Dry cell battery maker Eveready Industries India Ltd. (EIIL) is planning to become a debt-free company in three years.
Aided by price increases, which has helped improve its operating margins and its cash flow, EIIL has now begun retiring its debt and is planning to become debt free by 2016-17, thus consolidating its revival process.
“Our total debt stood at Rs.280 crore on March 31, 2013. With improved cash flow, we have been able to reduce our long-term debt by Rs.50 crore in 2013-14,” Executive Director Amritangshu Khaitan told The Hindu . While a substantial portion of EIIL’s EBIDTA (earnings before interest, depreciation, tax and amortisation) went towards servicing debt, this portion is set to reduce to 10 per cent by 2015-16 from about 40 per cent 2013-14.
“The two-phased price increase aggregating 15 per cent, which we effected in the just-closed year has been well-absorbed by the market, improving the company’s cash flow and reducing its dependence on borrowed capital,” he said.
EIIL’s PBDITA (profit before depreciation, interest, tax and amortisation) which stood at Rs.6.5 crore in 2012-13, grew by 30 per cent in the first nine months of 2013-14 compared to the same period in the previous year. “This helped us reduce our debt,” he said. The company proposes to carry forward the exercise and is planning to retire another debt tranche (by around Rs.70 crore) this fiscal and become a debt-free company by 2016-17. Of the total Rs.230 crore debt on the company’s books now, Rs.120 crore was working capital while Rs.100 crore was term-debt, it was learnt.
The company suffered a Rs.79.9-crore net loss in 2011-12, including a write-off on account of an overseas acquisition.
Mr.Khaitan said that even as the de-growth in sales of the D size batteries seems to have reached a plateau, new opportunities had opened up through digitisation of cable TV, as the market for AA and AAA batteries is estimated to have expanded by around 40 million units. Eveready gets 60 per cent of its revenues from batteries, with the rest coming from flashlights, lighting systems, tea and exports. With improved revenue flow it now seems less necessary to access the land bank that EIIL had created. It may be mentioned that EIIL had created a ‘land bank’ early last year comprising properties that it wanted to sell in Kolkata, Hyderabad, Lucknow and Noida.
