Companies

Surya Roshni eyes double-digit topline growth

Abhishek Law Kolkata | Updated on October 18, 2021

Nirupam Sahay, CEO, Lighting & Consumer Durables, Surya Roshni

On the back of import substitution, improving distribution network

Driven by improving sales outlook, Surya Roshni – the second largest LED maker in the country – is eyeing a high double digit growth in topline across these businesses. Import substitution and improving distribution network are expected to work in favour of the company, even though input cost pressures and chip shortages continue to remain the dominant issues across these two verticals. Surya Roshni, whose shares are traded publicly, is also the second largest manufacturer of steel pipes in India. The segment accounts for nearly 67 per cent of its EBITDA on ₹4,400 crore turnover in FY21. The consumer durables and lighting businesses reported sales of ₹1,240 crore last fiscal.

According to Nirupam Sahay, Executive Director and CEO of Lighting & Consumer Durables, Surya Roshni, LED is expected to drive demand and there has been a lot of cost optimization in recent times. Offerings have become more acceptable and affordable. From ₹310 in 2014, LED bulb prices are now priced at ₹70.

Moreover, Chinese imports — which at one point accounted for nearly 30 per cent sales in India — have reduced significantly. The company will invest ₹25 crore over a 5-year period towards scaling up its component manufacturing facilities in Uttarakhand and Madhya Pradesh. Post a rebranding exercise, Surya Roshni is now “actively introducing” offerings in categories covering LED battens, downlighters and also smart lighting options.

“We will be doubling our advertising spends in FY22 while the price of LED has bottomed out and is steadily rising over the last five to six months now,” he told BusinessLine.

While chip shortages have continued to dominate the LED market, Surya Roshni has managed to keep its supply chain intact with new tie-ups, where required. A 10 per cent price hike initiated across three rounds in the last six months includes a two percentage point increase due to chip shortages while the remaining is because of raw material price movement.

A recent report by IDBI Capital says Surya Roshni’s sales growth has been “weak” in comparison to peers “due to sharp fall in LED prices” while its ROCE (return on capital employed) at 26 per cent for a three-year period is at par with industry average. The report further mentions, the company could benefit from the PLI scheme because of its strong backward integration and scheme-backed benefits could help it tap export markets.

Consumer durables

According to Sahay, the consumer durables business – a segment it entered in 2014 – continues to follow an asset light strategy thereby ensuring high ROCE. Although a smaller base ensures higher growth numbers, the plan is to take the segment turnover to ₹1,000 crore over a five year period.

In FY21, the consumer durables business reported a turnover of ₹ 225 crore. “So far sales trends for our consumer durables business have been good and we are looking at a high double digit growth; driven primarily by improving festive demand,” he added. Moreover, plans are afoot to leverage the lighting distribution network in favour of the smaller consumer durables vertical.

Published on October 18, 2021

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