After Eveready Industries reported a stellar set of fourth quarter earnings, Amritanshu Khaitan, ED of the company, expects a revenue growth of 10-15 percent in FY15. He sees the margins of the company improving to 8.5-9 percent in FY15. According to him, the improvement in margins was led by the price rise in battery segment, wherein, the company enjoys a 52 percent market share.
In an interview to CNBC-TV18, Khaitan says the company will repay Rs 50 crore of debt in FY15, after having repaid Rs 50 crore last year. The company aims to cut down its debt to Rs 100 crore by FY16, which, as of March, stands at around Rs 225 crore.
The company saw a good operational improvement with revenues rising 13 percent to Rs 257 crores year-on-year. Bottomline saw a turnaround with a profit after tax of Rs 1.24 crore versus loss of Rs 2.15 crore Y-o-Y.
Below is the verbatim transcript of the interview:
Reema: What can you tell us about FY15? How was it expected to shape up? In FY14, you had a revenue growth of close to 11.5 percent though your margins improved. What is FY15 looking like in terms of revenues as well as margin performance?
A: FY15 for Eveready is looking very positive since the month of April. We have taken up price increase starting April 1. This will help us post a turnover growth between 10-15 percent in the coming year and should help us continue our improvement at EBITDA level. So, our EBITDA margin from a level of 7.8 percent in the year gone by should improve to anywhere between 8.5 to 9 percent in the coming year.
Ekta: How is demand looking?
A: Demand is very stable. The battery category, after many years, has posted a decent growth in FY13-FY14. In the coming year, too, we should see a 4-5 percent kind of volume growth with sharp price increase, which we have taken, should help the category post a 10-15 percent value growth.
The flashlight category has also been stable for the company and with new product launches, which we have done recently in this month, some new economic segment of flashlights have been launched. We expect a volume growth of between 10-12 percent this year.
Reema: What is the market share of Eveready in batteries and flashlight and has there been an improvement?
A: The market share of Eveready under its two brands Eveready and Powercell is around 52 percent. The market share has remained stable. This is despite taking a 15 percent price increase last year. In flashlight, our market share in the organised flashlight market is about 70 percent.
When we are talking of revenue growth in the coming year, we are basing a large part of our growth from the new segment of lighting that we have entered. We have clocked a 35 percent turnover growth last year and expect a growth of around 50 percent in this category going forward this year.
Ekta: Can you just talk about the new product segments? Has it broken even or can we expect some pressure on the margins going into FY15 just on account of the new products?
A: Margin improvement will be coming in the battery category due to price increase. The new product division of lighting should look at a break-even level in the coming year. This is because we have to put in investments behind the brand and the distribution required for growth of this category.
Out of Rs 1,100 crore turnover of Eveready, the lighting division is about Rs 150 crore. For this division to become profitable and give back margins to the overall company, it would take a year or two. By then the turnover of this category should at least reach Rs 300-350 crore.
We are using part of our positive cash flows generated from the highly profitable battery division to get turnover growth and extend the brand into these new sunrise categories of lighting. We have had a successful launch of a new rechargeable fan in February. This is a new age product which is targeting the power cut states of the country. We have already sold out whatever quantities we imported.
Going forward, new products will become profitable but it would take a year or two.
Reema: What kind of investment or cpaex have you lined up in FY15, since you have so many new launches?
A: The company's capex requirement is minimal; about Rs 10-15 crore because our real focus is to continue repaying the debt on the books of the balance sheet.
We have repaid about Rs 50 crore last year and continue to see that kind of run rate of debt repayment going forward. So, I don't see any large capex because most of the new products that are launching are outsourced.
Ekta: What is your total debt on books as of now? How much would you like to reduce it in FY15?
A: Debt on the books, as of March is Rs 225 crore. We see a repayment of Rs 50-60 crore as a run rate in the next two years. By FY16-end, the debt should be sub-Rs 100 crore and this will halve the interest cost that was at Rs 41 crore March end. I see that dropping annually by about Rs 10 crore in the next two years.
Ekta: What will you envisage on the bottomline for the profits in FY15 and FY16, will your interest cost reduce substantially as well?
A: I won't be able to give a forward guidance on absolute numbers but we have done EBITDA of around Rs 90 crore and posted a profit before tax (PBT) of Rs 15 crore in March end.
If you just add the interest cost alone, we are seeing a 50-100 percent jump at PBT level and whatever additional EBITDA the company gains would also go down to the bottomline. So, I see quite a smart improvement in Eveready's profitability going forward.
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