Bajaj Electricals Limited — Q3 FY25 earnings call

Call held 4 Feb 2025

Management summary

Bajaj Electricals reported a strong Q3 FY25, with revenue growing 5% YoY to ₹1290 crores and like-to-like PBT increasing 21% to ₹45 crores, driven by robust festive demand. The Consumer Products segment showed significant growth and margin expansion, while Lighting Solutions faced revenue contraction due to price erosion, despite substantial brand investments. The company is focused on premiumization and operational efficiencies, but acknowledges macroeconomic headwinds and challenges in specific distribution channels.

Highlights

  • Revenue from operations grew 5% YoY to ₹1290 crores, driven by good festive demand.

  • Profit Before Tax (PBT) on a like-to-like basis grew 21% YoY to ₹45 crores, adjusting for prior year's one-time items.

  • Consumer Products revenue grew 8.5% YoY, crossing the ₹1000 crore threshold after two years.

  • Consumer Products EBIT margins significantly improved to 5% (3.9% like-to-like) from 1.7% in the previous year, due to a 2% increase in gross margins.

  • Morphy Richards registered double-digit growth for the fifth consecutive quarter.

Concerns

  • Lighting Solutions revenue contracted by 7.5% YoY due to continued price erosion.

  • Lighting EBIT margin was 2.1% (6.4% like-to-like after brand investments), down from 8.4% YoY.

  • Interest rates are expected to remain elevated for a few months, potentially curbing private consumption and investment.

  • MFI channels, contributing ~5% of total offerings, are expected to continue struggling for some time.

Key financials

  1. Revenue from Operations ₹1,290 Cr +5%YoY
  2. Profit Before Tax (Reported) ₹45 Cr -10%YoY
  3. Profit Before Tax (Like-to-like) ₹45 Cr +21%YoY
  4. Profit After Tax ₹33 Cr -10.8%YoY

What they filed

Q1 FY27: revenue up 2.3%, net profit up 4700.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,118 1,290 1,265 1,065 1,107 −1%1,051 −19%1,240 −2%1,089 +2%
EBITDA52 87 93 33 57 +10%8 −91%40 −57%77 +133%
Net profit13 33 59 1 10 −23%-34 −203%-68 −215%48 +4700%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentRevenue GrowthEBIT Margin (Reported)EBIT Margin (Like-to-like)
Consumer Products8.5%5%3.9%
Lighting Solutions-7.5%2.1%6.4%

Order book

high confidence

Total value

₹231 Cr

as of 2024-12-31 quantified

The professional lighting order book remains healthy, and the company is committed to growing this business.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex ₹100 Cr
    So, it should be in the range of Rs. 100 to Rs. 150 odd crores for the next year.
  • Liquidity Cash ₹423 Cr The company generated Rs. 83 crores of positive cash from operations this quarter and ended with Rs. 423 crores in surplus funds.
    This quarter we generated about Rs. 83 crores of positive cash from operations and we ended up the quarter with a surplus funds of Rs. 423 crores.

Guidance & targets

Profitability

  • EBITDA Margin Profitability · FY27 · Medium confidence 7%
    So, I hope both of them start kicking in together, probably we will be reaching a 7% sort of margin.

    — EC Prasad, CFO

  • Margin improvement from VAVE Profitability · next year · High confidence 2-3%
    So, Achal, some of the VAVE benefits will start coming in in the next year. So, you can expect about 2%-3% to kick in.

    — EC Prasad, CFO

  • Margin improvement from operating leverage Profitability · when revenue reaches ₹6,000 crores+ · Medium confidence 2-3%
    So, as we reach that milestone, the operating leverage will kick in and we will have about 2%-3% coming from there.

    — EC Prasad, CFO

Cost

  • Logistics cost reduction Cost · couple of years · Medium confidence 1% more (to reach 5%)
    there is still a scope of one more percentage.

    — EC Prasad, CFO

  • Manufacturing cost reduction Cost · Medium confidence 1% point
    manufacturing also by a percentage point.

    — EC Prasad, CFO

Market Share

  • Increase market shares in Lighting Solutions Market Share · next few quarters · Medium confidence —
    The brand investments for this vertical will continue to be high for the next few quarters in our endeavor to increase our market shares.

    — EC Prasad, CFO

Product Mix

  • Ceiling category contribution to consumer lighting Product Mix · Medium confidence 25-30%

    From 17-18% today

    Now, in the last 2-3 quarters, we have improved that to almost 17%-18%. And we are continuing that journey to bring it to the level of 25% to 30% contribution coming from ceiling light.

    — Rajesh Naik, COO Lighting Solutions

  • Premium offering (750 watts and above) contribution to consumer products Product Mix · going forward · Medium confidence strengthen from ~40%
    we are close to 40% of our premium offering and we hope to continue to strengthen it in the 750 watts and above space.

    — Vishal Chadha, COO Consumer Products

  • Premium (BLDC) contribution to water heaters/fans Product Mix · going forward · Medium confidence increase from 20-25%
    water heaters, we are between 20% to 25% and the fans at an YTD level for premium as well as BLDC, we are close to around between 20% and 25% also. So, which we hope will to keep increasing as we go forward.

    — Vishal Chadha, COO Consumer Products

Capex

  • CAPEX Capex · next year · High confidence ₹100-150 crores
    So, it should be in the range of Rs. 100 to Rs. 150 odd crores for the next year.

    — EC Prasad, CFO

What to watch in Q4 FY25

Progress on 7% EBITDA margin target

next quarter (progress check)
Current CP EBIT at 5%, LS EBIT at 2.1%
Target Directional progress towards 7% overall EBITDA margin

Why it matters

This is a key profitability target for FY27, driven by VAVE, operating leverage, and cost reductions.

So, I hope both of them start kicking in together, probably we will be reaching a 7% sort of margin.

Risks & concerns

  • Elevated Interest Rates

    medium

    RBI target rate remains above CPI, depreciating rupee implies tight monetary stance, interest rates to remain elevated, potentially curbing private consumption and investment.

    Management acknowledged

  • Demand Moderation in Q4

    medium

    Analyst observed demand moderation across consumer goods in Q4, which is a bigger play for fans.

    Analyst acknowledged

  • MFI Channel Struggles

    medium

    MFI channels, contributing ~5% of offerings, impacted by RBI actions and expected to struggle for some more time.

    Management acknowledged

  • Continued Price Erosion in Lighting

    medium

    Price erosion in lighting (especially ceiling lights) expected to continue for next one or two quarters, potentially extending to professional lighting.

    Management acknowledged

  • Muted Kitchen Appliances Demand

    low

    Kitchen appliances expected to remain muted for some more time as discretionary spend has not kicked in.

    Management acknowledged

Q&A highlights

7 direct, 1 evasive
4Q Outlook and Demand Softness Direct
Our endeavor will be to do better than last year in the same quarter and that's what we are hopeful for.

Provides management's forward-looking sentiment for the next quarter amidst analyst concerns about demand moderation.

Asked by Natasha Jain

Price Hikes Across Categories Direct
We have taken price hikes across almost all categories, be it mixers, be it water heaters, especially in two channels or irons, whether it is national format retail or in e-commerce. So, across categories, not just one.

Indicates the company's ability to implement price increases across a broad range of consumer products, suggesting pricing power.

Asked by Natasha Jain

Lighting Ad Spend and EBIT Impact Direct
So, mostly, this is Rajesh here. Most of that was on the ATL. We created the first film after almost two years. We went to the market line in terms of investing into the brand. And that was mostly ATL.

Explains the significant brand investment (₹11 crores, 4.3% of lighting revenue) and its impact on lighting EBIT margins, highlighting a strategic push for market share.

Asked by Natasha Jain

MFI Impact on Business Direct
MFI used to contribute about 5% odd in our total offerings. And MFI has been impacted since the RBI came down heavily on the MFI and that issue still continues... MFIs will still continue to struggle for some more time.

Quantifies the contribution of MFI channels and signals continued headwinds from this segment, impacting overall performance.

Asked by Aniruddha Joshi

Continued Price Erosion in Lighting Direct
I think one of the category, which is ceiling light, it has to still hit. So, I feel that next one or two quarters it will continue for the price erosion. And it can come into the professional lighting also in some time. I think price erosion game is not completely over.

Management confirms that price erosion in lighting is ongoing and may extend to professional lighting, posing a risk to future margins.

Asked by Aniruddha Joshi

GTM Strategy and Focus Markets Direct
we launched Project Vriddhi... started with first pilot of five cities... expanded that to 167 markets. And there we are saying we are continuing to see high double-digit growth in volumes and single-digit growth in value as well.

Details the successful implementation of 'Project Vriddhi' in 167 focus markets, driving volume and value growth in consumer lighting.

Asked by Aniruddha Joshi

NEX Portfolio Expansion (Coolers) Direct
So, NEX, coolers are the ones which we will be bringing into the market, but the ramp up will be gradual. Fans, as you already know, are already existing. So, it will continue to remain a premium offering from our organization.

Provides insight into new product launches under the premium NEX brand, specifically coolers, and the strategy to strengthen premium offerings.

Asked by Natasha Jain

CEO Position Update Evasive
I was CMD for many years and I became CMD temporarily, now I am in fact CMD. I am just joking. We are working on that. Hopefully soon we will have an MD around. But till then, I'm very much now, my wife is much happier to see me away from home.

Addresses the ongoing leadership structure, indicating the search for an MD is active, but the Chairman is currently fully involved.

Asked by Achal Lohade

3 min read 7 chapters

Detailed narrative

Q3 FY25 Performance Overview

Bajaj Electricals reported a 5% year-on-year revenue growth, reaching ₹1290 crores, driven by strong festive demand. On a like-to-like basis, adjusting for one-time items in the prior year (₹23 crores warranty provision and ₹36 crores tax refund interest income), Profit Before Tax (PBT) surged by 21% to ₹45 crores, demonstrating underlying operational improvement despite a reported 10% decline in PBT and PAT.

Consumer Products Segment Momentum

The Consumer Products business achieved an 8.5% revenue growth, surpassing the ₹1000 crore mark after two years. This growth was fueled by strong demand for domestic appliances, particularly coolers and heaters, which saw high double-digit growth. The segment's EBIT margins significantly improved to 5%, compared to 1.7% in the previous year (3.9% on a like-to-like basis), primarily due to a 2% increase in gross margins. Morphy Richards continued its strong performance with double-digit growth for the fifth consecutive quarter.

Lighting Solutions Challenges and Investments

The Lighting Solutions segment experienced a 7.5% revenue contraction, primarily due to continued price erosion. Despite this, the company invested ₹11 crores (4.3% of segment revenue) in brand-building activities, including the 'Built to Shine' campaign, which impacted reported EBIT margins. The segment's EBIT margin stood at 2.1%, which would have been 6.4% on a like-to-like basis without these brand investments. The professional lighting order book remains healthy at ₹231 crores.

Strategic Focus on Premiumization and GTM

Bajaj Electricals is actively pursuing premiumization across its portfolio. In consumer products, the aim is to strengthen premium offerings (750 watts and above) from the current ~40%. For consumer lighting, the goal is to increase the ceiling category's contribution from 17-18% to 25-30%. The company's revamped Go-To-Market (GTM) initiative, 'Project Vriddhi,' has identified 167 focus markets, showing high double-digit volume and mid-single-digit value growth, with plans to expand to an all-India level in the next two quarters.

Margin Expansion Initiatives

Management outlined several levers for future margin expansion, targeting a 7% EBITDA margin by FY27. These include 2-3% margin benefits from Value Analysis and Value Engineering (VAVE) starting next year, 2-3% from operating leverage once revenue crosses ₹6000 crores, and further reductions of 1% in logistics costs (targeting 5% overall) and 1% in manufacturing costs. The company has already reduced logistics costs by 1-1.5% over the last nine months.

Market Dynamics and Outlook

While festive demand was strong, the company anticipates demand moderation in Q4. Macroeconomic factors like elevated interest rates and a depreciating rupee are expected to persist, potentially curbing private consumption. The MFI channels, contributing about 5% of offerings, are expected to continue struggling, though government channels are anticipated to pick up. Kitchen appliances are expected to remain muted for some time as discretionary spend has not yet kicked in.

Capital Allocation and Liquidity

The company maintains a healthy balance sheet, generating ₹83 crores of positive cash flow from operations this quarter and ending with ₹423 crores in surplus funds. Planned CAPEX for the next year is projected to be in the range of ₹100-150 crores, indicating continued investment in operational efficiencies and product development. The company's balance sheet ratios remain at an optimal level.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Consumer Durables earnings calls