Bajaj Corp Q2FY18 Concall Summary

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Financial Highlights

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  • The Company has closed the quarter with a turnover of Rs.204 Crores
  • The growth in turnover vis-à-vis the second quarter of last financial year is 3.84% with volume growth being 5.1%
  • The EBITDA for the quarter is Rs.59.6 Crores, which is a decline of 12.74% over EBITDA of Q2 of last financial year
  • The refund announced by the Government of India for units under the excise free zones in Uttarakhand, Himachal, and Assam have not been accounted while calculating above
  • The EBITDA without the refund being calculated is a very healthy 29.3%, but would have been over 32% if the refund has been accounted for
  • The profit before tax and profit after tax are Rs.64.5 Crores and Rs.50.7 Crores respectively.
  • In terms of cost of raw materials and packaging materials, the strain continues
  • The average purchase price of LLP as well as refined mustard oil  in the second quarter is  Rs.51.80 which is much higher than the Rs.44.55 per kg that was the purchase price in the second quarter of last financial year
  • There is increase in overheads as salary costs are increased by 32% YOY, as the management is building bench strength in all the departments
  • The sale of Nomarks cream, which is being actively promoted, has grown by 48% in this quarter
  • The price increase in raw materials has been largely compensated by input tax credit
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GST Impact

  • The wholesalers continue to be watchful and have not reacted positively post the implementation of GST
  • 22317 wholesalers listed in the ERP system out of which 8801 have not yet started buying from our distributors after the implementation of GST
  • Though the Government of India have extended the dates for filing GST returns for July and August most of the distributors are finding it very difficult to file the GST return
  • With the strain on wholesale channel the importance of direct distribution would be very high, so focus is on increasing numbers of distributors as well as outlook covers by field force

Distribution Channel

  • The share of wholesale was more than 50% of the total turnover, it has dropped to below 40% already and is expected to drop even further
  • As of September the total number of distributors has gone up from 9695 as against 7707 as on March 17, 2017
  • During Q@FY18, two sales verticals namely canteen stores department and international business have shown a negative trend as a result the sales to CSD have declined by 21% in the second quarter.
  • The outlook for CSD, which is now under 5% of the total business, does not look very promising for the remaining part of this financial year

International Business

  • International business, which has been a growth driver for the company, had also declined during the second quarter by 15.4%
  • The regions of MENA have shown the highest decline of 35% led by loss of sales in UAE and KSA

Innovation

  • The Innovations Center started in April by housing the R&D Center in Mumbai has started working
  • With help of R & D the company plan to launch at least differentiated and well researched product every quarter from here on

Industry Update

  • The volumes in the hair oil industry have grown by 6.7% as against 50.6% during the last quarter
  • The volumes of the light hair oil industry have slowed down a little and slowed down to 2.6% however  the lead brand  of the company Bajaj Almond Drops continues to outpace the light hair oil industry with an off take growth of 4.8%
  • The rural volume growths of the total hair oil had dropped from 12% in the first quarter to 4.8% in the second quarter of this financial year.

Future Prospects

  • Going forward the primary objective is to be able to reach as many people as possible
  • Focus is also on increasing the reach of direct distribution otherwise company would lose a bit of what it is communicating as a brand as you cannot control the reach of the advertisement
  • The growth in CSD is not expected in future quarters because of policies (to scale down)the  Ministry of Defense and Canteen Store Department is following
  • The volume growth in Nomarks is expected to grow in future quarters as the company is moving into more settees with the concentrated chemist plant which will increase its base

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