Bajaj Electricals is trimming down its low-margin engineering and projects business that has been creating pressure on the company’s balance sheet due to cost overrun in older projects.
“From 12 projects that the company has been executing during the past two years, we have trimmed down the portfolio to just six projects. We have decided to only bid for high margin projects,” said chairman and managing director Shekhar Bajaj.
The company’s engineering and projects division had orders of Rs 450 crore as of June 2012. The company will not bid for any project that is low margin or is unlikely to bring “profits” to the company’s balance sheet, pointed out Bajaj. However, the engineering and projects business is not expected to “perform well” over the next few months, he added.
The company had about Rs 900 crore from engineering and projects business in FY12. Bajaj Electricals, which reported Rs 30,98 crore revenue in FY12, targets more than 20 per cent rise in sales in FY13 with revenue reaching Rs 3,700 crore, Bajaj said.
To focus on LEDs
In lighting, Bajaj Electricals would focus in LED products over the next five years. “Almost 50 per cent of India’s lighting is predicted to be shifted to LED over the next three to four years. LED is the future,” Bajaj said. However, it would continue to sale traditional lighting equipments and fans, to cater to the mass market, especially in the rural areas.
While lighting is a growing business for Bajaj Electricals, fan business was hit last fiscal year, as the entire market was low. “We expect fan business to be better this year, but do not expect huge jump,” he added.
To enhance its technology and product offering in LED, Bajaj Electricals has tied up US-based RUUD Lighting and MegaMan, he said.
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With prices of domestic LPG sought up and the government capping supply of LPG cylinders for domestic use, Bajaj expects sale of induction cooker would cross Rs 150 crore in FY13, a 50 per cent rise from Rs 100 crore last fiscal year. “We are readying the inventory,” he said. The company expects exports to grow to about Rs 75 crore this fiscal year.
Slow on acquisitions
Bajaj Electricals, which has been seeking acquisitions in both India and overseas markets like Europe, has set aside the plan as valuations are “too high”. “With a few recent deals, valuation expectations have sought up unreasonably. It does not make sense for us to acquire such targets,” said Bajaj, adding that he would be interested in “distressed companies”.
Bajaj Electricals could spend up to Rs 1,000 crore in acquisitions, if required, he said.