GST cheer for Eveready as it eyes 10-15% growth in FY18

EIIL's MD says shrinking of unorganised batteries, flashlights market under GST cause for optimism

Optimistic about increasing its market share in the batteries and flashlights segment, along with growing its small appliances and LED businesses, post the Goods and Services Tax (GST) rollout, Eveready Industries India Ltd (EIIL) is eyeing a 10-15 per cent growth in the ongoing financial year.

Amritanshu Khaitan, the company’s managing director, is of the opinion that as a result of stricter compliance norms, the unorganised batteries and flashlights market will shrink. Therefore, EIIL, which is the market leader in both these categories, stands to gain the most.

EIIL's flashlights business vertical, which contributes 14 per cent to the company’s annual turnover, commands a 75 per cent market share in the organised space, while its mainstay batteries division, which accounts for 57 per cent of the annual earnings, has a 50 per cent market share in the dry cell batteries space.

"Until now, the unorganised space in both these categories wasn’t paying any tax, as a result of which, the prices for lower quality Chinese imports were cheaper. Now, under the GST regime, these importers will have to either comply with the taxes or stop imports," Khaitan told Business Standard.

Industry sources stated that these importers will now have to conduct their sales via formal trade channels to claim input tax credit, which will make these Chinese imports costlier.

"Thus, we stand to gain from GST from the second half of the ongoing financial year," said Khaitan.

It is estimated that 10-12 per cent of the total dry cell battery market in the country comprises imported batteries, while 35 per cent of the flashlights market is import dependent.

However, the sales of batteries and flashlights, in tune with other FMCG products, are poised to remain muted until the second quarter of the 2017-18 financial year as trade and distribution channels will take some time to fall in line with GST norms and requisites.

The company is also stepping on the gas when it comes to its small appliances and LED businesses by introducing new products and aggressively foraying into the business-to-business segment and government business, besides retail sales.

"Last year, the LED business accounted for Rs 200 crore. Of which, Rs 150 crore was from the retail segment. This year, we plan to double our retail sales to Rs 300 crore and will aggressively bid in government tenders," Khaitan said.

The lighting and electricals business, of which LED is a part, accounts for 21 per cent of the company’s consolidated sales.

On the appliances segment front, although the company hasn’t laid out an ambitious plan to capture market share, it hopes to exploit the rising demand. Khaitan estimates this market to touch Rs 20,000-25,000 crore in the next few years.

"The idea is to increase the contribution from the appliances and lighting & electricals businesses to the revenue, from the current 24 per cent to at least 40 per cent," he said.

However, the entire growth plan will be based on an asset-light model as Khaitan is reluctant to incur any further capital expenditure in the coming 3-4 years.

Over the years, the company, which was once laden with deep debts, has been able to reduce its debt-equity ratio from 1.42 in 2014-15 to 0.68 in the last financial year. Khaitan is now focusing on reducing its remaining outstanding debts further.

Company performance for past three financial years:

Category	2016-17	2015-16	2014-15
Net sales (in Rs crore)	1,353.81	1,322.51	1,277.76
Net profit (in Rs crore)	93.63	69.08	49.03
Debt position (in Rs crore)	195.81	186.81	206.78
Debt-equity ratio	0.68	0.91	1.42