Bajaj Electricals is trimming its low-margin engineering and projects business that has been creating pressure on the company’s balance sheet due to cost overrun in older projects.
“From the 12 projects the company has been executing during the past two years, we have trimmed the portfolio to just six. We have decided to only bid for high-margin projects,” said Chairman and Managing Director Shekhar Bajaj.
The company’s engineering and projects division had orders of Rs 450 crore as of June. The company will not bid for any project that is low-margin or is unlikely to bring “profits” to the company’s balance sheet, pointed out Bajaj. However, the engineering and projects business is not expected to “perform well” over the next few months, he added.
The company had about Rs 900 crore from the engineering and projects business in FY12. Bajaj Electricals, which reported Rs 3,098-crore revenue in FY12, targets a more than 20 per cent rise in sales in FY13, with revenues reaching Rs 3,700 crore, Bajaj said.
To focus on LEDs
In lighting, Bajaj would focus on LED products over the next five years. “Almost 50 per cent of India’s lighting is predicted to be shifted to LED over the next three to four years. LED is the future,” Bajaj said. However, it would continue to sale traditional lighting equipment and fans to cater to the mass market, especially in rural areas.
While lighting is a growing business for Bajaj, the fan business was hit last year, as the entire market was low. “We expect the fan business to be better this year, but do not expect a huge jump,” he added.
To enhance its technology and product offering in LED, Bajaj has tied up with US-based Ruud Lighting and MEGAMAN, he said.
With the prices of domestic LPG sought up and the government capping supply of LPG cylinders for domestic use, Bajaj expects the sale of its induction cookers will cross Rs 150 crore in FY13, a 50 per cent rise from Rs 100 crore last financial year. “We are readying the inventory,” he said. The company expects exports to grow to about Rs 75 crore this year.
Slow on acquisitions
Bajaj Electricals, which has been seeking acquisitions in both India and overseas markets like Europe, has set aside the plan as valuations are “too high”.
“With a few recent deals, valuation expectations have sought up unreasonably. It does not make sense for us to acquire such targets,” said Bajaj, adding that he would be interested in “distressed companies”.
Bajaj Electricals could spend up to Rs 1,000 crore in acquisitions if required, he said.