Feb. 1 (Bloomberg) -- Eveready Industries India Ltd., the country’s biggest maker of batteries, plans to step up imports of Chinese products to meet demand for portable power systems as it seeks to reverse the worst loss in a decade.
The Kolkata-based company is counting on its new Chinese-made, Eveready-branded offerings including compact smartphone chargers and rechargeable lanterns to boost sales in the South Asian nation known for blackouts that last as long as 16 hours a day. Price increases to compensate for rising input costs and an expanded portfolio will help revenue “enter double-digit growth” in the year starting April 1, Director Amritanshu Khaitan said in an interview.
The company, which manages the 107 year-old brand is augmenting its mobile energy solutions beyond dry cells and flashlights as policy makers in Asia’s third-biggest economy struggle to bridge an average 9 percent power deficit. Shares of Eveready have dropped 18 percent in the past year, compared with a 16 percent gain in the benchmark Sensitive Index, after the company reported a loss of 799 million rupees ($15 million) in the 12 months through March 2012, the most since 2002.
“We felt we need to take the next step in reinventing the brand in terms of innovation,” Khaitan said in his Kolkata office. “The way power projects are being delayed, I see in five to 10 years, India being short of power. I see good demand going forward.”
Eveready’s shares gained 5.4 percent to 22.5 rupees at 10:45 a.m. in Mumbai, the biggest jump since Oct. 18. The company’s owners, the Khaitan family, also run the world’s biggest tea producer.
Rising income is fueling demand for gadgets in the country with the world’s largest population under 30 and more than 900 mobile phone connections. Spending on consumer electronics in India is projected to grow an average 14 percent through 2017 from an estimated $37.5 billion in 2013, according to a report published by Business Monitor International.
Eveready’s sales in the current year ending March 31 may grow as much as 7 percent, accelerating from 3 percent in the previous 12 months, while the increase in prices will help operating profit, or earnings before interest, taxation and depreciation, increase by about 50 percent, ending the 12 months with neither a loss nor a profit, Khaitan said.
The rupee’s 12.4 percent depreciation against the dollar in the year through March 2012, the worst among the most-traded currencies in Asia, increased costs of imported raw materials including zinc, he said.
The company will continue with more rounds of price increases in the next fiscal year as well, starting with 4 percent in the next five months, he said.
Importing products from China may help Eveready keep capital expenditure low as it seeks to reduce its debt and pare interest costs. Sales of surplus land the company owns in the southern city of Hyderabad and near the capital New Delhi in the next 18-20 months will help Eveready become a debt-free company except for working capital in about two years, Khaitan said, declining to comment on profit margins from the imported merchandise.
Total debt at the end of March 2012 was at 3.2 billion rupees, compared with a record 8.7 billion rupees in 2002, according to data compiled by Bloomberg.
The company needs to keep a check on the quality of the imported products from China to be successful as it leverages its distribution network in urban and rural areas, said Mumbai-based Jai Sharda, a managing partner at Equitorials, which offers research services to investors.
“It is up to the purchaser to ensure the quality is good,” he said. “That is the critical point here for Eveready.”
Products of the company are available at 4,000 distributors across the country, including at grocery, general provision stores and photo studios, according to Eveready’s website. The newly introduced goods from China will start contributing to its earnings in the year ending March 2015, Khaitan said.
Eveready Industries India, which has the capacity to make 1.2 billion batteries per year, was formed in 1995 after Union Carbide Corp. sold its stake in its Indian unit to local investors about 10 years after the leak of a toxic gas in Bhopal, central India, killed thousands of people. The Eveready brand started selling in the country in 1905 with imported cells from the U.S.
“We are focusing on the growth opportunities in India and we are bringing in products which would be consumed by the large Indian population,” Khaitan said. “The brand has been around for a long time. We will make it more relevant to the youth of this country today.”
To contact the reporter on this story: Pradipta Mukherjee in Kolkata at email@example.com
To contact the editor responsible for this story: Arijit Ghosh at firstname.lastname@example.org