Bajaj Electricals ltd

Bajaj Electricals ltd Company Profile: Bajaj Electricals was incorporated as Radio Lamp Works Limited under the Indian Companies Act, 1913 as a July public limited by shares, pursuant certificate of incorporation dated 14,company 1938. Subsequently the name was to a changed to Bajaj Electricals Limited, pursuant to a fresh certificate of incorporation dated October 1, 1960. In 1964, Matchwell Electricals (India) Limited, ("Matchwell"), a manufacturer of electric fans became a subsidiary of Bajaj Electricals and subsequently, with effect from July 1, 1984, the business and undertaking of Matchwell was amalgamated with Bajaj Electricals. In the financial year 1993-1994, Bajaj Electricals entered into a joint venture with Black & Decker Corporation, United States, for the manufacture and marketing of power tools, household appliances, and related accessories, through a separate company named Black & Decker Bajaj Private Limited, ("Black & Decker Bajaj"). During the financial year 1999-2000 Black & Decker Bajaj became a 100% subsidiary of Bajaj Electricals upon Bajaj Electricals acquiring a further 50% of the shareholding thereof from Black & Decker Corporation, pursuant to which Black & Decker Bajaj was renamed as Bajaj Ventures Limited. However, the financial year 2002-2003, Bajaj Electricals divested 50% of its shareholding in Bajaj Ventures Limited and Bajaj Ventures Limited ceased to be a subsidiary of Bajaj Electricals. In January 1998, Bajaj Electricals established a new manufacturing unit at Chakan near Pune and commenced operations of manufacturing of fans and diecast components. The production of fans at our manufacturing activities of the Matchwell unit also was gradually shifted to Chakan unit. In September 1999, Bajaj Electricals established and commissioned a wind energy generation unit with an installed capacity of 2.8 mega watts at Village Vankusawade, Tal. Patan, District Satara, Maharashtra. In the year 2000-2001 Bajaj Electricals set-up manufacturing facilities including a fabrication unit and a galvanizing plant at Ranjangaon, near Pune for the manufacture of high masts, lattice towers, and related products, and the said

manufacturing facilities commenced commercial production with effect from April 1, 2001. In November 2002, Bajaj Electricals entered into a technical collaboration and brand licensing agreement with Morphy Richards, United Kingdom, for the sales and marketing of electrical appliances under the brand name of "Morphy Richards" in India. In the financial year 2002-2003 Bajaj Electricals discontinued manufacturing die-cast components. In the year 2005 Bajaj Electricals entered into a Distribution agreement with Trilux Lenze of Germany for high end technical lighting. In the year 2007, we acquired 32% of the share capital of Starlite Lighting Limited, a company engaged in the manufacture of Compact Fluorescent Lamps ("CFLs"). Our

vision:

Bajaj Electricals aim to bring greater happiness to their customers, through its products and services, while continuously enhancing stakeholder value. Company philosophy:

Trust builds Quality Quality builds Satisfaction Satisfaction builds Relationship Relationship builds Trust We believe in ³Inspiring Trust´. Values: Build Trust : We will conduct all our business dealings with fair and ethical business practices and strive to build trust in the minds of all our stakeholders. Belief in Excellence : We believe in setting higher levels of Excellence in all our actions and will recognize and reward the excellence achieved by our team members.

Customers : We will delight our customers by providing them worldclass products and services and thereby enhance their quality of life. Delighting

Encouraging Teamwork : We will ensure dignity and respect for the individual while encouraging Teamwork. Personal Growth : Every employee will be enabled to learn at the work place with significant opportunities for Personal Growth and Contribution to the organization.

Business Overview: Bajaj Electri cals operates in three divisions, Consumer Durables (Brown goods), Engineering & Projects (High Mast, Poles, Towers, Rural Electrific ation) and Lighting (Lamps, CFLs, LED, Street Lighti ng). All the three divisions have been growing at very healthy growth rates of 20-35% CAGR over the last 5 years and are highly scalable with future growth rates expected to be 20-25% as they are proxy of various growth themes of India such as Consumer Discretionary, Power Generation, Transmission, Distribution, Industrial Capex, Retail, Infrastructure etc. Rs mn Ap pl ia nc es

FY06 1410.0

FY07 1940.0

FY08 2600.0

FY09 3630.0

FY10 4640.0

CAGR 35%

Fa ns

1090.0

1410.0

1850.0

2410.0

2950.0

28%

Li gh tin g

1000.0

1090.0

1340.0

1760.0

2090.0

20%

Lu mi na ir es

1210.0

1550.0

1930.0

2300.0

2820.0

24%

1780.0

2450.0

3050.0

3630.0

5230.0

31%

Total Revenues 6490.0

8440.0

10770.0

13730.0

17730.0

29%

EBIDTA

418.6

677.5

869.4

1432.1

1797.4

44%

PAT

138.5

284.8

385.6

731.2

893.5

59%

Engineering & Proj ec ts

Marketing

1. 2. 3. 4.

± project topics: Customer Satisfaction Survey Strategic Analysis of market Consumer Perception Survey Service Quality Study

5. Service Blueprinting 6. Service Process Mapping ± Back stage, on-stage 7. Improving service quality using service blueprinting 8. Competition Analysis 9. Service standards 10. Study on effectiveness of employee¶s role in service delivery 11. Effectiveness of channels (distributors/ DSAs) in service delivery 12. Effectiveness of channels (on-line/ Internet) in service delivery 13. Customer Data Analysis 14. Study of Institutional markets 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25.

Effectiveness of promotion schemes Measurement of Brand awareness and brand perception Customer Loyalty study Study of purchase influencing factors Customer Profiling Advertising effectiveness study bcg matrix marketing process marketing mix and marketing research marketing objectives the 4 P's - product, price, promotions, place.

1)

Measurement

of Brand awareness and brand perception:

This research investigated direct and indirect relationship between brand equity constructs which includes brand awareness, brand association, perceived quality, and brand loyalty. We implement Structural Equation Modelling with LISREL to examine the hypothesis. The finding showed that there is a significant and positive direct effect between brand awareness toward brand associations, and brand association toward perceived quality and brand loyalty. We argue that brand association plays as a suppressor in our model that leads to inverse relation between brand awareness and perceived quality. With respects to the mediating effect of perceived quality to the relationship between brand awareness towards brand loyalty and brand association towards brand loyalty, our finding showed that perceived quality does not play as a mediator role in this study. On the other hand, we find that brand association is a very important variable which mediate the relationship between brand awareness toward brand loyalty. Keywords: Brand Equity, Brand awareness, Brand Association, Perceived Quality, Brand Loyalty. The issue of brand equity emerge as one of the most crucial topics for marketing management in 1990s and its concept and measurement has interested academicians and practitioners for more than one decade. There have been three different perspectives for considering brand equity; The customer- based perspectives, the financial perspectives and combined perspectives. While this study focus on customer based brand equity.

2)

Customer satisfaction survey of Bajaj Electricals:

We all know customer satisfaction is essential to the survival of our businesses. How do we find out whether our customers are satisfied? The best way to find out whether your customers are satisfied is to ask them. When you conduct a customer satisfaction what you askare thealso customers is important. How, when , and how often you survey, ask these questions important. However, the most important thing about conducting a customer satisfaction survey is what you do with their answers. How

You Ask Whether Customers Are Satisfied

There are many ways to ask your customers whether or not they are satisfied with your company, your products, and the service they received. You can ask them: y

y

y

y

y

Face-to-face As they are about to walk out of your store or office, ask them. Call them on the phone If you have their phone number, and their permission, you can call them after their visit and ask how satisfied they are. Mail them a questionnaire This technique has been used for a long time. The results are predictable. Email them a customer satisfaction survey Be careful to not violate Spam laws Email them an invitation to take a customer satisfaction survey

When To Conduct A C ustomer Satisfaction

Survey

The best time to conduct a customer satisfaction survey is when the experience is fresh in their minds. If you wait to conduct a survey, the customer's response may be less accurate. He may have forgotten some of the details. She may answer about a later event. Her may color his answers because of confusion with other visits. She may confuse you with some other company. What To Ask In A C ustomer Satisfaction

Survey

There is a school of thought that you only need to ask a single question in a customer satisfaction survey. That question is, "will you buy from me again?"

While it is tempting to reduce your customer satisfaction survey to this supposed "essence", you miss a lot of valuable information and you can be easily misled. It is too easy for a customer to answer yes to the "will you buy from me again?", whether they mean it or not. You want to ask other questions in a customer satisfaction survey to get closer to the expected behavior and to collect information about what to change and what to keep doing. By all means ask the basic customer satisfaction questions: y

y

y

How satisfied are you with the purchase you made (of a product or service) How satisfied are you with the service you received? How satisfied are you with our company overall?

And ask the customer loyalty questions" y

y

y

How likely are you to buy from us again? How likely are you to recommend our product/service to others How likely are you to recommend our company to others.

Also ask what the customer liked and didn't like about the product, your service, and your company. What's Next in Customer Satisfaction

Surveys?

So how do you know what's important? How do you know what really matters to them? More importantly, how do you know which things to focus your limited resources on first in order to have the biggest impact on improving customer satisfaction?

3) Strategic

Analysis of Bajaj Electricals:

Strategic analysis is about looking at what is happening outside your organisation now and in the future. It asks two questions: y

y

How might what's happening affect you? What would be your response to likely changes?

It¶s called strategic because it¶s high level, about the longer term, and about your whole organisation. It¶s called analysis because it¶s about breaking something that¶s big and complex down into more manageable chunks. The focus is external because factors outside your organisation have a powerful influence on it. Increasingly organisations appreciate that they can learn to manage their response to those influences, rather than assume there is nothing they can do. It's part of the overarching process of strategic planning. Strategic

analysis boosts organizational effectiveness

Strategic analysis helps to: y

y

y

Anticipate what might happen Evaluate how likely it is to happen Prepare for it happening

Strategic analysis will lead to clearer more relevant goals, better quality decisions, and a more secure future as you are better prepared for what will happen. Otherwise known as ³external environmental analysis´ it is a key step in strategic planning. It is the link between getting your overall direction right and making the right decisions. You will make better decisions if you understand the influences from the outside world to which you might have to respond in the future. Many funders are reassured by strategic analysis because they know that organisations that are well prepared for their future are more likely to use grants, donations and loans to greatest advantage and to maximise the difference their organisation makes.

The cost of not doing at least a small amount of strategic analysis means missed opportunities (some call this µopportunity cost¶ ± the cost of not doing something). If you don¶t do strategic analysis you risk being left behind, missing opportunities for beneficiaries. Company Profile:

Bajaj Electricals Ltd. is a high growth company (last 5 yr sales CAGR is 30%, PAT CAGR is 51%) trading at ~10x its FY11E earnings, its recent earnings have grown at 62% and 152% in Q1FY10 and Q2FY10 respectively. The company has grown at these high rates w ithout saturating any of its markets, with market share ranging between 15-30% implying significant future growth opportunities. The company generates significant cash to s ustain its operations thereby curtailing the need to raise capital which helps in generating high returns on capital (Average ROE of 40% o ver the last 4 years). However, the co mpany has recently done a QIP at Rs.785 per share to raise Rs.1600 mn, which would be used as growth capital (hinting acquisitions). Bajaj Electricals operates in three divisions, Consu mer Durables (Brown goods), Engineering & Projects (High Mast, Po les, Towers, Rural Electrificati on) and Lighting (Lamps, CFLs, LED, Street Lighting). All three businesses are a play on India growth story: All the three divisions have been growing at very healthy growth rates of 20-35% CAGR over the last 5 years and are highly scalable with future growth rates e xpected to be ~20-25% as they a re proxy on various growth themes of I ndia such as Consumer Discretionary, Power Generation, Transmission, Distribution, Industrial Capex, Retail, Infrastructure etc. Va l uations: There aren't any direct comparable companies to Bajaj Electricals, however If we look at the various businesses of the company and compare them with the sectoral valuations, Bajaj Electricals is trading at the lowest end of the valuations.

Year

Net Sales %growth EBI DTA

OPM%

PAT %growth EPS

PE(x)

FY08 13,815.9

27.2

1,432.1

10.4 731.2 86.8 42.3

FY09

28.7

1,797.4

FY10E 21,271.8 19.6

17,779.7

FY11E 25,907.7

35.0

10.1

893.5 22.2 51.7 17.0 42.6

39.0

2,240.9

10.5

1,295.6 45.0

36.1

21.8 2,749.3

10.6

1,638.6 26.5 84.7

Values: B uy Current Price Target Price % upsid e 52 Week Rang e

Rs 876 Rs 1282 46% Rs .1485 / Rs .331

Key Share Data

Market Cap EV / Sales EV / EBI DTA 1mth avg. dai y vol . No.of Shrs o/s i n MN Book Value BSE / NSE Reuters Bloomberg

Rs .16.9BN/$352.9MN 0.8 7.4 Rs .14.5mn/$0.3 mn 19.3 265.1 500031/ BAJAJELEC BJEL.BO BJE IN Equity

holding (%)

Period Promote rs MF/ Bank s/ FIs FII s Pub lic & Othe rs Total

RoCE%

20.7 50.1

Market

Share

RoE%

Dec ''10 65.7 18.1 2.2 14.1 100.0

Sep´10 73.5 10.1 1.3 15.2 100.0

67.0 13.1 34.2 10.3 28.1

33.2