Inflation has hurt consumers, rupee depreciation has impacted us: Bajaj Electricals

By Shailesh Yadav
Mumbai (Maharashtra) [India], November 9 : "Inflation has brought down the spending power of consumers and consumers are buying fewer goods, but paying more for them. Jobs had not come back since the loss of Covid last year," said Anuj Poddar, managing director and chief executive officer, Bajaj Electricals, in a virtual interview to ANI.
However, he was also hopeful, saying, "According to CMIE data, now we've seen some growth, almost back to peak levels. If that happens, I am hopeful that another quarter from now that should translate to better demand coming from the middle class."
Bajaj Electricals on Tuesday reported a marginal decline in its consolidated net profit to Rs 62 crore for the second quarter ending September 30 (Q2). It had Rs 62.55-crore net profit during the July-September quarter the previous fiscal, the company said in a regulatory filing. Net sales slipped 6.41 per cent to Rs 1,201.14 crore during the reviewed quarter, against Rs 1,283.44 crore a year ago.
Bajaj Electricals' total expenses fell 6.81 per cent to Rs 1,159.22 crore in Q2 of FY23 against Rs 1,243.94 crore in the year-ago period.
Talking about the Q2 result, Poddar said, "We've delivered growth in our PBT (profit before tax) on an overall basis as a company, within that, highlighting business has done very well with a very strong profit. EPC (engineering, procurement, and construction) business had turned around and given profit unlike the loss in the past, the consumer business profits are slightly down. That's because of high-cost inventory."
Talking about consumer sentiment, Poddar said, "If we look at all the financial results around the industry, there is a slowness in FMCG (fast-moving consumer goods) sector. Consumer sentiments are pretty weak except for the very premium products. Most of the middle-class rural economy is not doing well right where demand is quite weak. The festive season has not gone quite well. I'm looking at two data points."
"One is the middle class. Jobs had not come back since the loss of Covid last year. Now, as per CMIE (Centre for Monitoring Indian Economy) data now we've seen some growth, almost back to peak levels," Poddar said, adding, "If that happens, I am hopeful that another quarter from now that should translate to better demand for the middle class."
"The second big segment is a rural economy that is yet not showing a good sign. We'll wait and see for FMCG whether soap, oil, shampoo, etc., that start selling and that will give us confidence that demand is coming back," he said.
Poddar said, "Company products cater to mass segments as Bajaj Electricals is traditional for the mass segment and we want the purchasing power coming back to the mass segment which is the middle class. If I talk about the premium segment there is the upper class in India which is not impacted in the last two years. So that's why Mercedes sale continues to do well, premium white goods, refrigerators, TV sales are doing very well. But that's not the middle class. Mass India. That's not the segment we cater to."
Poddar expects that the third quarter (Q3) will be better than Q2. Poddar said "My guess is Q3 demand may not come back that quickly, but if margins come back profitability will improve because the commodity prices have come down.
He said, "Q2 had some old high-cost inventory, in Q3, we'll have the benefit of the commodity cost going down and lower cost inventory. Therefore, our profits may be better in Q3. I think for the demand we may have to wait till Q4 and I'm hopeful that we'll also see demand coming back in Q2."
Poddar said, "For us, inflation is of two types; one is all the core commodities like aluminium, steel, copper, etc., that have come down in the last six months quite a bit. If you look at the international exchange, you know, prices, LME, etc., while that has come down for us because it appears they appreciated some of that. You know reduction is that we'd lost."
"So, let's say if prices come down by 20 per cent but rupee depreciated by 7 per cent and the net reduction for us is that much less than," he said.
Talking about the G20 Presidency of India, Poddar said, "It's good for us to continue to have more engagements internationally, I believe in an open globalised economy. So the more we are part of a global economy, the better it is for us."