We expect Havells to see a return to double-digit top-line growth in 2H FY16 as the high base caused by the post-election trade upstocking is behind. We expect Havells to be a major beneficiary of the pay commission implementation. The full impact is likely in FY18 as the state governments and PSUs would hike with a lag. In the slowdown, Havells has streamlined its already strong distribution with FMCG-like processes for demand generation, which places it well for the pickup in demand during FY17 and FY18.
The divestment of 80% stake in Sylvania, will lead to incremental cash on books of ~Rs 11 bn immediately and the total cash by FY17 would be ~Rs 18 bn. This gives ammunition to fuel inorganic growth in India; Havells will look for acquisitions which will give them a new product segment or distribution reach in weak geographies.
The company’s key strength has been its distribution. They have further enhanced that advantage in past one year by streamlining processes towards more demand generation (pull based), rather than just push-based sales.