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We are always looking at opportunities to enhance shareholder value: Amritanshu Khaitan, Eveready

As we scale up, the margins in lighting should improve substantially, says Khaitan.

ET Now|
Feb 15, 2019, 02.45 PM IST
Amritanshu Khaitan, Eveready Industries1-1200
The battery business has seen a 7% growth in turnover and that has come after many quarters of flat volumes due to dumping of cheap Chinese batteries, Amritanshu Khaitan, MD, Eveready Industries, tells ET Now.

Edited excerpts:

If I look at Q3 performance, the top line growth has been disappointing. Lighting which has seen good growth at a pace for so long has also been faltering. What is the reason behind this kind of a performance?

The Q3 numbers have to be dissected category wise. The battery and the flashlight categories had very solid performance in the quarter. The batter category after many quarters has had a volume growth of close to 7% and EBITDA margins have come in at the highest level of 18% for the category.

Flashlights too have come in with an EBITDA margin of 13%. In nine months, batteries clocked 17% EBITDA margins. The lighting category has been disturbed this year. On the top line front, we had supply disruptions as one vendor packed up and we are trying to get two, three new vendors to come in but al that takes time and that impacted sales.
Also, there have been competitive pressures on the LED bulb front which has brought prices down. These are the two reasons why revenue has actually declined by 11%. Regarding the EBITDA in lighting, it has come in at 5% but there is a 3% additional expense at EBITDA level due to the company foraying into professional lighting as a segment, which is half the industry where Eveready was not present.

We are at a position to hire people to set this up. We have got one of our first orders where we actually lit up one-third of the whole Kumbh Mela in Uttar Pradesh and got a value order of about Rs 5-6 crore. This is early days for the professional lighting piece. As we scale up, the margins in lighting should improve substantially from where it is.

Coming to appliance, which is another investment category for the company, we have seen very strong growth and we have clocked a revenue of Rs 41 crore for the quarter. We are on track to achieve Rs 140-150 crore for the full year. I would also like to highlight that fourth quarter last year was an operating loss quarter where a lot of our expenses got bunched up. That is not the case in the current year. If I look at the full year, we are still on track to achieve a 25-30% growth at EBITDA level, which would show positively on the bottom line.

There is no smoke without fire. There is a buzz that the promoters are looking at monetising their stake either in Eveready or in their battery business. Can we dismiss it or is there a consideration?

As a company, we are always looking at opportunities to enhance shareholder value. The company is always looking at options for joint ventures and strategic partnerships. As and when anything material develops, we will duly inform the stock exchange and the investor community at large.

Agreeing to the fact that you would be open to selling the battery business, is that something that we can take on record?

Anything material which does get developed, we will duly inform the stock exchanges. At the moment, the company in its routine business always explores opportunities to enhance value for its shareholders in terms of business opportunities.

Let us talk about the flagship battery business because that has been having a tough time. There has been some recovery there in volumes but is this growth sustainable?

The battery business has seen a 7% growth in turnover and that has come after many quarters of flat volumes due to dumping of cheap Chinese batteries. The government was supposed to make Bureau of Indian Standards mandatory in October. We assume that imports have reduced in anticipation of this BI standard becoming mandatory but that has got delayed to 1st April. It is still early days but I personally believe that per capita consumption of batteries is the lowest in India and with curbs being placed to reduce poor quality batteries being imported, you should look at much better growth and a much better year ahead for the battery segment.

Eveready is not just a battery company. There is LED business. You have moved into the confectionary and appliance businesses. In three years from now, how much of turnover will come from the non-battery business? Will it start making serious money for you?

The lighting and the appliance category together should be close to over Rs 1,000-1,500 crore of revenue in the next three years just because of the sheer size of the industry. Once we get economies of scale in these segments, the company can make EBITDA margin of around 10% in these segments.

Regarding FMCG, we are at a nascent stage where we are test marketing the confectionary category. Our joint venture with the Wings Group is also ready to start moving and we should have some new products coming out in the next three to four months through the JV.

When you said that you are looking at enhancing shareholder value, what did you mean? Eveready is a zero-debt company. Why would you be looking at selling stake there?

If and when any strategic action takes place or any material development takes place, I would be able to comment on that. At the moment, it is very speculative and so I cannot give any more details.

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