Bajaj Electricals ties up for different price points

Economies of scale ensure Bajaj doesn't import from China except for a few products

In its 75th year in 2014, Bajaj Electricals is targeting a sales turnover of over Rs 5,000 crore in 2014-15. This financial year, ending March, 2014, it is working to touch Rs 4,200-4,300 crore revenues.

The company, which is in three verticals - consumer durables, lighting and engineering, procurement and construction (EPC) projects - is hoping to drive growth by ramping up distribution, introducing immersive retail outlets, servicing price segments through distribution agreements, leveraging the economies of scale in manufacturing and setting up a new R&D centre.

Shekhar Bajaj, the chairman and managing director, says, "The consumer durables and lighting segments would cross Rs 2,100 crore and Rs 900 crore, respectively in 2013-14."

While the lighting and consumer durables contribute 15 per cent each, the EPC brings in 70 per cent of the company's business.

It is in the consumer goods verticals that it is up against stiff competition. While small home and kitchen appliances have seen cut-throat competition from international and domestic brands, including private labels from organised retailers who access cost-effective manufacturing out of China, lighting has seen an influx of cheap, Chinese products threatening the traction of branded lighting brands. However, Bajaj says, "We are market leaders in small appliances, selling 3.5 million irons, 1.6 million mixer grinders and almost 600,000 water heaters. That gives us sufficient economy of scale in India to not depend on Chinese imports."

Bajaj hopes to improve manufacturing productivity over the next two-three years to increase the amount of exports of small appliances. On the cards, is an improvement in the looks of the products as well. Currently, 1 per cent of total sales are accounted for by exports to West Asia and Africa.

Bajaj Electricals has straddled the different price-points in its verticals with the help of its distribution agreements. It has such arrangements with Trilux Lenze of Germany; Disano of Italy; CREE Lighting of USA (lighting); Delta Controls of Canada (building management systems) and Securiton of Switzerland (security systems), Morphy Richards of UK (appliances), Disney of USA & Midea of China (fans).

Bajaj says, "We realised that we are value for money and there was an opportunity in the premium segment. So, we tied up to distribute Morphy Richards products. We have also done substantial indigenisation of Morphy Richards to bring down costs. Morphy Richards and Bajaj don't cannibalise each other. The premium brand reaches 12,000 outlets, while Bajaj reaches 40,000 outlets."

Bajaj would also set up more Bajaj World showrooms, taking it from 65 stores to over 75 across the country by the end of 2013-14. These would provide a collective experience zone for customers to choose products from a wide range.

Just like Bajaj Auto, which has developed its own technology for motorcycles, Bajaj Electricals is also planning to set up an integrated R&D centre near Mumbai that will drive innovation and help create technology across its three verticals. Anant Bajaj, the joint-MD says cutting-edge technology could widen the appeal of the products across geographies.