Recoveries may not be as sharp as last fiscal: Anuj Poddar, Executive Director, Bajaj Electricals

Regional lockdowns followed by restrictions on sale of non-essentials via e-commerce across some States, has “severely impacted” consumer durable off-take in the first two months of FY22. While unlocking may see some “chugging along” of demand Q2 onwards, recoveries may not be “as sharp as last fiscal” as consumer sentiments are still down, said Anuj Poddar, Executive Director, Bajaj Electricals.

The fall in demand for summer sale items like coolers and fans and consumer durables – that include kitchen appliances and lighting – has seen the company operate factories at just 30 per cent of capacities (a 65 per cent fall over the 90 per cent capacity utilisation in normal times). Typically, coolers and fans witness peak demand in April-June period.

Bajaj Electricals scripted a turnaround in FY21 as it was able to improve margins in FY21 especially with over 170 launches in the consumer products vertical – fans & coolers, kitchen appliances and lighting. The segment’s revenues grew 7 per cent YoY, to ₹3,315 crore; EBIT rose 60 per cent to ₹320 crore and operating margins stood at 9.6 per cent.The other vertical or the EPC segment, where the company is reducing its exposure, brought down losses and saw a fall in revenue.

Impact of lockdowns

According to Poddar, while there have been regional lockdowns – instead of a national one – the “front end” impact (sales to consumers) is no different as markets and retail chains remain closed. Even in States which announced partial lockdowns, sale of non-essentials were either suspended or timing of retail stores were fixed at such odd-hours that they did not see necessary demand.

Geography-wise revenue break-up, stands at 31 per cent for East, 27 per cent for West, 26 per cent for North and 16 per cent for South, say market sources.

E-commerce sales were hit as deliveries were stopped following pressure from trader lobbies. The channel saw over 40 per cent growth in FY21 – the highest in recent years – and is the second highest sales channel for Bajaj Electricals.

Apart from ‘Bajaj’, the company also markets the premium brand ‘Morphy Richards’ in the small appliances segment.

“Ultimately there is no demand in the market. Shops and marketplaces are closed. Even States, which initially allowed online sale, modified orders following pressure from trader lobbies. So with a practical nation-wide lockdown like situation, there will be impact on Q1 sales for the second straight year. Already two months of the quarter are through,” he told Businessline .

While supply chains have not been hit, reduced demand means inventory pile-up.

Consumer sentiments down

Most States, Poddar says, are mulling a phase-wise unlock and if this happens mid-June onwards, a possibility of pull-back in sales in Q2 is definitely achievable. However, recovering lost sales of Q1 across other three quarters “would become difficult” in the “summer portfolio of coolers and fans”.

Festive season sales hold the key but recoveries may not be “as sharp as last fiscal”. The spread of Covid in the rural market and its impact on demand is yet to be assessed fully. In urban markets, job losses, impact on personal finances in households, among others have led to hesitations in spending. Urban markets account for two-third of sales.

“Vaccination drive needs to pick up and maybe we will need another set of economic relief packages to boost consumer sentiment. As markets remain closed, we still do not know how deep the impact of the virus surge is on upcountry and rural markets,” he said.

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