Introduction of Havells India Ltd.

Havells India Ltd is a billion-dollar-plus organization, and is one of the largest & India's fastest growing electrical and power distribution equipment manufacturer with products ranging from Industrial & Domestic Circuit Protection Switchgear, Cables & Wires, Motors, Water Heaters, Fans, Power Capacitors, CFL Lamps, Luminaries for Domestic, Commercial & Industrial applications and Modular Switches covering the entire gamut of household, commercial and industrial electrical needs. Havells owns some of the prestigious global brands like Crabtree, Sylvania, Concord, Luminance, Linolite, & SLI Lighting. With 94 branches / representative offices and over 5000 professionals in over 50 countries across the globe, the group has achieved rapid success in the past few years. Its 12 state-ofthe-art manufacturing units in India located at Haridwar, Baddi, Noida, Faridabad, Alwar, Neemrana, and 6 state-of-the-art manufacturing plants located across Europe, Latin America & Africa churn out globally acclaimed products. Havells is a name synonymous with excellence and expertise in the electrical industry. Its 20000 strong global distribution network is prompt to service customers. The company has acquired a number of International certifications, like CSA, KEMA, CB, CE, ASTA, CPA, SEMKO, SIRIUM (Malaysia), SPRING (Singapore), TSE (Turkey), SNI (Indonesia) and EDD (Bahrain) for various products. Today, Havells and its brands have emerged as the preferred choice of electrical products for discerning individuals and industrial consumers both in India and abroad. In an attempt to transform itself from an industrial product company to a consumer products company, Havells launched the consumer electrical products such as CFLs, Fans, Modular Switches & Luminaries. The company has been consistent in its brand promotion with sponsorship of Cricket events like T20 World Cup, India-Australia Series and IPL Season first, second and third. The company has also taken the initiative to reach directly to the consumers through "Havells Galaxy" a one stop shop for all electrical and lighting needs. Social and environmental responsibility has been at the forefront of Havells operating philosophy and as a result the company consistently contributes to socially responsible activities. For instance, the company is providing mid-day meal in government schools in Alwar district, covering 15000 students per day. Besides this company has acquired land for

constructing a larger kitchen with all the modern facilities to serve freshly cooked food to 50000 students in the area. Havells runs a mobile Medical Van, equipped with a trained doctor and necessary medicines in the rural areas of Delhi & NCR for the very poor and needy villagers. We also set up free medical check-up camps. In the past also, the company has generously contributed to the society during various national calamities like the Bihar Flood, Tsunami and Kargil National Relief Fund etc. The essence of Havells success lies in the expertise of its fine team of professionals, strong relationships with associates and the ability to adapt quickly and efficiently, with the vision to always think ahead.

Products
Fans Geysers

Building circuit protection

Capacitors

Industrial Circuit Protection Lighting Modular Plate Switches Motors CFL Cables and Wires

Introduction of Bajaj Electricals Ltd.

Limited by shares, pursuant to a certificate of incorporation dated July 14, 1938. Subsequently the name of our Company was 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 our Company and subsequently, with effect from July 1, 1984, the business and undertaking of Matchwell was amalgamated with our Company. In the financial year 1993-1994, our Company 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 19992000 Black & Decker Bajaj became a 100% subsidiary of our Company upon our Company 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, our Company divested 50% of its shareholding in Bajaj Ventures Limited and Bajaj Ventures Limited ceased to be a subsidiary of our Company. In January 1998, our Company established a new manufacturing unit at Chakan near Pune and commenced operations of manufacturing of fans and die-cast components. The production of fans at our manufacturing activities of the Matchwell unit also was gradually shifted to our Chakan unit. In September 1999, our Company 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 our 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.

In 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. In the financial year 2002-2003 our Company discontinued manufacturing die-cast components. In the year 2005 our company 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").

Products
Mixer Grinders Food Processor JMGs and Juicers Hand Blenders Toasters Oven Toaster Grillers Microwave Ovens Automatic Electric Cookers Electric Kettles Electric Tea Maker Coffee Makers Induction Cookers Water Purifier

Cook Tops Chimneys Nardi Hobs Pressure Cookers Water Heaters Irons - Dry and Steam Room Coolers Room Heaters Home UPS and Inverters Luminaries Special projects

RATIO ANALYSIS
LIQUIDITY RATIOS:
Cash on hand, bills receivable, bank balances, debtors etc. are such assets which are readily available for paying current liabilities as and when they arise. Where such liquid assets are in

sufficient proportion as compared to current liabilities. The liquid position of business is said to be satisfactory. Liquidity ratios provide information about a firm's ability to meet its short-term financial obligations. They are of particular interest to those extending short-term credit to the firm. Two frequently-used liquidity ratios are the current ratio (or working capital ratio) and the quick ratio. (1) Current Ratio: This most widely used ratio shows the proportion of current assets to current liabilities. It is a measure of the short term financial strength of the business and shows whether the business will be able to meet its current liabilities as and when they mature. The liability which matures within a time period of 12 months is called current liabilities. Which includes creditors, bills payable, bank overdraft, outstanding expenses, provision for taxation etc. similarly, the current assets are in the form of cash or can be readily converted into cash within a short time. It includes cash, bank balance, stock, debtors, bills receivable, prepaid expenses, accrued income, readily marketable securities etc.:

Current Ratio =

It is generally believed that 2:1 ratio shows a comfortable working capital position. It means the current assets should be twice the current liabilities. But this rule changes according to the type of business. Here we can say that the current ratio of both the Havells India ltd. And Bajaj Electricals ltd is more than 1. Which shows that both the companies have enough current assets as compared to their current liabilities. But we can see here that the current ratio of Havells is much lower than the Bajaj and it is fluctuating widely. In the last year it has come down to the 1.04 which shows that the current liabilities of the co. are increasing and the current assets are decreasing. In case of Bajaj, the current ratio is moreover consistent and it is higher. It means that the co. is working with enough current assets. In the last year it has come down to 1.47 from 1.64 which shows that company should take enough steps to control the ratio to come down.

Short-term creditors prefer a high current ratio since it reduces their risk. Shareholders may prefer a lower current ratio so that more of the firm's assets are working to grow the business. A current ratio of 2:1 or more is considered satisfactory. Typical values for the current ratio vary by firm and industry. For example, firms with less than 2:1 current ratio may be doing well as compared to firms with current ratio more than 2:1. As current assets can decline in value but liabilities are not subject to any decline in value.

(2) Quick Ratio: One drawback of the current ratio is that inventory may include many items that are difficult to liquidate quickly and that have uncertain liquidation values. The quick ratio is an alternative measure of liquidity that does not include inventory in the current assets. The measure of absolute liquidity may be obtained by comparing only cash and bank balances as well as readily marketable securities with liquid liabilities. This ratio is defined satisfactory if it is 0.5:1. The quick ratio is defined as follows:

Current Assets - Inventory Quick Ratio = Current Liabilities BOD

The current assets used in the quick ratio are cash, accounts receivable, and notes receivable. These assets essentially are current assets less inventory. The quick ratio often is referred to as the acid test and a ratio of 1:1 is considered satisfactory.

Here we can say that the quick ratio of Havells is much lower than Bajaj. Considering the last 5 years, we can say that in Havells the quick ratio was more than 0.5 only in the year 2008-2009. In all other years it has remained lower than 0.5. Which means that Havells is not working with enough liquid assets? If we refer to the ratio of Bajaj than we can say that it has remained higher than 1 that is consistent through all the last 5 years. Which shows that the Bajaj is working with

enough liquid assets and the ratio is moreover consistent Hence, comparatively Bajaj is more efficient in liquid assets than Havells.

LEVERAGE RATIOS
(1) Debt-To-Equity ratio: This ratio establishes relationship between the outside long term liabilities and owners funds. It shows the proportion of long term external equities. i.e. proportion of funds provided by long term creditors and that provided by shareholders or proprietors Long term liabilities Debt-to-Equity Ratio = Shareholders funds

The above calculated ratio suggests that for every Rs. 100 shareholders fund, there is long term debt of Rs. 16, Rs. 8, Rs. 87 etc. the higher ratio means that outside creditors have a large claim than the owners of the business. The pressure from creditors would increase and their interference will also increase. Here we can say that long term debt of Havells has remained lower continuously. It has reached to 2% in the year 2008-09 which is much lower and shows

that company has very less long term debts as compared to the shareholders funds. If we refer to the data of Bajaj, we can say that the ratio was much higher in the year 2006-07 but it is continuously decreasing and has reached to the level of 8%. Which is same as of Havells in the year 2010-11? It means that the debt of Bajaj is decreasing Y-o-Y. hence, it is good for both the Havells and Bajaj because the interference from the creditors is less and they dont have the fixed burden of interest on them. But if we look from the perspective of financial leverage, the financial leverage for both the companies is very less and it can be said that the companies are using less fixed income bearing securities in the capital structure. Also its operating leverage is low, which indicates that the decrease in sales / contribution will not affect the EBIT to a great extent. This is very cautious policy followed by management which need not be necessary as it will not maximize the shareholders wealth. At the same time, it also indicates that the company is not utilizing its borrowing capacity properly and fully. (2) Proprietary ratio: The ratio shows the proportion of proprietors funds to the total assets employed in the business. The proprietors funds consist of share capital and reserves and surplus. Shareholders fund Proprietary ratio = Total funds

The higher the ratio, the stronger the financial position of the enterprise, as it signifies that the proprietors have provided large funds to purchase the assets. This ratio cannot exceed 100%. If it is 100% than it means that the business does not use any outside funds. There are no outside liabilities. Purchases are made for cash only and the firm carries on the business entirely with owned funds. A very high ratio is therefore not desirable, because it means that insufficient use is being made of outside funds. There is not any standard for this ratio but it can be said that the proprietors funds should be enough to cover the fixed assets.

Here the proprietary ratio of Havells has remained constant over a period of last 5 years. This is around 90%. This means that the co. is not much dependent upon the outside funds. If we see this in Bajaj than we can observe that this ratio is continuously increasing. This means that the co. was much more dependent upon outside funds but now it is using the shareholders funds to purchase the assets. Here in both the companies the benefit of trading on equity is not available at large. Generally, in most of the Indian companies this ratio is around 50%

(3) Interest Coverage ratio The ratio indicates as to how many times the profit covers the payment of interest on debentures and other long term loans. It measures the debt service capacity of the firm in respect of fixed interest on long term debts. Interest coverage ratio= EBIT Interest Where, EBIT = Earnings before Interest and Taxes

The ratio shows that the profit available before interest and taxes is 7.06 times, 3.54 times 27.53 times etc. towards the interest payable. The higher this ratio, the sounder is the financial strength of the company, as it indicates greater ability of the firm to handle fixed charge liabilities. Here we can see from the graph that interest coverage ratio of both the companies is continuously increasing. But, it is higher in the case of Havells rather than Bajaj. Also there was a huge increase in this ratio for Havells in the year 2009-10 which was 27.53 times. Since last 2 years this ratio in case of Havells is more fluctuating. Still it is higher and sound. In case of Bajaj this ratio is growing substantially. Still it has increased at a higher rate in last 2 years. Hence, we can say that the interest coverage ratio of both the companies are increasing but in case of Havells it is much higher and this shows that Havells is having much more ability than Bajaj to handle fixed charge liabilities. (4) DIVIDEND PAYOUT RATIO: The DPR (it usually doesnt even warrant a capitalized abbreviation) measures what a companys pays out to investors in the form of dividends.

You calculate the DPR by dividing the annual dividends per share by the Earnings Per Share. DPR = Dividends per Share / EPS For example, if a company paid out $1 per share in annual dividends and had $3 in EPS, the DPR would be 33%. ($1 / $3 = 33%) The real question is whether 33% is good or bad and that is subject to interpretation. Growing companies will typically retain more profits to fund growth and pay lower or no dividends. Companies that pay higher dividends may be in mature industries where there is little room for growth and paying higher dividends is the best use of profits (utilities used to fall into this group, although in recent years many of them have been diversifying). The payout ratio and the retained earnings ratio are the indicators of the amount of earnings that have been ploughed back in the business. The lower the payout ratio, the higher will be the amount of earnings ploughed back in the business and vice versa. A lower payout ratio or higher retained earnings ratio means a stronger financial position of the company.

Here we can see from the graph that out of the net profit the Bajaj is paying more dividend than the Havells. This means that Bajaj retains less profit as compared to the Havells. This means Havells retains more percent of profit.

PROFITABLITY RATIOS

(1) Gross Profit Ratio: It is a ratio expressing relationship between gross profits earned to net sales. It is an useful indication of the profitability of the business. It reflects efficiency with which a firm produces its products. As the gross profit is found by deducting cost of goods sold from net sales, higher the gross profit better it is. There is no standard GP ratio for evaluation. It may vary from business to business. However, the gross profit earned should be sufficient to recover all operating expenses and to build up reserves after paying all fixed interest charges and dividends.

Gross profit Gross profit ratio = Net sales

This ratio is usually expressed as a percentage. A ratio of 10.46% shows that for a sale of every Rs.100, a margin of Rs. 10.46 is available from which operating expenses of business are to be recovered. The ratio shows whether the markup obtained on cost of production is sufficient. There is no standard showing reasonableness of gross profit ratio. However, it must be enough to

cover its operating expenses. Here we can see from the graph that the gross profit ratio of both the companies is around 8 to 9 percent and it has remained stagnant over a period of last 5 years. But, it is lower as compared to other companies. Normally, it is around 20% in most of the companies. Here, in both the companies it is lower but not insufficient. (2)Net Profit Ratio: The ratio is valuable for the purpose of ascertaining the overall profitability of business and shows the efficiency or otherwise of operating the business. This ratio also indicates the firm's capacity to face adverse economic conditions such as price competition, low demand, etc. Obviously, higher the ratio the better is the profitability. But while interpreting the ratio it should be kept in mind that the performance of profits also be seen in relation to investments or capital of the firm and not only in relation to sales.

Net profit Net profit ratio = Net sales

This ratio shows what portion of sales revenue is left to the proprietors after all operating expenses is met. The higher this ratio, the better will be the profitability. Here we can see from the graph that the net profit ratio of both the companies has remained stagnant over a period of time. But if we see carefully than it can be observed that the net profit ratio of Havells is good in comparison with its gross profit which means that there are less administrative expenses in Havells India Ltd. While, in Bajaj the net profit ratio is too lower in comparison with its gross profit ratio. So, there are more administrative expenses in Bajaj Electricals. Hence, comparatively we can say that Havells is more efficient in profits as compared to Bajaj.

(3) Operating Margin Ratio:

It is a ratio showing a relationship between cost of goods sold plus operating expenses and net sales. It shows the efficiency of the management. The lower the ratio, the less will be the margin available to proprietors. Operating ratio shows the operational efficiency of the business. Lower operating ratio shows higher operating profit and vice versa. An operating ratio ranging between 75% and 80% is generally considered as standard for manufacturing concerns. This ratio is considered to be a yardstick of operating efficiency but it should be used cautiously because it may be affected by a number of uncontrollable factors beyond the control of the firm. Operating ratio = cost of goods sold + operating expenses Net sales

Out of sales of Rs. 100, almost Rs. 90 is taken away by cost of goods and other expenses and Rs. 10 is left in the hands of proprietors. This ratio therefore suggests that a particular share of selling price is absorbed by cost of sales and other operating expenses and the remainder is left for the owners of the business.

(4) Return on capital employed

It is an index of profitability of business and is obtained by comparing net profit with capital employed. The success or otherwise of the company is judged with the help of this ratio. Return on capital employed ratio is considered to be the best measure of profitability in order to assess the overall performance of the business. It indicates how well the management has used the investment made by owners and creditors into the business.

Return on capital employed = Net profit Capital employed Here the net profit is EBIT, which means that the profit is before interest and taxes.

Here we can see from the graph that in 2006-07, the return on capital employed in case of Havells was 43.31 which were very high. At that time the Bajaj was having it at 25 percent. But

after that the ratio had a huge fallback in case of Havells for consecutively 2 years and after that it has remained stable. While in case of Bajaj the ratio had a good increase for consecutive 2 years and after that it has fallen to some extent. (5) Return on Shareholders Funds Ratio In order to judge the efficiency with which the proprietors funds are employed in business, this ratio is ascertained. Proprietors funds include share capital and reserves. It is of great importance for investors to compare the profitability of the different companies and to decide in which to invest. It also indicates whether the return on proprietors funds is enough in relation to the risk they undertake. Return On Shareholders Funds (ROSF) = PAT Shareholders funds x 100

Here we can see from the graph that in the year 2006-07 the return on shareholders funds for both the companies were almost same. But in the year 2007-08 there was a huge fallback in case of Havells which fell from 37.59% to 20.79% and in case of Bajaj there was an increase in this ratio from 35.31% to 42.37%. but after that both the companies had decrease in this ratio continuously. But still the Bajajs return is higher than Havells. (6) EARNINGS PER SHARE (EPS): This ratio measures the profit available to equity shareholders on per share basis. It is not the actual amount paid to shareholders as dividend but it is the maximum that can be paid to them. The earnings per share is a good measure of profitability and when compared with EPS of similar companies, it gives a view of the comparative earnings or earnings power of the firm. EPS ratio calculated for a number of years indicates whether or not the earning power of the company has increased. Calculated as:

Earning per Share = PAT Pref. dividend

No. of equity shares

Here we can see that the EPS for Havells was continuously increasing, but in the last years it had fallen down to Rs. 18.64 Per share from Rs. 37.55 per share. This is because Havells announced the issue of bonus share in the ratio of 1:1. Also the EPS of Bajaj has decreased because it had split its shares by 5 and therefore, No. of shares increased around 5 times.

In HAVELLS new innovative different marketing strategies boost up the sale of the company which helps in the increase of profit. Example, Advertising campaign during IPL. ACTIVITY RATIOS The ratios which show the efficiency with which assets are used in business are known as Activity ratios or Turnover ratios. Such ratios show the speed with which assets are converted into cash as compared to sales. The higher these ratios, the higher are the efficiency of the business. Creditors and shareholders invest their money for investing in assets of business and so they are interested in knowing the efficiency and speed with which the assets are converted into sales. These are concerned with measuring efficiency in asset management. And so they are also called efficiency or assets utilization ratios. An activity ratio may be defined as a test of the relationship between cost of sales and the various assets of the firm. The greater is the rate of turnover or conversion, the more efficient is the utilization / management. Depending upon the various types of assets, there are various types of activity ratios. (1) INVENTORY (STOCK) TURNOVER RATIO The number of times the average stock is turned over during the year is known as stock turnover. This ratio indicates the number of times inventory is replaced during the year. It measures the relationship between the cost of goods sold and the inventory level. This ratio measures how quickly the inventory is sold showing efficient inventory management. In this concern the inventory turnover ratio is increasing, which shows utilization of inventories in generating sales is good.

Cost of goods sold Stock turnover ratio = Average stock Here the average stock is the average of opening stock and closing stock of the year.

This ratio shows that in the last year the average stock is turned over 6.98 times for Havells and 9.43 times for Bajaj. The higher is the turnover ratio, the more profitable the business would be. The firm in such cases becomes able to trade on a smaller margin of gross profit. Low turnover indicates that the goods are slow moving, obsolete and low quality goods. This is very dangerous for the management. This ratio for the Bajaj has remained stagnant for the period of last 5 years. There are very less fluctuations in case of Bajaj. This shows that management of Bajaj is efficient enough to maintain the turnover of the goods. While in case of Havells it is widely fluctuating. This shows that the management of Havells is not efficient enough to maintain the turnover of inventories and you cant estimate with accuracy that which way it will move. (2) Fixed Assets Turnover Ratio: To ascertain the efficiency and profitability of the business, the total fixed assets are compared to sales. The more the sales in relation to the amount invested in fixed assets, the more efficient is the use of fixed assets. It indicates higher efficiency. If the sales are less as compared to investment in fixed assets, it means that fixed assets are not adequately utilized in business. Net sales Fixed assets turnover ratio = Net fixed assets

Here we can see from the graph that, Fixed assets turnover ratio in case of Havells is lower than Bajaj. This means that investment in fixed assets by Havells is more than what is necessary and

must be reduced. We can also see that the ratio in case of Havells is continuously decreasing. This shows that the investment in fixed assets is creating burden on the management and it must be reduced. While in case of Bajaj this ratio is continuously increasing. This means that fixed assets in the business are being used effectively to earn profits. (3) Debtors Turnover Ratio: The ratio shows the number of days taken to collect the dues of credit sales. It shows the efficiency of the collection policy of the enterprise. Closely related to this ratio is the average collection period. It shows how quickly receivables or debtors are converted into cash. In other words this ratio is a test of liquidity of the debtors of a firm which can be examined in two ways:

(i) (ii)

DEBTORS / RECEIVABLES TURNOVER = Sales/Avg. Debtor AVERAGE COLLECTION PERIOD = 360/Debtors Turnover

The debtors turnover suggests the number of times the amount of credit sale is collected during the year Debtors turnover ratio = credit sales Average debtors

Here we can see from the graph that debtors turnover ratio is much higher in Havells as compared to Bajaj. This means that Havells collects the amount of credit sales more no. of times in a particular year as compared to Bajaj. This shows that the collection policy of the Havells is much effective. Yet it is widely fluctuating. But still it is higher. In case of Bajaj it has remained stagnant over a period of time. This ratio indicates the speed with which debtors/accounts receivable are being collected. A turnover ratio of 42.35 signifies that debtors get converted into cash 42.35 times during the financial year 2007-08 and 28.83 times during 2008-09. This ratio shows that there is high turnover in 2007-08 and the collection period is also less which means that the liquidity of debtors is better and there is prompt payment on the part of debtors. But in 2008-09 the turnover

has decreased and the collection period has increased which means there is a delayed payment by debtors. But in Bajaj it has remained significantly lower which shows that the collection policy of the Bajaj is not much efficient.

(4) Total Assets Turnover Ratio: The amount invested in business is invested in all assets jointly and sales are affected through them to earn profits. So in order to find out relation between total assets to sales, total assets turnover is calculated. Total assets turnover ratio = sales Total assets

These ratios show how the resources are efficiently utilized in the concern. The capital employed is increasing every year but not in the same proportion as profits. Though assets turnover was quite high in HAVELLS but efficiency is still a matter of concern as it has fallen in last some years. While in case of Bajaj it has remained stagnant.

Financial Statements Analysis

Bajaj Electricals Ltd.
Financial year 2010-11 has been a very difficult year for the company. There was an adverse effect on the margins due to increase in commodity prices. Net sales/ income from operations grew by 23% to Rs. 2741 crore. PBDIT increased by 7.06% to Rs. 263.69 crore. Net profit grew by 22.8% to Rs. 143.8 crore.
CSR by Bajaj: the company had endeavored to make its employees and their extended

families tobacco free. On 31/05/2010 (world anti-tobacco day), out of 153 tobacco users, 130 had given up tobacco completely.

Havells India Ltd.

Net sales/ income from operations grew by 21.52% to Rs. 2881.65 crore. PBDIT increased by 10.42% to Rs. 337.30 crore. Net profit grew by 5.88% to Rs. 241.58 crore.
CSR by Havells: (1)donation of a sum of Rs. 65 lacs to QRG foundation

(2)mid day meals to 15000 students of primary schools in Alwar

Net Profit
The Above Chart shows the net profit of Havells India limited for the last five years. The profit is consecutively increasing year on year (YoY) basis. This shows the good fundamentals of the company as continuous growth in net profit.

The Net Profit of Bajaj Electricals is also increasing consecutively Five years showing continuous and steady growth in the sector.

Profits of Havells India limited and Bajaj Electricals Limited for Year 2009-10 and 2010-11

The pie chart shows Net profit comparison for year 2010-2011 and 2009-10 between Bajaj Electricals Limited and Havells India limited. The profit of the Havells India limited is 68% more than Bajaj electronics. Also the net profit of Havells grew by 6% and net profit of Bajaj grew by 16% in the year 2010-11.

Chart Showing capital Employed in Crore by the Havells India and Bajaj Electricals in year 20102011

Management Analysis
Management analysis of Bajaj
The Management Discussion and Analysis presented in this Annual Report focuses on reviewing the performance of the Company in the past financial year and the current year theme Dominate 2011, a Company-wide initiative to excel and take leading position in various areas of operations. After successful implementation of ORACLE ERP, the Company has undertaken a project Leap Ahead to considerably improve the supply chain, vendor management and trade management practices by following principles of Theory of Constraints. Through Theory of Constraints, the Company intends to redefine paradigms of managing the supply chain right from

vendors to channel distribution. This will have an enterprise-wide impact on the Companys consumer focusing business units. The project will help all the suppliers and channel partners of the Company to substantially improve their inventory turns and to the Company to penetrate the market with full reach and range. It will also establish a true Win-Win partnership where Companys every trade partner and the Company stands to gain significantly.

Overall Review
Bajaj Electricals Limited is a 73-year-old trusted Company, with diversified interests in Lighting, Luminaires, Appliances, Fans, and Engineering & Projects. In the financial year 2010-11, overall profitability of the Company has been impacted mainly due to increase in the input costs, site related expenses and competitive pressures in the Engineering and Projects business. However, the better sales performance of all the BUs, an improved product mix with introduction of new products, value engineering and the ability to pass on a part of the steep increase in input costs to customers, favorable forex movement and reduction in interest costs have helped the Company to maintain its profitability. 0045&P BU is ISO 9001, ISO 14001 and now has been internationally recognized OHSAS 18001 certificate for occupational health and safety management system for manufacturing facilities at Ranjangaon. 1.Successful illumination of Wankhede Stadium at Mumbai, where World Cup 2011 final was played and Team India lifted the Cup, under Bajaj floodlights making us feel proud and delighted with our contribution to this world-class event. 2. Order received from East North Interconnecting Co. Ltd. (ENICL) for 400 KV D/C (Quad) Biharsharif Purnia Line to cover a distance of 272 kms. 3.Order received from HRBC, Kolkata for special effect lighting for Vidyasagar Setu Bridge, Kolkata. The launch of vide range of Pressure Cookers and Water Purifiers during the year in few markets has received good response. Encouraged by the response received, the BU has decided to launch these products on Pan India level. All the new products that were launched during 2010-11 contributed about 23% to the total sales of the BU.

Modern Retail Format and Corporate Sales recorded a sale of Rs.100 crores in 2010-11. The BU is in the process of setting up showrooms in major cities across India to make Bajaj Appliances and other products to have more visibility. The BU will have a special focus on PLATINI range of appliances which have received overwhelming response from the customers.

Dominate 2011
For the year gone by, the Company had chosen the theme Transform 2010 as its motivating and guiding factor, to continue to remain on the growth path and to achieve superior business performance driven by continuous improvements in products & processes, widening of the product range and entering new categories and geographies. The Company transformed itself well to remain on the growth path by achieving a sales turnover of Rs.2770.55 crore with a growth of 23% over the previous year. For the current year, the Company, emboldened by the strong performance year-on-year has chosen the theme Dominate 2011 as a mantra to scale new heights by dominating all the products segments and winning over the competition. Also, the cost reduction, improvement in margins and reduction in working capital deployment will continue to remain a focused agenda.

Management Analysis of Havells

Globalisation: Globalisation at Havells is a term for the horizontal and vertical integration of manufacturing and trade on an international level. In addition to the expanding business in India, Havells was looking to expand the geographical footprint. To remain competitive in today's scenario of consolidation and to have sustainable development, aggressive measures should be implemented to expand business. Starting business internationally is as defensive as an offensive play. Changing slowly to economic alterations in today's world could ultimately harm the business in long run. Through international acquisition, Havells is vying for a reasonable share in the high entry barrier markets of developed countries and is capturing buoyant growth prospects in the developing countries. The key strategy behind Sylvania acquisition was to acquire a brand with global presence over last 100 years in the electrical space and to get access to strong distribution network spread across Europe and Latin America. Also globalization is necessitated due to competition with lowest cost producers across geographies. While modern trade is ushering in the 'global village', very significant national differences remain in culture, consumer preferences,

and business practices. Havells strategy is to keep local preferences intact and to leverage on the key strength of each cluster. Growth in developing economies A seismic change is visible in the world's economic geography led by the developing economies of Asia, Latin America and Africa. The economic crisis may have been debilitating for the rich world but for emerging markets it has been closer to a triumph. Emerging economies now characterize younger population, increasing number of well-qualified population, growing middle class, elevating incomes and urbanizations. Havells is deriving 70% of its consolidated revenue from developing economies like India and Thailand in Asia and Latin America. Leading brand presence and strong distribution channel will lead to the profitable growth in these regions. In addition we would be launching new products, aggressive market strategy and developing local leadership in order to capture robust growth available in these economies. Capitalizing brand recall of Sylvania in other geographies within the same vicinity, we would strengthen the growth momentum in developing economies. Driving profitability is the key focus area in our operations at developed countries of Europe. Restructuring of European operations by reducing fixed cost along with operational efficiencies, re-strengthening of the brand and improved relationship with customer would contrive improved performance. Local management Havells has an open environment which facilitate in building trust and motivation in the employees. Employees are as enthusiastic about the business as the management. We try to create a culture of participative management and ignite the creative endeavor of employees. It involves making people an interested party to the strategic decisions, thus aligning them to the business objectives. We cultivate entrepreneurship skills at each level. Building long lasting and customer focused strategic partnership is important for Havells as our business depends on the ultimate growth of these channel partners. Human values, culture, ethics and behaviour of our employees with these partners are keys to our growth. Havells aims to be close to its customers around the world by providing them local partnership for fast and effective solution of the business needs. As a result of the 100 year presence of Sylvania and over four decades of Havells we perceived as a local in the countries we operate. Diversity is a key feature of our Company. We promote collective decision making at local level. In order to do so 'Strategic Business Unit' for each business segments has been formed across all geographies. SBU is headed by a key strategic team which take collective decisions. Thus SBUs act as self contained planning units for developing discrete business strategies, objectives and parameters. Because strategic business units are more agile, they respond quickly to changing economic or market situations at local level. Unique business model Havells business model is unique in India. We focus on the entire customer need of low voltage electrical products by selling through same distribution channel. We have aligned ourselves horizontally by having large product basket. Thus our channel management has become important and Havells enjoys paramount relationship with its dealers for the past four decades. The strategic business model that we adopted and implemented has certain features which place our business in a unique positioning in India. 1. Brand building. Havells has created a strong brand in the electrical consumer products in India which traditionally was a low involvement product category. We started investing in brand

promotional activities through large scale television advertisements in 2006 in addition to other mode of advertisement like seminars, print media and local advertisements. It was unheard at that time about any electrical company co-sponsoring cricket mega events like T-20 world cup, Indian Premier League. 2. Premium positioning. Havells brand is associated with quality at par with the products of the global leaders. As a strategy Havells entered into the premium category in each product while leaving 'bottom of the pyramid' strategy. 3. Common distribution channel. Havells selling pattern is quite different from its peers in India. We sell our entire product categories through same distribution channel targeting same consumer. As a result we are more consumer focused-channel friendly company. We enjoy unparalleled space with both the consumer and dealers in our industry. 4. Havells Galaxies. Breaking the conventional selling methods, Havells started 'Havells Galaxies' which are one stop shops satisfying directly the entire electrical product need of the consumer. Under franchisee model Havells Galaxies provide additional premium sale channel to its existing channel partners. Growth imperative In financial year 2010-11 we extended our competitive advantage, while investing in growth. We fortified our leadership and culture. We are a market-driven company forming strategies based on the feedback from markets to capture growth opportunities and to accelerate change while staying fast and productive. Growth is considered as a process to achieve better returns to stakeholders. Growth imperative at Havells means: 1. Lead in growth markets. In 2010-11 we grew exponentially in the markets where we lead in the product segments and generated close to Rs. 4,000 crores revenue from Latin America, India and Thailand. With a growth of 22% in financial year 2010-11, we continue to make long term investments to drive growth across these geographies. 2. Launch new products. We are committed to grow ahead of the competition. India, which is the key market for our electrical consumer durables segment, new product range of Electrical Water Heater was launched in September 2010. To leverage brand presence and distribution strength in India the next plan is to launch small appliances. Sylvania's strong brand and distribution channel in Europe & Latin America will be further leveraged by launching low voltage switchgears. 3. Entering new countries. Sylvania is a 100 years old brand having visibility across five continents. Capitalizing on the brand recall in other geographies than Europe and Latin America, Sylvania will be relaunched in growing economies. 4. Investing in manufacturing capabilities. During the last five years Havells invested more than Rs.650 crores in India for converting its manufacturing capabilities into world-class, stateof-the-art units. We own largest facilities in terms of some of our product segments in India and amongst top few in the world. As a manufacturing organisation we manufacture 85% of our products in India and outsource only those products which are either not viable or cannot be done. Global market driven forces necessitated us to reduce fixed cost and increase utilisation

levels at the international manufacturing facilities. During recession in 2009, we closed down three manufacturing facilities in England, Brazil and Costa-Rica. Seven facilities at Europe and Latin America are still operational where critical products are being manufactured while conventional products are being outsourced from low cost countries like China and India.

DIVIDEND BY BOTH THE COMPANIES

In Havells, Directors were pleased to recommend a Dividend @ Rs. 2.50 per equity share for 2011 on 12,47,74,812 equity shares of Rs. 5/- each. The proposed dividend, subject to approval of Shareholders in the ensuing Annual General Meeting of the Company, would result in appropriation of Rs. 36.25 crores (including Corporate Dividend Tax of Rs.5.06 crores) out of the profits thus giving 15% payout from the net profit of the Company. The dividend would be payable to all Shareholders whose names appear in the Register of Members as on the Book Closure Date. In Bajaj, the board has recommended a dividend of 140% (Rs. 2.80 per equity share of Rs. 2 each) for the financial year 2010-11 as against 120% (Rs. 2.40 per equity share of Rs. 2 each) for the previous year. The dividend paid to those shareholders whose names appear in the register of the members of the company.

AMALGAMATION BY HAVELLS
With a view to reap synergies of operations and to optimally utilize the available resources and services, the Company envisaged a Scheme of Amalgamation during the year to merge Standard Electrical Limited (a 100% subsidiary of the Company) with the Company.

ENTRY INTO THE NEW BUSINESS BY HAVELLS

To leverage brand presence and distribution strength, Havells entered into electric water heater business. They launched it in September 2010. They are also planning to launch small appliances within a short period.

ARRANGEMENT AND PARTNERSHIP BY BAJAJ

Lighting: entered into an arrangement with Helvar Ltd of Finland for Dimming & non-Dimming electronic ballasts as also for Lighting Controls to offer complete energy saving solutions to discerning class of customers and has partnered with Securiton of Switzerland & Delta Controls

of Canada to offer the latest and cutting edge Security and BMS (Building Management Systems) to its institutional customers.

CREDIT RATING OF HAVELLS

Credit Analysis & Research Ltd. (CARE Ratings) is a full service rating company that offers a wide range of rating and grading services across sectors. CARE Ratings methodologies are in line with the best international practices. CARE's Credit Rating is an opinion on the relative ability and willingness of an issuer to make timely payments on specific debt or related obligations over the life of the instrument. During the year, CARE has reaffirmed the ratings assigned to Havells India Limited. CARE has assigned the rating of 'CARE AA' (Double A) to Havells for its long term bank facilities and 'PR1+' (PR One Plus) to its short term bank facilities. Facilities with these ratings are considered to offer High safety for timely servicing of debt obligations with very low credit risk. The ratings continue to reflect the reputed brand name of Havells India Limited (HIL), its established market position in the electrical equipment business, wide product portfolio and well-established distribution network.

CREDIT RATING OF BAJAJ

Credit rating agency, ICRA has assigned an A1+ rating to the Rs 1.5 billion non-fund based facilities of Bajaj Electricals (BEL). The highest-credit-quality rating assigned by ICRA to short-term debt instruments. Instruments rated in this category carry the lowest credit risk in the short term. Within this category, certain instruments are assigned the rating of A1+ to reflect their relatively stronger credit quality. ICRA also has ratings outstanding of LA+ with Stable outlook on term loans and fund based facilities of the company aggregating to Rs 3.5793 billion and A1+ on non-fund based facilities and short term loans aggregating to Rs 7.505 billion. ICRA also has a rating outstanding of A1+ on the short term debt program of the company aggregating to Rs 500 million.

BONUS ISSUE OF SHARES BY HAVELLS

Company had brought out a Bonus Issue of Shares in the ratio of 1:1 being approved by the Shareholders by means of a Special Resolution in the last Annual General Meeting held on 29th September, 2010. The Record Date for the purpose was fixed for 11th October, 2010 and the allotment of Bonus Shares was made on 12th October 2010. The Issued, Subscribed and Paid-up Share Capital of the Company reckoned with no. of shares was 6,23,87,406 Equity shares of Rs. 5/- each prior to Bonus allotment and post-allotment of Bonus shares the no. of shares doubled to 12,47,74,812 Equity shares of Rs.5/- each.

STOCK SPLIT OF SHARES OF BAJAJ

On October 12, 2009 the Bajaj Electricals co. Okayed for 5 for 1 stock split. The Company had passed a special resolution U/s.94 of the Companies Act, 1956 to sub-divide the Companys equity shares of Rs.10/- each into shares of Rs.2/- each commonly known as Stock Split and consequential alterations in the existing Clause 5 being Capital Clause of the Memorandum of Association and Article 8(i) of the Articles of Association of the Company.

INCREASE IN NUMBER OF SHARES BY BAJAJ

The increase in number of shares is due to the issue of 13,00,312 equity shares of Rs. 2 each to the employees upon exercise of their stock options. These shares were included, on weighted average basis, for the computation of EPS.

INCREASE IN AUTHORIZED SHARE CAPITAL BY HAVELLS

The issuance of Bonus Shares in the ratio of 1:1 necessitated the increase in the Authorized Share Capital of the Company. Accordingly, increase in Authorized Share Capital of the Company by Rs.60,00,00,000/- (Rupees Sixty Crores only) by creation of additional 12,00,00,000 Equity Shares of Rs.5/- each was also approved by the Shareholders of the Company in the last Annual General Meeting held on 29th September, 2010 by means of a Special Resolution. At present the Authorized Share Capital of the Company stands at Rs. 100,00,00,000/- (Rupees One Hundred Crores only) divided into 20,00,00,000 Equity Shares of Rs.5/- each.

CONTRIBUTION TO EXCHEQUER BY HAVELLS & BAJAJ

The Company is a regular payer of taxes and other duties to the Government. During the year under review the Company paid Rs. 68.29 crores towards Income Tax and Wealth Tax as compared to Rs. 62.15 crores paid during the last financial year. The Company also paid Excise Duty of Rs. 163.95 crores, Sales Tax & Service Tax of Rs. 204.32 crores, totaling Rs. 436.56 crores during financial year 2010-11 as compared to Rs. 315.15 crores paid during last financial year. While the Bajaj co. paid Rs. 75 crores as tax in the year 2010-11

Segment wise revenue analysis of Havells

21 00 21 01 Incroresof rupees Net revenue %to total Net revenue %to total Growth% Switchgears 673 28% 734 26% 9% Cables & wires 984 41% 1232 43% 25% Lighting & fixtures 349 15% 445 15% 27% Electrical consumer durables 334 15% 469 16% 40% Others 31 1% 2

Segment wise revenue analysis of Bajaj

Incroresof rupees Lighting Consumer durables Engineering & Projects Others 21 00 21 01 Net revenue %to total Net revenue %to total Growth% 536 24.05% 631 23.03% 17.72% 954 42.81% 1277 46.60% 33.86% 737 33.07% 831 30.33% 12.75% 1.47 0.07% 1.32 0.05% -10.20%

Revenue breakup of Havells

Revenue breakup of Bajaj:

Shareholding pattern
Shareholding pattern of Bajaj:

Shareholding pattern of Havells: