Eveready hope on new Assam unit

With battery volumes flat on account of dumping from China and demonetisation effects dragging down its wholesale sales, Kolkata-based Eveready Industries is working on improving its bottom line.
 
Its new factory in Goalpara, Assam, is likely to commence production from March. The plan is to reduce production of dry cell batteries from its existing plants by 400 million pieces a year and to manufacture these through the Goalpara one. This is expected to fetch the company an additional five percentage rise in its profit margin.
 
Also, the income tax benefits and excise duty exemptions from its Haridwar plant is to expire in March 2017 but the Goalpara one will compensate. Whereby, the company will get excise duty exemption for 10 years and its income tax rate will decrease by six percentage points to 21 per cent for production from this plant.
 
The company is spending a little over Rs 100 crore to set up this plant. Goalpara will focus on manufacture of AAA and AA batteries, as well as flashlights. It will take Eveready’s production capacity from 1.4 billion units a year to 1.8 billion.
 
Although sales took a hit after demonetisation was announced, managing director Amritanshu Khaitan is hoping sales would pick up in the March quarter, as battery consumption should increase with digitisation. “The demand should grow by seven-eight per cent in the coming years,” he said.
 
Brokerage Motilal Oswal feels the inflow of cheaper Chinese batteries should reduce as a result of demonetisation, as most transactions are in the unorganised segment and in cash, dominated by Chinese players. 
 
“We expect a positive impact on Eveready’s batteries segment over the medium term,” said an analyst with the brokerage. 
 
However, one of its reports also quoted the company as expecting a 10 per cent decline in the batteries segment in value terms, with a 15 per cent drop in volume and a similar decline in flashlights, in the December quarter. The brokerage expects a decline of 12 per cent in growth during the ongoing quarter.
 
“After a fall in retail sales in November, it picked up this month (December). However, wholesale sales are yet to recover,” said Khaitan.
 
Dry cells comprise of 57 per cent of Eveready’s turnover. The Indian market for dry cell batteries is estimated at Rs 1,500 crore by value and 2.7 billion pieces by volume in a year. Eveready is estimated to occupy 52 per cent of this market, followed by Nippo at 28 per cent and Panasonic with 18 per cent.