Bajaj Electricals Banks On Demand And Distribution To Maintain Margins

Home appliance maker Bajaj Electricals Ltd. said it expects to maintain its margins despite the disruption caused by Goods and Services Tax, banking on a strong demand and distribution network.

An improved range, expansion and a strong demand will help the company maintain profitability after tax rates doubled to 28 percent under the new tax regime, Shekhar Bajaj, chairman and managing director, Bajaj Electricals told BloombergQuint in an interview. While the company didn't increase prices, it partly offset higher costs by cutting discounts to wholesalers, he said.

Most companies felt the pain of transition to GST as distributors pared inventory ahead of its rollout fearing losses on existing stock. There may still be some dealer-level problems, but that hasn't hurt secondary demand, Bajaj said.

The maker of fans and lighting products is banking on its improved distribution reach to cross the Rs 5,000-crore revenue mark in the year to March 2018. The company plans to further increase its reach from about 1 lakh outlets to 1.6 lakh during the year.

Factoring in all this, Bajaj Electricals may not be able to record a 10 percent growth in revenue. Yet, profits won't be impacted and the company will maintain its margins, Bajaj said.

The company's tie-up with British appliance maker Morphy Richards and Italy's Nardi is not to step up growth but to show that “we are higher up in technology”.

EPC Business

Bajaj Electricals' order book for engineering, procurement, construction business comprising power distribution and illumination stands at Rs 3,500 crore. “A growth of 20 percent-plus is necessary” to sustain the order book, Bajaj said. “It is very important that we expedite our execution.”

The number of orders is not a problem but procuring the site from the government and the capability to execute faster is, he said.