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Starlite investments failed to pay off as LED killed CFL market: Bajaj Electricals CFO

The company took a one-time hit of Rs 89.36 crore on provisions for its joint venture Starlite Lighting, producing CFL products.

May 23, 2018 / 06:17 PM IST
 
 
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Bajaj Electricals which saw an 81 percent drop in its March quarter standalone net profit due to a one-time hit from its joint venture Starlite Lighting, is confident of a strong revenue growth in FY19. In an interaction with Moneycontrol, Anant PuResults Boardroomrandare, Chief Financial Officer, Bajaj Electricals, talks about the financial and business strategy.

Excerpts:

Q: There was a one-time hit of Rs 89.4 crore due to loans of Starlite Lighting. Could you explain the rationale?

A: In 2013, Compact Fluorescent Lamp (CFL) contributed Rs 360 crore out of the Rs 600 crore of lighting business. It has dropped to Rs 54 crore now. It would be accurate to say that CFL segment is almost dead and light-emitting diode (LED) lighting has picked up.

We entered into the joint venture with Starlite in 2007 and had invested Rs 60-65 crore. Considering the 40 percent year-on-year growth then, we were hoping that we will be able to recover the investments. Unfortunately, LED killed the market. Due to this, the company was unable to pay the debt and this led to a one-time provision for the investment.

Q: What about the assets of Starlite Lighting?

A: While the CFL market has gone out, we have the land, building, and factory. We have already started manufacturing products like water heaters and mixers there. So, we are currently using the assets for new product lines.

Q: Without the exceptional item, did goods and services tax (GST) act as a dampener?

A: The company had Rs 1,602.27 crore of income from operations in Q4, which was an almost 26 percent growth YoY. Similarly, our profit before tax PBT (before exceptional items) was Rs 253.83 crore in Q4 showing a YoY growth of 51 percent.

Q: In terms of the segmental revenue, engineering, procurement, and construction (EPC) saw a higher rate of growth than consumer durables. Will this continue?

A: For consumer durables, you have to keep in mind the GST factor. Adjusting that, the actual volume growth was 15 percent in this segment. This year, we expect to see a double-digit growth in this space.

On the EPC side, we have been implementing a lot of strategies in project management and project monitoring which has led to a reduction of losses due to project overrun and at the same time helped revenue growth. We have an order-book of around Rs 8,800 crore and this growth should continue.

Q: Will rural electrification also be a major growth driver in FY19?

A: The government has a strong thrust on rural electrification. There is a big package through Rural Electrification Corporation. We will be taking those orders because over time, the company has been able to build expertise in this segment.

M Saraswathy
first published: May 23, 2018 06:15 pm

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