Bajaj Electricals Q2 FY19 Earnings Conference Call

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This is the verbatim transcript of Bajaj Electricals management call with analysts.

Moderator: Ladies and gentlemen, welcome to the Q2 FY 19 Results Call of Bajaj Electricals hosted by Emkay Global Financial Services. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes.
Should you need assistance during the conference call, please signal an operator by pressing '*' and then 'O' on your touchtone phone. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Varshit Shah of Emkay Global. Thank you and over
to you, sir.

Varshit Shah: Thank you, Tanvi. Good evening everyone. I would like to welcome the management and thank them for giving us the opportunity to host this conference call. We have with us today, Mr. Shekhar Bajaj - Chainnan and Managing Director, Mr. Anant Purandare - President and Chief Financial Officer and Mr. Anuj Poddar - Executive Director. I would now like to hand over the call to Mr. Bajaj for his opening remarks. Over to you sir.

Shekhar Bajaj: Thank you, Varshit. Good afternoon friends. Let me first introduce you to Anuj Poddar who has from today taken over as the Executive Director. He would be basically taking the same responsibility and moving the company ahead as was being done by Anant Bajaj earlier. He has
been on our board for last 2 years since May of 2016 and he was chairman of our audit committee. He has been working in Arthur Andersen and KPMG for over 10 years and was in Viacom 18 for the last 13 years, so he has got a vast experience and because he was in the board for over the last 2 years, he knows the company operation and therefore when this opportunity came and I asked him would you like to join, he was very happy to accept to be a full time Executive Director. He is also there, so if anybody in the future discussion want to talk to him about some areas where you want him to share his ideas, you are very welcome to contact that. Let me come to our results.

In the first quarter, many of the investors were little upset that why is the EPC not showing growth, all were happy with the CP growth. CP growth in last quarter, also it was 25%, this quarter also we are around 25% and which is something is consistently 20 to 25% growth I can see happening every quarter for next many quarters because our distribution is in place. As for
the EPC, I mentioned that we can't look at EPC on the month to month basis. What you should really look at, how the order book and therefore because we got the order book of over 7300 crores, whether we like it or not, we have to execute fast, otherwise we end up with LDs and other problems coming in and therefore though we had earlier looked at a possibility of doing about 6500 crores which I had mentioned in the last quarter, about 2800 to 3000 crores coming out of CP business and may be 3,300 to 3,500 crores coming out of the EPC along with luminaires. Now looking at our big thrust in the UP project that we have got, now our expectation that we should be reaching around 4000 crores in the EPC business including Iuminaires, that is the B2B business and it will be 2800 to 3000 crores coming out of business of CP, so total around 6800 to 7000 crores plus it may happen which only by next quarter will be much more clearer,
but we are now looking at instead of 6500 crores, we are looking at a 7000 crores possibility.

Now, as far as consumer product business is concerned, it is consistent as I said there should be no problem. As per EPC business is concerned, because of the cost escalation that has taken place and because of whether exchange rate or otherwise and we have to do it very fast, there can be I or 2% dip in our margins as far as the EPC business is concerned because the business
of UP is going to be very taxing on one side and there is a lot of pressure because the quantity we have to do and the timeframe is very short. So, sometimes we have to pay some higher prices also to get some product because we have no alternatives but to finish it fast, so we may have to
pay higher. So, to that extent, margins may get impacted in the coming period because our volumes are going to be so much higher compared to last year, . last year was 2300-2400 crores and now we are talking about 4000 crores. My overheads distribute over volumes and therefore though the margins may get impacted, our EBITDA may not go down more than I or 2% if any, that only time will show and let us see how the thing pans out, but I think the business overall climate for us is good.

There have been questions asked to me that with the competitor, many of them has given special scheme this Diwali, they have given special discounts this Diwali, are you also going to match it. We as a company have taken a decision to do our distribution properly and therefore, we are
not looking at giving any special scheme or special quantity discounts for people to buy. We are saying we should be consistent. If we give