We are full-out on capacity in batteries: Eveready's Amritanshu Khaitan

Eveready recorded a 234 per cent increase in profit before tax (PBT) to Rs 30.29 crore in the June quarter even as operating income fell by around 18 per cent

The country’s largest dry cell battery maker with more than 50 per cent share — Eveready Industries India — is seeing all its units working full throttle now. “All factories are operational and we are full out on capacity in batteries,” said Amritanshu Khaitan, managing director (MD), Eveready. The company has a capacity of 1.8 billion batteries a year.

It has recorded one of its best quarterly performances in the April-June period. 

This comes at a time when it is struggling with debt at the promoter level.

Eveready saw a 234 per cent increase in profit before tax (PBT) to Rs 30.29 crore in the April-June quarter even as operating income fell by 18 per cent to Rs 263.45. This is primarily due to a complete stoppage or disruption of economic activity during the initial phases of the lockdown in April. 

“This is the best performance for Eveready in many quarters in terms of operating margins and what you are seeing is performance of two months,” Khaitan said.

Price revision, strong demand and implementation of quality standards helped prop up the company’s performance. “About 10-15 per cent of the market — that used to be dumped by China — has come down to negligible levels,” Khaitan added.

These were typically the unorganised players and their share is now flowing into the organised market. 

Not just batteries, Ever­eady’s flashlights business, which is wholesale-driven and suffered in March-April, is seeing a surge in demand. 

“In March and April, with the wholesale mandis closed, we could not move it into the hinterland. But with monsoons arriving and agrarian economy picking up, we saw strong demand in June,” Khaitan said.

Eveready has a 75 per cent market share in the organised flashlight market and 70-75 per cent of its sales is rural and semi urban-focused. In batteries, the rural to urban sales ratio is 50-50.

The other segment, lighting and appliances, however, suffered prolonged restrictions on trade of non-essential items coupled with a weak demand. But then, lighting is still looking at an earnings before interest, taxes, depreciation and amortisation (Ebitda) break-even while the appliances segment is in loss. 

However, what helped the company’s performance was the more profitable products like battery and flashlights. Ebitda margins in batteries is at 23-24 per cent while that of flashlights is 18 per cent. 

Cost-saving measures like merging distribution networks of lighting and appliance segments were also undertaken. This helped boost margins. “We have managed to reduce losses in the lighting and appliance segment,” said Khaitan. 

But even as Eveready’s financial performance is improving, issues at the holding company level remained. 

Promoter holding has hit a nadir in both Eveready and McLeod Russel, after IndusInd Bank invoked pledged shares in the firms by 7.82 per cent and 7.50 per cent, respectively. 

As a consequence, the Khaitan family holding in Eveready and McLeod stand at 7.25 per cent and 18.32 per cent, respectively. Continuous selling of pledged shares by financiers has brought down promoter holding in the two firms over the past year and a half. In June 2019, promoter holding in Eveready stood at 42.17 per cent and in McLeod it was at 31.02 per cent.

In Eveready, the Burman family – promoters of Dabur – are now the largest shareholders at 19.84 per cent. They have been buying into Eveready since March 2019.

It may be difficult for the Khaitans to claw back shareholding as lenders may throw a spanner. Though Eveready’s debt is at Rs 350 crore, debt at the group level is around Rs 6,000 crore.

Each of the companies – Eveready, McLeod Russel and McNally Bharat Engineering – are now charting separate ways to resolve the debt problem. 

However, a Delhi High Court order, in a case filed by KKR India against the Williamson Magor group last year, prevented a change in the capital structure and sale of assets by Eveready, McLeod Russel India and other group entities.

Eveready plans to monetise non-core assets as well. But any major step would have to wait for the injunction to be lifted.