‘We believe that in the next course of two years we should bring in a fourth if not a fifth segment’
Dry cell battery major Eveready Industries plans to enter at least one new consumer-centric businesses in the next two years as the company aims at doubling its turnover in the next four years time, says its Managing Director Suvamoy Saha. In an interview with businessline, Saha says the company may decide within the next three months on setting up a large composite plant to get economies of scale. Excepts:
How is India’s dry cell batteries market growing? Within the batteries segment, how is Eveready planning to grow its alkaline battery range which is more premium?
Total size of the dry cell batteries market is around ₹3000 crore. In India, historically, the batteries business has had very modest growth. There is a huge potential. But at this stage it is very difficult to say when that potential will get unlocked. We are settled down to the fact that currently the growth would be only between 5-8 per cent in terms of volume, in best case scenario growth would be high single digit, while in worst case scenario it would be mid single digit. We expect similar growth in terms of value. The company will hold on to its market share of 54 per cent.
Currently, of our product portfolio, around 92% is zinc carbon batteries and around 8 per cent is alkaline batteries. Of late we are putting emphasis on alkaline batteries, otherwise how do you premiumize? So, we are trying to convert our customers to more premium products which are alkaline batteries. We feel that our alkaline category should be at least 20 per cent in the next two years.
As the company is planning to increase the share of the alkaline category in the battery portfolio, how will the measure impact profitability of the overall segment?
The margin profile (for zinc carbon and alkaline categories) would remain the same. As alkaline batteries are higher priced products, the unit margin would be higher, but in terms of percentage it may be the same or may be little better. Alkaline category also has two segments-- premium alkaline and value alkaline. Value alkaline obviously is lower margin and premium alkaline has higher margin. If we manage to sell the premium alkaline more, it will be more Ebitda margin accretive in absolute value. Going forward, revenue growth would come from other two categories-- flashlights and lighting. As a result, the batteries segment which is currently around 63% of our total business, will gradually come down to around 50% in the next three-four years.
What are the strategies you are taking to ensure high growth for the lighting segment?
We have the entire range in the lighting solutions segment. Currently, we are in the replacement market because that is our strong area of distribution. We are in the B2C category. As we get more evolved, we will certainly be in the B2B category. It will become an important part. As we go to the next financial year, our lighting business will certainly become profitable.
Do you have any plans to enter a new segment of business?
At this point of time none. But we believe that in the next course of two years we should bring in a fourth if not a fifth segment. We have not decided yet in which segment we could enter. The only thing that we know is that it should have some synergy with Eveready. If possible, also be able to be distributed to our distribution network. We are completely engaged for the next 18 months, but beyond that there should certainly be a fourth or a fifth segment, if we are to meet the dream of doubling our turnover in the next four years time.
Do you have plans to set up new manufacturing plants going forward?
We are thinking. As we try to drive growth, we feel that it is good to manufacture ourselves. Within the next three months we may decide on setting up a large composite plant for manufacturing batteries, flashlights and lighting to get economies of scale. We would perhaps be looking for a tax incentive related area for the new plant. For a composite plant, capital expenditure requirement may be around ₹100 crore.