We are full-out on capacity in batteries: Eveready’s Amritanshu Khaitan

The country’s largest dry cell battery maker with more than 50 per cent share, Eveready Industries India, has recorded one of its best quarterly performances at a time when the company is struggling with debt at the promoter-level.

“All factories are operational, we are full-out on capacity in batteries,” said Managing Director Amritanshu Khaitan. The company has a capacity of 1.8 billion batteries.

Eveready recorded a 234 per cent increase in profit before tax (PBT) to Rs 30.29 crore in the June quarter even as operating income fell by around 18 per cent to Rs 263.45 primarily due to a complete stoppage and disruption of economic activities during the initial phases of countrywide lockdown in April.

“This is the best performance for Eveready in many quarters in terms of operating margins and what you are seeing is a performance of two months,” Khaitan said.

Price revision, strong demand and implementation of quality standards by the Bureau of Indian Standards (BIS) helped prop up the company’s performance. “About 10-15 per cent of the market that used to be dumped by China has come down to negligible levels,” Khaitan explained.

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These were typically the unorganised players and their share is now flowing into the organised market. Not just batteries, Eveready’s flashlights business, which is wholesale-driven and suffered in March-April is seeing a surge in demand.

“In March and April, with the wholesale mandis closed, we could not move it into the hinterlands. But with monsoons arriving and agrarian economy picking up, we saw strong demand in June,” Khaitan said.

Eveready has a 75 per cent market share in the organised flashlight market and 70-75 per cent of its sales is rural and semi urban-focused. In batteries, the rural to urban sales ratio is 50-50.

The other segment, lighting and appliance, however suffered by prolonged restrictions on trade of non-essential items coupled with a weak demand as consumers deferred discretionary consumption. But, lighting is still looking at an EBITDA break-even while appliance is in loss.

However, what helped in the company’s performance was that the more profitable products like battery and flashlights sold more and EBITDA margins in batteries is at 23-24 per cent while that of flashlights is at 18 per cent.

Cost-saving measures like merging distribution networks of lighting and appliance segments were also undertaken which helped boost margins.

The performance trend will continue in the company with whatever steps the company has taken. We have managed to reduce losses in the lighting and appliance segment, said Khaitan.

But even as Eveready’s financial performance is improving, issues at the holding company level remained. Promoter holding has hit nadir in Eveready and bulk tea producer, McLeod Russel, after IndusInd Bank invoked pledged shares in the companies by 7.82 per cent and 7.50 per cent, respectively. As a consequence, Khaitan family holding in Eveready and McLeod stand are at 7.25 per cent and 18.32 per cent.

ALSO READ: Eveready Industries PBT rises 234% to Rs 30.29 crore in June quarter

Continuous selling of pledged shares by financiers has brought down promoter holding in the two companies over the past year and a half. In June 2019, promoter holding in Eveready stood at 42.17 per cent and in McLeod at 31.02 per cent.

In Eveready, the Burman family – promoters of Dabur – are now the largest shareholder at 19.84 per cent. They have been buying into Eveready since March 2019.

Even if they want to, it might be difficult for the Khaitans to claw back shareholding as lenders might throw a spanner. Though Eveready’s debt is at Rs 350 crore, the debt at the group level is around Rs 6,000 crore.

Each of the companies – Eveready, McLeod Russel and McNally Bharat Engineering – are now charting separate ways to resolve the debt problem. However, a Delhi High Court order in a case filed by KKR India against Williamson Magor group last year prevented a change in the capital structure and sale of assets by Eveready, McLeod Russel India and other Williamson Magor group entities.

Eveready has plans to monetise non-core assets, as well. But any major step would have to wait for the injunction to be lifted.