Bajaj Elec may further raise product prices

Thu, Jul 24 05:51 PM

By Janaki Krishnan

MUMBAI (Reuters) - Lighting products and electrical appliances maker Bajaj Electricals Ltd may further increase prices of its products if raw material costs rise, a top official said on Thursday.

It has already increased prices of its fans and appliances by 5-7 percent in the last few months.

"I wont be surprised if there are further price increases in store because ultimately if there is a commodity-led cost push I have no option but to pass on the burden," Executive Director R. Ramakrishnan told Reuters.

"If there is a cost push we will pass it on to the consumers in a calibrated manner. I would like to distribute the load over a period of 2-3 months, so that consumer resistance is not too strong. We dont want a sudden slump in demand," he added.

Bajaj Electricals reported a 29 percent rise in net profit to 100.2 million rupees, while total income rose 26 percent to 3.18 billion rupees.

It profit growth was helped by improvement in margins in its consumer durables and lighting business, Ramakrishnan said.

Overall earnings before interest, depreciation, taxes and amortisation rose by 34 percent, he added.

RISING COSTS

Bajaj is facing margin pressure on its transmission line tower business due to new entrants in the segment who are hungry to get volumes. "So that is one bit of a problem area," Ramakrishnan said.

Further, certain imported products from China are coming in at higher prices. "China costs have gone up anywhere between 8-15 percent in different product groups. So that is also a bit of a pressure point," he added.

Rise in copper prices, higher transportation costs and rise in plastics prices due to soaring oil prices have all added to the pressure, he said.

The company however has been able to report better profits due to its ability to raise prices, improving margins through better product mix, and controlling costs.

"To some extent we are able to pass on the price pressure to our customers," Ramakrishnan said.

While there was demand still for its products the buoyancy could be affected due to a slowdown in new housing construction as a fallout of rise in interest costs.

"New construction affects about 20-25 percent of our business. So a slowing down in the housing demand would also affect us."

During the quarter Bajaj's interest cost was at 2.52 percent of sales, down from 2.75 percent a year ago, due to better utilisation of capital, he said.

Shares in Bajaj Electricals closed down 3.85 percent at 426.20 rupees on the BSE.

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