The board of Bajaj Electricals has authorised the management to evaluate and recommend options to consider housing the power transmission and power distribution business as a standalone entity.
In addition to the manufacturing and sale of appliances, fans, and consumer lighting products, Bajaj Electricals also has an engineering procurement and construction (EPC) business vertical that houses illumination projects business. The segment also includes Extra High Voltage (EHV) transmission line projects, EHV substations, monopoles for transmission and distribution, electrification projects, high mast and street lighting, sports lighting, industrial and commercial lighting, specialised illumination projects on turnkey basis, and other solutions.
The company is exploring demerger, subsidarisation and strategic partnership in an effort to unlock growth and value creation.
‘Need for focussed approach’
“Considering the varied nature and potential opportunities of each segments and the need for a focussed approach to unlock these opportunities, the board of directors has decided that the company should undertake a comprehensive review of the existing corporate structure,” Bajaj Electricals said in a filing with the stock exchanges.
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Shekhar Bajaj, Chairman & Managing Director, Bajaj Electricals, said, “Over the past couple of years, the power transmission and power distribution business verticals have sharpened their operational focus, ensuring project closures, increased cash flows, reduction in receivables and repayment of most of the debt, whilst simultaneously focusing on health and safety and ESG in general. We believe the time is now ripe to build further on this and review our structures to enable unconstrained business growth for each business segment.”
The company intends to appoint various advisors or consultants to assist the board in evaluating the options.
Tailored capital structure
Through this initiative, Bajaj Electricals intends to have a tailored capital structure and capital allocation policies based on business-specific dynamics, well-defined corporate positioning coupled with value unlocking for all stakeholders, distinct investment profiles to attract deeper and broader investor bases, accelerate sustainability initiatives and expediting ESG practices, and attract right talent and provide enhanced growth opportunities to existing talent in line with a sharper strategic focus on each business segment under separate entities.
The EPC business was the reason behind the drop in company’s total revenuesduring FY21. While the revenue from the consumer products business increased 7.10 per cent, revenue from the EPC business dropped by 32.9 per cent during the same year. The EPC business was responsible for generating 28 per cent of the company’s FY21 revenues.