Eveready Industries India, the leader in the dry cell batteries market in India, is banking on LED (light emitting diode) lighting products for its next phase of growth, even as competition from cheap Chinese imports is dimming the prospects of growing the battery business significantly in the future. The new line of business the company is entering should help it double its revenues in the next three years, according to Amritanshu Khaitan, Eveready’s MD.
Eveready, owned by the Kolkata-based Khaitan family that has other business interests like tea, controls over half of the country’s battery market. But the withdrawal of anti-dumping duties on batteries imported from China has led to a proliferation of these cheaply priced batteries in the Indian market. In comparison, Eveready has hiked battery prices by over 20% in the last 18 months to protect its profit margins.
The company, which is famous for its tagline: ‘Give Me Red’, which it has used since 1993, is now focusing on diversifying itself by selling other products like LED lights. Khaitan expects the company’s recently launched range of LED products to start contributing to its revenues and profitability from next fiscal itself.
The batteries business contributes around 60% to Eveready’s turnover at present and with the company’s fledgling lighting and electricals business gaining traction, Khaitan expects the battery business’ share to drop to 40-45%.
Foreign investors (FIIs) appear to have faith in the management’s vision for Eveready’s future growth and have significantly increased their holding in the firm. FII holding in Eveready stood at 7.47% as on December 31, up from 3.43% in the September quarter. The company’s latest shareholding pattern shows that some of the FIIs to have recently invested in the company include Goldman Sachs India Fund and Nomura Trust & Banking. The promoter group has also increased its stake in the company by close to 3% in the last one year. Apart from batteries, Eveready also sells flashlights and is a market leader in the segment with sales of 25 million units.
To begin with, the LED lights, Eveready proposes to sell, would be manufactured in China through an outsourced contract, since the scale of the business wouldn’t justify investing in setting up a greenfield manufacturing unit, Khaitan said. It is also in discussions with Indian manufacturers of LED lights and will retain control over the quality of the outsourced products through its in-house R&D team.
Eventually, it plans to introduce other products under its lighting and electricals segment, including rechargeable fans to be launched coming summer.
Eveready aims to become a debt-free company in the next two to three years on the back of better profitability, and then utilise its wide distribution network to offer other FMCGs.
The Kolkata-based company’s total debt stood at R225.05 crore at the end of fiscal 2014. “Our first aim is to make the company debt-free. Once we do that, we will also look to bring in other FMCG products,” Khaitan said. “We could do that either through acquisitions or organically, by using the vast distribution channel that we have.”