COMPANY PROFILE BAJAJ ELECTRICALS Bajaj Electricals Limited has diversified interests in lighting, luminaires, appliances, fans, and

engineering and projects. The Company operates in four segments: lighting, consumer durables, engineering and projects, and Others. Lighting includes lamps, tubes, luminaries; consumer durables includes appliances and fans; engineering and projects includes transmission line towers, telecommunications towers, highmast, poles and special projects, and Others includes die-casting and wind energy. Appliances business unit (BU) offers a range of domestic appliances, including water heaters, mixers, food processors, microwave ovens, air coolers, steam and dry irons, electric kettles and water filters. The Fans BU has a range of ceiling, portable, fresh air and industrial air circulators. The Luminaires BU markets a range of luminaires covering, commercial, industrial, flood lighting and street lighting. Lighting BU markets light sources and domestic luminaires. SEGMENTWISE SALES BREAKUP

HAVELLS INDIA Havells India Limited is an electrical and power distribution equipment manufacturer with products ranging from Industrial and domestic circuit protection switchgear, cables, motors, fans, power capacitors, compact fluorescent lamp (CFL) lamps, and luminaries for domestic, commercial and industrial applications, modular switches, water heaters and domestic appliances covering the entire range of household, commercial and industrial electrical needs. The Company operates in four segments: Switchgears, Cable, Lighting and fixtures and Electrical Consumer Durables. The Company along with its subsidiary companies owns brands, such as Crabtree, Sylvania, Concord, Luminance, Linolite and Standard. Its manufacturing facilities are located at Faridabad in Haryana, Alwar and Neemrana in Rajasthan, Haridwar in Uttarakhand, Sahibabad and Noida in Uttar Pradesh and Baddi in Himachal Pradesh. The Company has introduced new generation series, Cosmic Star, in Controlgear segment.

SEGMENT WISE REVENUE BREAKUP

SHARE HOLDING PATTERN

MARKET SHARE BAJAJ ELECTRICALS During 2011, Bajaj Electricals enjoyed 15-30% market share in various product categories like Oven Toaster and Griller (30%), Irons (26%), Water Heaters (23%). Apart from appliances, BEL was one of the top 3 players in Fans (16% of organized market), Lighting (8%) and Luminaires (17%). In 2012, Bajaj Electricals saw increase in its market share in all the four segments. The figure below shows trend of Market Share of Bajaj Electricals from the year 2006. In Fans segment its competitors are Crompton Greaves (24%), Usha (17%), Orient, Khaitan, Polar and Havells. In lighting section it competes with Philips (26%), Surya (12%), Crompton, Wipro and Havells. In Luminaries it stands second with Philips (23%) and Crompton Greaves (13%).

HAVELLS INDIA The Company had been gaining market share in various segments consistently over years. It stands 1st in domestic switch gears competing with Legrand and Schneider. In Modular Switches it stands 2nd following Anchor. It enjoys 2nd position in Cable & wire segment competing with Polycab, Finolex and KEI. The Figure below gives the Segment wise market share of Havells over various years.

RAW MATERIAL COST The Raw material cost for Bajaj Electricals and Havells has been increasing every year. The Net profit for Bajaj Electricals had decreased due to lower margins (High Raw material cost) and abnormal increase in site expenses. The Cost of Key Raw materials for Bajaj electrical and Havells is shown in the figure below.

DEMAND DRIVERS Per Capita GDP Growth Significant increase in discretionary income and credit availability lead to shortened product replacement cycles and evolving lifestyles where some of the consumer durables are perceived as utility items rather than luxury possessions. Easy Consumer Credit The buyers of Consumer durables are able to get interest free loans from various sources easily and this drives the sales of certain high end products. The total credit to consumer durables segment by banks and other non-banking financial Institutions is growing year by year. Consumer Confidence Index The Consumer Confidence Index in India is part of The Nielsen Global Survey of Consumer Confidence and Spending Intentions. The Index tracks consumer confidence, job prospects, personal finances and spending intentions. Consumer confidence levels above 100 indicate optimism and below a 100 indicate pessimism. Consumer Confidence in India decreased to 118 in the second quarter of 2013 from 120 in the first quarter of 2013. However it had been increasing year by year. India Consumer Confidence averaged 118.88 from 2009 until 2013, reaching an all-time high of 131 in December of 2010 and a record low of 92 in March of 2010. Urbanisation Growth The Growth in Urbanisation in India has been a constant driving factor for Consumer durables sales. The Urban population constitutes around 33% of the total population in 2013 and it had been growing constantly every year. The below table shows trend of Per capita GDP, CCI, Urbanisation and Credit growth over the past 9 years.

Year 2005 2006 2007 2008 2009 2010 2011 2012 2013

GDP per capita in Consumer Urbanisation Consumer durables US $ Confidence Index % loans growth % 687.31 107.00 29.00 7.00 740.12 105.00 30.00 4.00 797.26 114.00 30.00 5.00 863.46 115.00 30.00 6.00 885.17 120.00 31.00 3.00 947.75 117.00 31.00 5.00 1034.24 112.00 31.00 10.00 1085.73 126.00 32.00 16.00 1106.80 119.00 33.00 22.00 Source: Trading economies.com, Indexmundi.com and World Bank

MULTIPLE REGRESSION ANALYSIS FOR SALES OF BAJAJ ELECTRICALS AND HAVELLS WITH THE GROWTH DRIVERS BAJAJ ELECTRICALS The Revenue of the company is considered as the dependent Variable and the following model is constructed. It is seen that the model explains 87.9% of the variation in Sales (Sig : <0.05). It is also observed that all the four predictor variables contribute significantly to the regression model and hence have an impact on the Sales. The Regression equation is given below Sales (In Million) = 71.1(Per Capita GDP in $) +36.72(Consumer Confidence Index) + 3469.9(Urbanisation %) + 288.517 (Credit growth %) 149615.03 Considering the demand drivers grows at the same rate, the revenue for the next two years as predicted by the model will be Rs 39,526 Million and Rs 45,360 Million.
Model Summary Mod el 1 .969
a

R Square .940

Adjusted Square .879

Std. Error of the Estimate 4601.98433

a. Predictors: (Constant), credit growth %, CCI Index, Urbanisation %, Per capita GDP in US $ ANOVA Model
a

Sum Squares

of

df

Mean Square

Sig.
b

Regression

1318441317. 965

329610329.4 91

15.564

.010

Residual

84713038.92 4

21178259.73 1

Total

1403154356. 889

a. Dependent Variable: Revenue (In Millions) b. Predictors: (Constant), credit growth %, CCI Index, Urbanisation %, Per capita GDP in US $ Coefficients Model
a

Unstandardized Coefficients

Standardized Coefficients

Sig.

B 1 (Constant) 148615.034 Per capita GDP in US $ CCI Index Urbanisation % credit growth % 36.726 3469.933 288.517 71.100

Std. Error 104952.532

Beta -1.416 .021

32.539

.806

2.185

.044

479.979 4033.466 498.168

-.018 .315 -.143

-.077 .860 -.579

.034 .003 .038

HAVELLS INDIA The Regression model for the Company Sales using the predictor variables is shown below Revenue (In Crores) =4.715 (Per Capita GDP in $) +12.034 (Consumer Confidence Index) + 320.886(Urbanisation %) + 19.627 (Credit growth %) 13305.174 From the below results it is seen that the model explains 98.5% of the variations in Sales. It is also found that all the four predictor variables have significant impact on explaining the variation. (Sig level < 0.05) Considering the demand drivers grows at the same rate, the revenue for the next two years as predicted by the model will be Rs 4945.21 Crores and Rs 5556.41 Crores.
Model Summary Mod el 1 .996
a

R Square .993

Adjusted Square .985

Std. Error of the Estimate 153.30933

a. Predictors: (Constant), credit growth %, CCI Index, Urbanisation %, Per capita GDP in US $ ANOVA Model
a

Sum of Squares

df

Mean Square

Sig.
b

Regression Residual Total

12545241.616 94015.006 12639256.622

4 4 8

3136310.404 23503.752

133.439

.000

a. Dependent Variable: Revenue (In Crores)

b. Predictors: (Constant), credit growth %, CCI Index, Urbanisation %, Per capita GDP in US $ Coefficients Model
a

Unstandardized Coefficients

Standardized Coefficients

Sig.

B 1 (Constant) Per capita GDP in US $ CCI Index Urbanisation % credit growth % 12.038 320.886 19.627 -13305.174 4.715

Std. Error 3496.362 1.084

Beta -3.805 .563 4.350 .019 .012

15.990 134.370 16.596

.061 .307 .103

.753 2.388 1.183

.043 .045 .032

LATEST DEVELOPMENTS Bajaj Electricals Bajaj Electricals is in the process of formulating a fresh strategy on the eve of its completion of 75 years operation. The strategy will focus on consolidation of product line, strengthening of R&D and scaling up of export share. Bajaj Electricalss expansion into turnkey EPC projects was heavy losses due to delays and cost overruns. Its net profit in the current quarter plunged 95% as loss from E& P more than trebled. However its consumer durables business is robust owing to the strong public demand and it contributes to 55% of the business. It plans to increase share of exports to 5% in 2-3 years from the current 1%. Fan and appliances are growing strong for Bajaj Electricals and BE launches four new exclusive fans for the premium segment of the ceiling fan market. Despite the drop in copper and aluminium prices in the international market, falling rupee has made imports costlier for Bajaj Electricals. For the Morphy Richards range of Bajaj Electricals, imports are at 40% of turnover, for appliances it is at 20% and for fans and lighting it is at 10%. The company has decided to pass the increased cost to the customer, the decision which will also be taken on the basis of competitors next move. Bajaj electrical after witnessing a good response in the online space now decided that online retail will be the focal area of expansion in 2013-14. It has tied up with major online retailers in this regard. BE also has the largest distribution network in the country for consumer appliances. Havells Havells with its aggressive expansion plans intends to reach Tier 2 and Tier 3 towns with its products. Karnataka is a major market for havells and expects Rs.500 crores revenue from Karnataka in 2 years. In the domestic market it is favorably poised with a leading dealer franchise, strong brand and diversified product line up. Overseas business face issues due to the reduced demand in Europe and currency volatility in key markets like Columbia, Brazil and Argentina impacts margins in Latin America. The company has

benefitted from Rupee depreciation due to its overseas business and turn around in its global operations. Structural Issues in Europe and the macro economic situation are the key problems facing Sylvania operations of Havells which brings about major chunk of its business. Havells still maintain a 6% operating margin and hopes to take it up since no outflow in the form of investments is required in Sylvania.