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BAJAJ ELECTRICALS LTD.

BAJAJ ELECTRICALS LTD.
INSPIRING TRUST
INTRODUCTION:
Bajaj Electricals Ltd (BEL) (BSE: 500031) is an Indian consumer electrical Equipments
manufacturing company based in Mumbai, Maharashtra. It is a part of the 380 billion
(US$6.2 billion) Bajaj Group. It has diversified with interests in lighting, luminaries, appliances,
fans, LPG based Generators, engineering and projects. Its main domains are lighting, consumer
durables, engineering and projects .Some notable project includes lighting works at the
Commonwealth Games stadium and the Bandra Worli Sea Link
It has 19 branch offices spread in different parts of the country with a chain of about 1000
distributors, 4000 authorised dealers, over 400,000 retail outlets and over 282 Customer Care
centres.
HISTORY:
July 1938- It was incorporated in 14 July 1938 as Radio Lamp Works Limited under the Indian
Companies Act, 1913 as a Public company limited
October 1960- On 1 October 1960 it was renamed to Bajaj Electrical Limited
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
2000-2001- The Company set-up our 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.
November 2002-Our Company 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.
Year 2005-the year 2005 the company entered into a Distribution agreement with Trilux Lenze of
Germany for high end technical lighting
Year 2007-In the year 2007, the company acquired 32% of the share capital of Starlite Lighting
Limited, a company engaged in the manufacture of Compact Fluorescent Lamps ("CFLs").
2012-2013 -In 2012-2013, they have completely divested our stake and association with Black &
Decker Corporation, USA.
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BAJAJ ELECTRICALS LTD.

PRODUCT RANGE :
Its main domains are lighting, consumer durables, engineering and projects.
Lighting includes lamps, tubes and luminaires.
Consumer durables include appliances and fans.
Engineering and projects -The Company provides engineering and projects services
consisting of mast lighting, mobile light tower, flag mast; street furniture projects,
including hot dip galvanized poles, cast iron ornamental lamp posts, and glass reinforces
polymer composite poles; specialty projects, such as stadium lighting, rural
electrification, and transmission line towers.
Luminaires includes industrial lighting, roadway lighting, area lighting, urban
architecture and accessories fluorescent lamps, fluorescent tube lights, LED lights;
power solutions, including home UPS, inverters, and generators.
Others include die casting, wind energy & solar energy












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BAJAJ ELECTRICALS LTD.
LEVERAGE RATIOS :
DEBT/EQUI TY RATI O= (SHORT TERM DEBT + LONG TERM DEBT)/EQUITY
(CONSIDER ANNEXURE 2)
FOR THE YEAR ENDING MARCH 2010:
=151.84/494.38
=0.30
FOR THE YEAR ENDING MARCH 2011:
=116.47/611.11
=0.19
FOR THE YEAR ENDING MARCH 2012:
=187.16/699.86
=0.26
FOR THE YEAR ENDING MARCH 2013:
=159.99/728.64
=0.21


INTERPRETATION:
COMPANIES WITH LESS DEBT EQUITY RATIO ARE LESS RISKY THAN THE
COMPANIES HAVING A HIGH RATIO. IT IS IMPORTANT FOR A SHARE HOLDER TO
LOOK AT THE FINANCIAL RATIOS IN ORDER TO INVEST IN IT.COMPANY WAS
HAVING LEAST DEBT EQUITY RATIO IN THE YEAR 2011 AND IS TRYING TO
MAINTAIN IT BY HAVING DEBT EQUITY RATIO AS 0.21 IN THE YEAR ENDING
MARCH 2013.





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BAJAJ ELECTRICALS LTD.
I NTEREST COVERAGE RATI O:
(CONSIDER ANNEXURE 1)

INTEREST COVERAGE =OPEARTING INCOME/INTEREST EXPENSE

FOR THE YEAR ENDING MARCH 2010:
= 240.03/38.21
= 6.28

THE YEAR ENDING MARCH 2011:
= 255.45/37.68
= 6.77

FOR THE YEAR ENDING MARCH 2012:
= 238.83/62.31
= 3.83

FOR THE YEAR ENDING MARCH 2013:
= 110.75/68.97
= 1.60

INTERPRETATION:
IF A COMPANY BORROWS MONEY IN THE FORM OF DEBT, IT MOST LIKELY INCURS
INTEREST CHARGES ON IT. THE INTEREST COVERAGE RATIO MEASURES A
COMPANY'S ABILITY TO MEET ITS INTEREST OBLIGATIONS WITH INCOME EARNED
FROM THE FIRM'S PRIMARY SOURCE OF BUSINESS. AGAIN, HIGHER INTEREST
COVERAGE RATIOS ARE TYPICALLY BETTER, AND INTEREST COVERAGE CLOSE TO
OR LESS THAN ONE MEANS THE COMPANY HAS SOME SERIOUS DIFFICULTY
PAYING ITS INTEREST.
FOR
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BAJAJ ELECTRICALS LTD.

INTEREST COVERAGE RATIO INDICATES THE COMFORT WITH WHICH THE
COMPANY MAY BE ABLE TO SERVICE THE INTEREST EXPENSE (I.E. FINANCE
CHARGES) ON ITS OUTSTANDING DEBT. HIGHER INTEREST COVERAGE RATIO
INDICATES THAT THE COMPANY CAN EASILY MEET THE INTEREST EXPENSE
PERTAINING TO ITS DEBT OBLIGATIONS. IN OUR VIEW, INTEREST COVERAGE
RATIO OF BELOW 1.5 SHOULD RAISE DOUBTS ABOUT THE COMPANYS ABILITY TO
MEET THE EXPENSES ON ITS BORROWINGS. INTEREST COVERAGE RATIO BELOW 1
INDICATES THAT THE COMPANY IS JUST NOT GENERATING ENOUGH TO SERVICE
ITS DEBT OBLIGATIONS.

BAJAJELECS AVERAGE INTEREST COVERAGE RATIO OVER THE LAST 5 FINANCIAL
YEARS HAS BEEN 4.62 TIMES WHICH INDICATES THAT THE COMPANY CAN MEET
ITS DEBT OBLIGATIONS WITHOUT ANY DIFFICULTY.
















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BAJAJ ELECTRICALS LTD.
LONG TERM DEBT TO EQUI TY RATI O
(CONSIDER ANNEXURE 2)
=LONG TERM BORROWINGS /EQUITY
FOR THE YEAR ENDING 31 MARCH 2010
= 151.83/494.37
=0.30
FOR THE YEAR ENDING 31 MARCH 2011
=45.10/611.11
=0.07
FOR THE YEAR ENDING 31 MARCH 2012
=40.45/699.86
=0.06
FOR THE YEAR ENDING 31 MARCH 2013
= 34.54/728.64
=0.05
INTERPRETATION:
COMPANIES OPERATING WITH HIGH LONG TERM DEBT TO EQUITY ON THEIR
BALANCE SHEETS ARE VULNERABLE TO ECONOMIC CYCLES. IN TIMES OF
SLOWDOWN IN ECONOMY, COMPANIES WITH HIGH LEVELS OF DEBT FIND IT
INCREASINGLY DIFFICULT TO SERVICE THE INTEREST ON THEIR BORROWINGS AS
PROFIT MARGINS DECLINE. WE BELIEVE THAT LONG TERM DEBT TO EQUITY RATIO
HIGHER THAN 0.6 - 0.8 COULD AFFECT THE BUSINESS OF A COMPANY AND ITS
RESULTS OF OPERATIONS.

BAJAJELEC'S AVERAGE LONG TERM DEBT TO EQUITY RATIO OVER THE LAST 4
FINANCIAL YEARS HAS BEEN 0.12 TIMES WHICH INDICATES THAT THE COMPANY
OPERATES WITH CLOSE TO ZERO DEBT AND IS PLACED WELL TO WITHSTAND
ECONOMIC SLOWDOWNS


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BAJAJ ELECTRICALS LTD.

BAJAJ ELECTRICALS SHAREHOLDINGS PATTERN.



SHAREHOLDING PATTERN (% OF SHARES HELD)

Shareholding March 2010 March 2011 March 2012 March 2013 December 2013
Promoter 65.71 65.20 65.98 66.08 66.22
FIIs 3.85 8.85 5.47 11.50 15.40
DIIs 16.27 11.28 10.06 4.48 2.90
Others 14.17 14.67 18.49 17.94 15.48


(CONSIDER ANNEXURE 1)
THE OPERATING PROFIT OF BAJAJ ELECTRICALS HAS GONE DOWN FROM 255.45
IN YEAR 2011 TO 238.83 IN THE YEAR 2012 AND FINALLY 110.75 IN THE YEAR 2013.
The reason for the poor show on bourses is the EPC business, which has been a drag for the
company: it wiped out 53% of the total operating profit in FY13 and 66% in the first half FY14.
Cost overruns and execution delays in the EPC business have resulted in the poor performance. The
segment also led to a rise in working capital, which impacted the return on capital. But now the
company is trying to set things in order. "We have become very selective about the projects we
choose and will take the ones only with high margins. We have also set up a new ERP system and a
new team for the EPC business and our focus will only be on execution. The uncertain future
surrounding its Engineering & Projects division (E&P) has made investors jittery, causing the
market cap to lose substantial value.
CREATING VALUE FOR SHAREHOLDERS: Over the years, the company has not only
strengthened its financial position but has also created a great deal of shareholder value. The same
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BAJAJ ELECTRICALS LTD.
has been the result of the company's continuous improvement in product and processes, widening
of product range and entering new categories and geographies. Few initiatives to name are
innovative launches in fan division (Disney fans for kids), launching new models in appliances
segment (consumer durables like ovens, heaters, iron, etc.), tie-ups with leading international
brands like Morphy Richards, acquiring stake in Starlite Lightning Ltd - manufactures compact
fluorescent lamps and technology tie ups in the lightening segment (Abacus and Trilux, Delta and
Securiton).
Its efforts to boost earnings, lower expenses, efficient use of assets and expanding reach through
dealer distributor network led to improvement in ROIC (return on capital employed). ROIC
improved from merely 1.7% in FY03 to 25% in FY11). There has been a marginal dip in ROIC in
FY12. The same is on account of poor macroeconomic environment surrounding its E&P business.
Economic revival and increase in infrastructure spend is likely to result in better utilization of
assets and higher earnings. The changing revenue mix and lower finance cost is likely to give a
further boost to profitability. Despite working capital needs remaining the same, improved earnings
is expected to boost ROIC.
BALANCE SHEET STRENGTH: With increase in profitability and consequently cash flows, the
company's debt servicing capability has improved. The same is highlighted by consistently
declining gearing ratio (debt to equity ratio- D/E) and improving interest coverage ratio. D/E ratio
has come down from 2.6 times in FY03 to 0.3 in FY12. Going forward, we expect the company to
further lower its debt burden and maintain the debt to equity around similar level (well below 1x).
As the company's profitability improved and obligations declined, its interest coverage ratio
improved from 0.4 in FY03 to 8.4 in FY11. Although interest coverage fell substantially to around
4x in FY12, we believe that this is only a temporary phenomenon and expect the coverage to go
back to FY11 levels.








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BAJAJ ELECTRICALS LTD.
ANNEXURE 1:
Operating Profit 110.75 238.83 255.45 240.03 187.98
PBDIT 152.39 247.98 267.30 248.15 188.74
Interest 68.97 62.31 37.68 38.21 42.20
PBDT 83.42 185.67 229.62 209.94 146.54
Depreciation 14.45 12.52 10.76 9.20 8.55
Other Written Off 0.00 0.00 0.00 0.00 0.00
Profit Before Tax 68.97 173.15 218.86 200.74 137.99
Extra-ordinary items 0.00 2.80 -1.07 -8.18 2.48
PBT (Post Extra-ord Items) 68.97 175.95 217.79 192.56 140.47
Tax 17.77 58.07 73.99 75.35 50.67
Reported Net Profit 51.21 117.88 144.86 117.10 89.13

ANNEXURE 2:
Sources Of Funds MAR13 MAR12 MAR11 MAR10

Total Share Capital 19.95 19.93 19.77 19.51

Equity Share Capital 19.95 19.93 19.77 19.51

Share Application Money 0.00 0.00 0.02 0.00

Preference Share Capital 0.00 0.00 0.00 0.00

Reserves 708.69 671.11 582 465.52

Revaluation Reserves 0.00 8.82 9.08 9.35

Networth 728.64 699.86 611 494.38

Secured Loans 51.02 76.66 48.26 68.39

Unsecured Loans 108.97 110.50 68.21 83.45

Total Debt 159.99 187.16 116 151.84

Total Liabilities 888.63 887.02 727 646.22



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BAJAJ ELECTRICALS LTD.