Electrical goods maker Havells India Ltd reported its best ever quarter after pent up demand lifted the company’s sales and profits to unprecedented levels in October-December 2020.
The company’s third-quarter revenue jumped nearly 40% year-on-year, breaking the Rs 3,000 cr mark for the first time in its history.
Similarly, pretax profits zoomed 101% to Rs 468 cr, setting a new record by overcoming the previous quarter’s record of Rs 425 cr.
Both numbers are way beyond Street expectations, which were tempered by a flaky performance by the company in recent quarters.
For example, in the year ended March 2020, the company’s revenue fell by 6% to Rs 9,429 cr from Rs 10,078 cr in the previous year, even as rivals like Polycab continued to set the charts on fire with blazing year-on-year numbers. Havells, which had been one of the best performers in the entire corporate sector in India, seemed to have lost its mojo.
The company was a darling of investors as it had grown its sales by 24% in FY19 and a whopping 33% in the year before. As such, the decline seen in the year-ended March 2020 was as unexpected as it was painful for shareholders.
Given the impact of COVID-19 pandemic, analysts were expecting Havells to barely match its sales number this year with that of last year. They expected full-year revenue in the range of Rs 9,200-9,300 cr.
However, with the latest quarter contributing sales of Rs 3,175 cr, Havells has already notched up revenues of Rs 7,269 cr with three months remaining in the year. The nine-month figure is almost level with last year’s Rs 7,315 cr, despite the sharp disruption caused by the COVID-19 pandemic.
Going by the accelerating growth, the final three months of the year too could see some fireworks.
Against the 10% YoY growth recorded in the Jul-Sep quarter, the company has posted revenue growth of 39% for Oct-Dec.
Even if growth moderates to around 30% in the final quarter of the year, it would end up growing its total sales for the year by around 7%-8%, a far cry from the -2% to flat performance expected by most analysts.
FIRING ON ALL CYLINDERS
October-December 2020 is also perhaps the first time in the company’s history when the company has seen growth in both revenue and profits in all its six operating segments, including the ever-suffering Lloyd division.
The cable and wire division, which had reported a decline in revenue in the September quarter, delivered revenue growth of 27% in the December quarter.
Some of it may be because of higher metal prices that may have pushed up prices for copper wires and cables.
The cable division had been suffering because of delays in the resumption of large industrial projects, even though sales of wires had started showing signs of revival in the September quarter itself.
Loyd, an electrical and electronics brand that the company acquired recently, too seemed to show some signs of finally turning the corner as far as breaking even was concerned.
Against an operating loss of Rs 13 cr in the September quarter, the Lloyd division reported an operating profit of Rs 31 cr — its most impressive performance in recent years.
The revenue of Rs 512 cr posted by Lloyd during the quarter is also perhaps the highest ever for the division for any three-month period.
Lloyd had reported revenue of only Rs 300 cr in the September quarter and Rs 280 cr in the year-ago quarter. At the same time, Lloyd had posted strong revenue of Rs 458 cr in the March 2020 quarter, but the recovery was interrupted by COVID-19.
Given that it competes largely with MNCs like Samsung and LG, Havells had taken its distribution partners on a tour of its factories to reassure them of the quality of its consumer durables and electronics goods.
The company explained that the strong momentum in Lloyd’s December quarter numbers was aided by “significant growth” in AC sales.
This was in turn because of a “perceived change in industry dynamics consequent to import prohibitions” relating to China, ramp up of own production as well as an increase in the company’s retailer network, it said.
There was also some demand in the market from people gearing up for the summer.
The central government had announced a scheme under which employees could claim their travel allowance by submitting bills for purchases of durables.
The company attributed the growth seen in other segments, such as electrical goods, lights and small electrical machines and durables, to gains from the unorganized sector.
The unorganized sector has been disrupted by the pandemic-related shutdowns and import curbs on raw materials and components.
Havells’ expanding distribution footprint also helped, it added.
What remains to be seen, however, is how much of the current momentum in sales is owing to pent up demand, and how much of it is really sustainable in the medium and long term.