May 13, 2016, 11.55 AM | Source: CNBC-TV18
To focus on premium value-added products: Crompton Electricals While all businesses of the company are growing at a healthy pace, the company hopes to grow its market share significantly in the fans segment, says Shantanu Khosla, MD of Crompton Greaves Consumer Electricals.
Crompton Greaves Consumer Electricals is focusing on improving revenue by expanding premium value-added products, said Shantanu Khosla, MD, in an interview to CNBC-TV18 post the Crompton Greaves' demerged entity’s listing on the stock exchange on Friday.
While all businesses of the company are growing at a healthy pace, the company hopes to grow its market share significantly in the fans segment, Khosla said.
On any prospective plan to move away from the Crompton Greaves brand name and on royalty payments, he said they would instead try to make the brand stronger. There is no impact of royalty now or in future, he added.
The debt position (currently around Rs 700 crore) is comfortable considering the cash flows, he said, adding the company will focus on cost efficiencies and scaling possibilities to improve margins though.
Below is the verbatim transcript of Shantanu Khosla's interview with Nisha Poddar on CNBC-TV18.
Q: What is your strategy going forward because profitability and market share are the two things that you will need to balance out? How are you going to do that?
A: There are few things which will help us drive both and we do believe we can drive both. First, we will work to drive our revenue but we will work to drive our revenue by focusing on disproportionate growth in value added premier propositions. Second, we believe that with the demerger and the focus on consolidation will bring efficiencies across all cost buckets.
Q: You spoke about premium products, so that means you are also going head-on with your competition Havells India in this particular space. How is the competition panning out in your space and could you give us some mix of premium products, more high value-added and the ones which you are operating in. Is there a mix that you have in mind?
A: I won't get into specific numbers in terms of the mix but we do expect the premium value-added products to grow faster than the others. The way we will do this is through innovation and better meeting consumer needs.
Q: So fans, lightings, pumps, appliances are the various categories you exist in. Where is the most amount of growth coming in for you?
A: We are quite fortunate that all our businesses are growing nicely. Some businesses of ours such as appliances are relatively small. So the small base makes growth look bigger. One area which is significant growth opportunity, not just for us but the industry also is LED lighting, which is starting from a small base and gives us the opportunity to transform the industry.
Q: In fans you said there is a new product launch and how much is the target in terms of market share and ramp up in margins that you are looking at from that particular segment?
A: We expect to grow our market share significantly. We do expect that this will be disproportionate from the premium end of the business.
Q: What about the brand. You are going to continue with the Crompton Greaves brand and any sort of impact on your balance sheet because of any royalty in future also, if that can come up with the erstwhile promoters of Crompton Greaves?
A: There is no impact of any royalty now or in the future. The Crompton brand is something that we believe has got outstanding values. We believe that it has the breadth in the equity to cover a large breadth of consumer electrical business. We are focused on making that brand even more relevant and stronger in the future.
Q: What about debt - Rs 700 crore. Are you going to refinance that for lower cost and how are you going to take this debt equity forward?
A: We are comfortable with our debt. We believe that it is an appropriate level of debt given the cash flows which we have. We will always be looking at opportunities to reduce cost on every element.
Q: 50 percent of your manufacturing is done in-house. Are you also progressing towards more efficient sourcing now? Is that the right thinking in the company that is happening which the market believes?
A: We are looking at efficiencies in sourcing but I would like to point out that sourcing is beyond just factories; sourcing include the entire supply chain, so it is also warehouses, distributors, logistics, vendor based at the back. We see significant opportunity in that whole area.
Q: A word on margins because market is bothered about the margin picture when it comes to comparing with market share because you also have a big competition. What is going to be your biggest thrust in terms of margins progressing to more value-added products in all the categories that you are involved in?
A: Largely yes, it will be an overall focus but there is also going to be a significant focus on cost efficiencies and scaling possibilities. We do see that margins will stay a focus area for us.
Q: Any targets on that?
A: Of course we have internal targets but I would not be comfortable sharing our targets. Suffice to say at this point as I said our expectation is to grow our topline faster than competition and at the same time make sure that our bottomline grows at the same pace as our topline or slightly ahead of it.
Q: Any word on open offer even though it is from the promoter side?
A: I have nothing to add on the open offer.
