COVID-19 lockdown, high Aluminium pricing forced Bajaj Electricals to re-consider its strategy

Bajaj Electricals, an Indian consumer electrical equipment manufacturing company based in Mumbai, has come up with extremely good results during the lockdown phase. The company’s consumer business rose to 10.08% from 4.7%, which is a huge development in EBIT margin. However, Shekhar Bajaj, Chairman & MD of Bajaj Electricals said: “This is not a sustainable type of margin. This is something which has happened because there are many things which were not done in this second quarter and which we will do. For example, in terms of publicity, our advertising costs which we had postponed started in October. Therefore the margins will get impacted because of that.”

The Chairman also stated that the company informed multiple vendors in regards to payment, which will be delayed and it was collaboratively agreed so that has enhanced the margins. He added: “Also, our costs are going up. Aluminium pricing has gone up. I do not think at this moment there will be a possibility of price revision. Therefore, to that extent, some margin may get impacted.

Although, Bajaj expects it will be better than last year and he thinks anything between 6% and 7% which is a sustainable type of margin that the company have committed earlier also. It will improve by 1% per year and that 1% per year may go up a little more but it is nowhere around 10% or 11% which happened in the second quarter.

“The good news is that from minus 50% in terms of the top line in the first quarter, after the end of H1, we are at minus 20%. By December, January we hope to catch up with last year and that means in 10 months, we should be equal to the last year’s 10 months” Shekhar Bajaj said.

The Chairman commented that in July-August, it was not a supply issue and it was more to catch up with the sales. However, from September onwards, the demand has been very high. Now, in the forthcoming months, demand will continue to be strong.

Shekhar Bajaj stated: “All these lockdowns have made us rethink the whole strategy and our working. Earlier, we could not even think of anybody working from home. But this time when we are forced to do it, we realised that it is not that bad and in many cases of work from home output has been almost 80-90% and in some cases even 110% of their normal output. Therefore a lot of that will take place.”

“We have had substantial growth in online in the second quarter also and in October also, it has been very strong. So the future of online is very bright that is where our focus is going to continue.”

“We have kept a good balance between the two and therefore our trade, as well as e-commerce segments, are growing well.”