Bajaj Corp
Shishir Bajaj’s group’s Bajaj Almond drops and Brahmi Amla hair oil maker Bajaj Corp reported Q2FY14 sales of Rs. 158.4 crore, down 6.8% QoQ, with a sharper 23% QoQ contraction in net profit to Rs. 36 crore, from Rs. 47 crore in Q1FY14. EBITDA margins slipped to 33.5% in Q2, from 34.4% in Q1 and 35.0% in FY13. On a YoY basis, revenue is up 16.5% but net profit is down 6.2% during the quarter.
Company has reported exceptional loss of Rs. 5.1 crore on account of amortization of acquisition cost and non-compete fees of Nomarks acquired in August 2013 for Rs. 140.94 crore, which will be spread over company-estimated brand life of 3 years. Thus, FY14 will have total amortization charge of Rs. 28.60 crore while FY15 and FY16 will each have Rs. 47 crore.
Another disappointment, although materially less significant but conceptually important is finance cost of Rs.1.31 crore in Q2 on long-term debt of Rs. 60 crore, as of 30th September 2013. Company has always remained debt-free with nil interest charges, and on the contrary, has cash and equivalents of Rs. 390 crore, as of 30th September 2013, pursuant to its Rs. 300 crore IPO in 2010, Rs. 109 crore of which still remains unutilized and locked in interest-earning instruments. The loan and resulting interest cost would in all probability be to finance the August acquisition.
Q2FY14 EPS stands at Rs. 2.44, while that for H1FY14 is 5.63. Annualizing the half yearly EPS, leads to discounting of 21 times for the share, which corrected over 4% on result announcement in last half hour of Monday’s trade. Although company is improving market share in value terms from FY13’s 56.9% to 58.3% during first 5 months of FY14 for its key Almond drops hair oil, the overall slowdown in consumption seems to be hitting it. It also remains to be seen how the company fares in the skincare segment with the newly-acquired Nomarks brand.