Informist, Friday, Aug 30, 2024

--Eveready MD: Will build India's first plant for alkaline batteries

--Eveready MD: Plan to invest 1.8 bln rupees on alkaline battery plant

--Eveready MD: Alkaline battery plant to start ops in August 2025

--Eveready MD: To finalise location of alkaline battery unit in 2-3 wks

--Eveready MD: Alkaline battery plant to produce 350 mln pieces a year

--Eveready MD: Aim 30-40% initial capacity use at new battery plant

--Eveready MD: Will fund alkaline battery plant via debt, own funds

--Eveready MD: Co's addressable alkaline battery mkt at 30 bln rupees

By Avishek Rakshit

KOLKATA – India's largest dry-cell battery maker, Eveready Industries India Ltd, plans to invest 1.8 bln rupees to set up the country's first alkaline dry-cell plant, which will be operational in August next year. While the company is yet to finalise the location of the greenfield plant, it will be near its existing plants, Managing Director Suvamoy Saha told Informist.

"In the coming two-three weeks, we will hopefully finalise the location of the new plant. But it will be near our existing facilities; we are not looking at new geographies to set up the plant," Saha said. "There are various things which are being considered, like synergy with the existing distribution channel, logistics and transportation, and others."

Though the amount earmarked by the company for investment in the new plant is relatively low in the consumer goods industry, for the battery sector, it is a substantial investment, Saha said.

The new plant will also mark Eveready's direct foray into the alkaline battery segment, in which the company has been losing significant sales opportunities to its direct competitor Duracell. Eveready has a line-up of alkaline batteries, but these are imported and sold in the country under the Eveready brand name. Alkaline batteries roughly account for 8% of the company’s revenues from batteries, and the rest is contributed to by zinc-carbon dry-cell batteries.

The Indian division of Duracell Inc is the country's largest alkaline battery seller, but these are imported as well.

Eveready, which holds more than 53% share in India's dry-cell battery market, currently has six manufacturing units – in Kolkata, Lucknow, Haridwar, Noida, Matia in Assam, and Maddur in Karnataka. The new alkaline battery plant could come up near any of these plants.

"The plant will have an installed capacity to produce 350 mln units a year, but it will take some time, like two-three years to reach full capacity utilisation," Saha said. "Initially, the plan is to reach 30-40?pacity utilisation and then scale it up."

Eveready will fund the new plant through a mix of debt and internal accruals in a ratio of 2:1. "There is a stay from the High Court which prevents us from altering the capital structure of the company, so we will borrow some money, and then fund the rest from our available funds," Saha said.

As of Mar 31, Eveready Industries' debt was 2.9 bln rupees.

In 2019, when the Burman family – promoters of Dabur India Ltd – were making a creeping acquisition of Eveready from the Khaitan family of Williamson Magor Co Ltd, the Delhi High Cout ordered the company not to alter its capital structure, after one of the lenders moved court.

"The alkaline batteries from this plant can be sold in the retail market in India and can be exported as well. Then, there is also scope to supply to original equipment manufacturers and to private labels. We will explore all these possibilities to grow in the alkaline battery market," Saha said. "The plant will manufacture both value and premium alkaline batteries, depending on demand and market conditions."

In the overall alkaline battery industry, premium products account for 30% of the total sales volume.

Saha said that the total addressable market for alkaline batteries was around 30 bln rupees, which has largely been left untapped by Eveready as it continued to focus on the value zinc-carbon dry-cell segment. "But now, alkaline (battery) is growing by 25%, and zinc-carbon battery volumes may grow by 4-5% once rural demand starts picking up," he said.

Around 350 mln alkaline batteries are sold in India every year, and it is estimated that Eveready holds around 17% share in this.

Value alkaline batteries are mostly consumed in urban areas while zinc-carbon batteries are primarily used in rural areas. A drop in rural consumption in the last financial year hit Eveready hard, with its battery sales volume remaining flat and battery-operated flashlight sales volume seeing a drop. The company's overall revenue fell over 1% to 13.1 bln rupees in the year ended March.

"It is the alkaline segment where the growth is poised to happen, and we need to move fast to tap this market," Saha said.

Although Saha said Eveready was considering entering a new product category in the coming days, the batteries business remains crucial and is expected to fund upcoming capital investments. Batteries account for 61% of the company's turnover and 85% of its profitability.

At 1414 IST, shares of Eveready were down 0.8% at 456.55 rupees on the National Stock Exchange. End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Avishek Dutta

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