Foreign companies' cost of financing is very low: Shekhar Bajaj

Q&A with Bajaj Electriclas CMD Shekhar Bajaj

Acquisitions have been on Bajaj Electrical’s radar for quite some time now, but steep interest rates are playing spoilsport. Bajaj Electricals, chairman and managing director, Shekhar Bajaj, tells Digbijay Mishra in an interview the roadmap for the company and hints at a possible elevation for son, Anant.

You have been talking about acquisitions for quite some time. What is holding you back?

This is mainly because of high interest rates in our country. Foreign companies who are looking to acquire, their cost of financing is very low and the premium that they generate is better. The payback time is longer too, in their case. We have to pay interest at the rate of 10% and 12% and that is in a way playing spoilsport in our inorganic plans.

RBI's monetary policy review is due on January 29, what should be the central bank's move?

They should cut the key rates by half a% because quarter% change won't help much.

Can you elaborate on the acquisition that you are eyeing?

We want to acquire an established brand then the problems are less. I already have a strong distribution network and say in a period of three years, I can use that existing network to introduce the brand and establish that properly. For deals worth Rs 1,000 crore, I won't have to look to go to the equity market but if anything it’s more than that then I may think of raising money from the market.

You are actively decreasing your dependency on China for sourcing CFL lamps, why?

The rates of Chinese products are going north and we have a weak domestic currency so it is better that we source it from India. And the Indian products are also equally good.

What about your exports plan?

Exports will be very big. It will be a substantial part of BEL’s topline and we will give more thrust on this. Because of a weak currency, our products are becoming very competitive in the global market. In the coming years, it will grow by more than 60%. Even 100% is possible. You see Bajaj Auto had started exporting with a very low level but now 30% of their sales is from exports.

How has the E& P division of BEL doing?

It was quite a bad year as the government did not want to take any decision and major projects were put on hold. I am hopeful it would do better in the next fiscal. We will start afresh in the next fiscal.

How was the ongoing fiscal for the consumer durable and lighting segments and how do you see it shaping up in FY14?

It was good. We have witnessed a 15-20% growth and next year too would be similar. Consumer durables and lightings now constitute over 75%. Apart from a  partial failure in Kerala, the festive season has shown good growth.

You are number two in induction cookers, has the cap on subsidized LPG improved sales?

Absolutely. We have witnessed more than 60% growth already and overall the consumer durables division also saw a spurt in growth due to that. We are selling 1,00,000 induction cookers every month.

Finally, Anant, your son, when is he going to become the managing director?

That depends on him, he has to demonstrate that that he is ready now. There is a difference in being number two and number one. It can happen in a year's time or it may take longer than that. It all depends how he demonstrates his skills.