted from Covid-19.
According to Anuj Poddar, Executive Director of Bajaj Electricals, savings anticipated from the project is yet to be seen as implementation delays due to the second wave. Furthermore, the higher cost of freight ate up margins the company anticipated from optimising their logistics structure.
In March 2021, Bajaj announced a joint project with Mahindra Logistics, where both companies signed a ₹1,000-crore agreement for five years, payable by Bajaj Electricals to Mahindra Logistics. “There were more savings anticipated that did not happen, however, the positive side is that our costs of operations did not increase during this extremely tough period with supply chain and pandemic related issues,’‘ Poddar said.
Bajaj Electricals sees 52 per cent degrowth in net profit in Q3Another price hike of 5 per cent on our goods is to be expected, will take the decision imminently, says Executive Director Anuj Poddar
Poddar still remains confident that “the partnership is shaping up fine” in the long run, it is just the transition plans which have been delayed.
Corporate restructuring plans
On Tuesday, the Bajaj Electricals board also approved corporate restructuring plans for Bajaj’s power infrastructure business as a separate entity “Bajel Projects”. This entity will be demerged from their consumer business, so that, “we can focus our energy on growing our business separately in the next 3-5 years,” Poddar explained. Bajaj’s power infrastructure business had been struggling even before the demerger, however, Poddar believes that it has started to see some turnaround.
“If you look at the quantum of losses (for the power and infrastructure business) compared to what they were in the past, the illumination business is actually profitable now, the losses are from the distribution and the transmission verticals. Losses on the distribution side are a function of legacy projects which will close, losses in the transmission verticals are because the order book is too small to foot the CAPEX. Which is why they need to bid for more projects” said Poddar.
One of the reasons behind the corporate restructuring according to Poddar is so that the new demerged enterprise “Bajel Projects” has a lot more risk-taking ability to participate in bidding aggressively.”
“What we have done in the last few years is to maintain bidding discipline and projects, so that our new projects are not loss-making,” said Poddar. Thus the hope is that the new enterprise is able to scale up the company’s efforts more fruitfully as a demerged entity.
Poddar also said the company is well on track to become debt-free by July if not earlier. The company is also not looking at any strategic partnerships or investments for this purpose, “We are raising money purely from our internal cash generations. We will be debt free on our own organic basis” Poddar said.