Eveready is a company in transition right now. First, post the entry of the new promoters, the Burman family, the Street has been very bullish about the prospects in terms of growth for this company. Where is it that you see Eveready, say, in the next three to five years? What is the vision under the new leadership or the management?
Suvamoy Saha: The company, after a long period of very little growth, has today set itself for an ambitious target of growing to a level which is double its current turnover in the course of the next three to four years. In fact, in FY23, we did grow handsomely, that was post the period when the transformation started. However, FY24 was a little bit of a dampener because the top line remained stagnant. All the three verticals of batteries, flashlights and lighting faced headwinds. Batteries and flashlights due to very weak rural demand, which impacted offtakes and the lighting industry due to the industry-wide phenomenon of price deflation whereby manufacturing efficiencies were passed on to the market and were also impacted by the same.
However, we were encouraged by volume gains in FY24. But we think that the worst is over and we already have started seeing some green shoots and we think that we should be back to a high single digit to low double digit kind of growth in the year to come and follow it with a trend of growth that would take us to double our size in the course of the next three to four years.
But where do you see the maximum growth coming from and the segment that will be driving the growth for the company there?
Suvamoy Saha: We have articulated this before. It is the lighting and electrical segment that we entered much later than our other two segments, we remain committed to growing this vertical at a pace much faster than the rest of the company. Due to the significant price erosion, we landed up with a low level of growth in the last fiscal. However, that price erosion which was led by manufacturing efficiencies seem to have stabilised and we should be able to bring back a strong level of growth in this vertical.
The lighting and electricals vertical contributed in nine-month FY 24, around 22-23% of your revenue. So, in the next couple of years, how do we see this mix changing? How much will come in from lighting, electricals, flashlights, as well as the battery business then?
Suvamoy Saha: Currently, batteries constitute about 65% of our turnover and the other two, about 35%, of which lighting is 22-23% and 12% is flashlights. We expect that even flashlights should grow faster than batteries. We feel that when we come to a stage where we are double the size of our turnover today, flashlights and lighting should actually be more than 50%.
Your overall margin trajectory has been fairly healthy. You have managed to maintain your margins. You have been talking about the premiumisation trend which has been the focus for the company. In light of that, what kind of margins are you expecting and what will drive your margin growth?
Suvamoy Saha: Last financial year, we maintained an EBITDA margin of 10% plus which was in a way contributed by some amount of benefits that we got from raw material prices and also due to cost conservation efforts and premiumisation as you have mentioned. It was a blend of all these factors together. As we go forward, we feel that with our overhead costs remaining constant or there will be very little change there, with the top line growing, our margins will continue to grow beyond and certainly at a pace which would be double digit of the top line.
What about the pricing pressures for the LED and the lighting business? Is that still being witnessed? Could that be a bit of a drag when it comes to your overall margin picture?
Suvamoy Saha: Actually, it is not a drag on the margin, it is a drag on the top line of what we have seen in the last financial year because the manufacturing efficiencies led to the so-called price deflation in the market. So, there was no erosion of margin percentages. What happened was as we improved our cost structure – and that is true for all other players in the market – that efficiency was passed on to the market that impacted the top line, not the margins. We feel quite confident of retaining margins as we go forward.
The other thing I wanted to understand is what is the balance debt on your books and what is the reduction plan then?
Suvamoy Saha: We started last financial year, at about Rs 370 odd crore. It has come down to about 280 crores at the end of the year and we would just keep paying it out, out of our normal cash accruals. And so, debt is not something which is kind of a top line anxiety item for the company at this point of time.
What about any new launches that you have lined up?
Suvamoy Saha: We are currently committed to our newly launched hero product of Eveready Ultima Alkaline batteries. We have just now taken on a new brand ambassador who is sort of the face of that campaign. So, currently we are looking at that. But as we go forward, we would certainly be bringing more products into the portfolio.
Just one more thing is in terms of the flashlight segment, rechargeable segment over there. How is the demand trend there and the client confidence you are looking at that specifically, anything exciting there?
Suvamoy Saha: Yes, for us, that is also an exciting segment. The market is inundated with a lot of unorganised players who do not adhere to all the legalities. We believe that there is a case for us as we bring more and more enriched products which fulfill consumer requirements. We should be able to make further inroads into that market.
I would say to an extent it was this company’s fault that it did not take on this segment very seriously earlier and kept focusing on battery operated flashlights. It had sort of lost sight of this new segment emerging which is the rechargeable side. So, we have come into this segment quite strongly from last year. We are already about 25% of the market and if we can get some of the regulations, which is only the fair thing for the consumers, if we can get those implemented, like BIS and legal metrology, etc,I think there is a very good case for domestic players and we are the leader of the domestic side on the organised space.