SOME INTERESTING POINTS HIGHLIGHTED BY MR KUSHAGRA BAJAJ
- NEGATIVE WORKING CAPITAL
- MARKET SHARE INCREASES INSPITE OF PRICE INCREASE
- EBIDTA MARGINS FOR SACHETS SAM AS IN GLASS BOTTLE
- EBIDTA IS EQUAL TO PROFIT BEFORE TAX AS THERE IS NO INTERST,LOW DEPRECIATION,UNITS IN TAX EXEMPTED ZONES
WOULD BE A RUNAWAY IPO BASED ON ITS STRENGTH ALONE
JUST BUY ON LISTING N HOLD FOR 2-3 YEARS
Mr. Kushagra Bajaj, Vice - Chairman, Bajaj Corp Ltd. is one of the Promoters of the Company. He holds a bachelors degree of science in economics, political philosophy and finance from the Carnegie Mellon University, Pittsburgh, USA and a master’s degree in science in marketing and finance from the Northwestern University, Chicago, USA. He has over 10 years of experience in the consumer and sugar industry.
Bajaj Corp Ltd. is one of India’s leading FMCG Company with major brands in Hair care category. With brands that have been in the market for eight decades, it is part of one of the oldest business houses of the country. The Bajaj group is known for creating widely respected brands in Hair Oil category and generating loyal base of consumers who are using our brands for years.
Speaking with Jasmine Kohli of IIFL, Mr. Kushagra Bajaj says "We are coming up with our third manufacturing facility at Ponta Sahib with which our production capacity will be augmented to 74 million litres per annum"
Tell us about Bajaj Corp?
Earlier, we were known by the name Bajaj Sevaashram but the name was changed to Bajaj Consumer and now Bajaj Corp. post separation.
We are the third largest manufacturers of hair oil in India. Our leading brand is Bajaj Almond drops; it commands a 52% market share in light hair oil category. It is the second fastest hair oil category across all hair oils.
Among our other brands we have Bajaj Brahmi Amla, Bajaj Amla Shikakai, Bajaj Kala Dant manjan and Bajaj Jasmine hair oil.
What is your outlook on the industry?
The FMCG sector is valued at Rs1,610 bn. This is only the branded products and we are not talking about the unbranded category. Of this, the Hair Care segment is roughly 8% or Rs92bn. Hair care is further divide into Shampoo, Oil, Conditioners, Hair Dyes, hair colours, etc.
Shampoos and Hair Oils, including Coconut Oils continue to be the key components of this segment. Recent growth in the Hair Oil industry has primarily been the result of volume growth due to increased distribution and higher per dealer off-takes.
The overall Hair Care market has been growing at a CAGR of 17% by volume and 28% CAGR by value over the last four years. Light Hair Oil is growing even faster than the industry at a CAGR of 18.5% by volume and 27.5% CAGR by value over the last four years.
Our brand Bajaj Almond Hair Oil has grown at a CAGR of 32.7% by volume and over 42% in value over the last four years. The value is higher than industry by about 1.5 times chiefly as we are the second most expensive Hair Oil across categories.
80% sales are still sold through Kirana shops and general stores. Only 2% of sales come from modern trade. Like other categories, except coconut, 50% plus sales come from Northern India. Only 4% sales come from southern part of India, due to coconut dominations.
How do you see usage of hair oil among youth?
For our brands in particular, 55% of users are males in urban India; they are in the age group of 35-80 years. The reason is that it is non-sticky hair oil. This category has grown at a CAGR of 30%. So it shows that the hair oil category is not de-growing against the popular belief.
How are you placed in the sachets space?
Industry has been selling about 2% of its volume on sachets. We sold about 8% last year; this year we plan to do 10-11%.
The unique thing about our sachets business is that EBITDA margin for sachets is the same, as that of our 300ml Rs100 bottle because we are the only company that sells oil in a glass bottle while others have shifted to PET bottle.
Unlike most hair oils which are packaged in plastic PET bottles, Almond Drops is packaged in glass bottles. This preserves the product for a longer period of time even in high temperatures.
Brief us about your manufacturing facilities?
Currently we manufacture our products at two facilities in Parwanoo and Dehradun. With the completion of a third facility at Ponta Sahib, our production capacity for light hair oil is expected to be augmented to 74 million litres per annum from the current capacity of 39 million litres per annum.
In addition, we also engage third-party manufacturers at Parwanoo, Himachal Pradesh for hair oils and Udaipur, Rajasthan to produce our oral care products. These third-party facilities have a combined installed capacity of 9 million litres per annum.
As of December 31, 2009, the combined production capacity for all company and third-party operated production facilities was 83 million litres per annum.
Brief us about your market share?
Our market share has steadily grown from 31% in FY05 to over 50% in FY09. It has been a pull strategy rather than a push strategy.
We have not brought our market share to 50% by lowering prices but by increasing prices. This is clearly indicative of our strength in Branding, Products, Presence and Distribution.
Brief us about your distribution network?
We have a pan India network with 4600 distributors. In a year and half we aim to reach about 6,000 distributors.
What is your topline growth?
Last financial year we had a topline of 35%.
Brief us about working capital cycle?
We don’t give any credit to the market for any of our products. We buy our raw material between 30-90 days credit depending on the material. So it is a negative working capital business.
What is the purpose of the IPO?
Purpose of the issue is to bring down the dependence of the company on one product Bajaj Almond oil which generates 92% of our revenues. We have allocated Rs2.2bn for brand extensions and Rs500mn for acquisitions. The balance IPO money will be utilized for general corporate purposes.
We could enter into Non-hair Oil segments also. We plan to penetrate the rural market going forward.
We will also pursue acquisitions if we come across any worthwhile target.
Zerodha (Trading Account)
RHP
