Havells India: Business recovery blues

Shares of Havells India were trading lower for the fifth straight day, slipping 4.4% to fresh 52-week low of Rs 447 on the BSE on Wednesday amid concerns about slower recovery in business as compared to peers.
Thus far in the month of May, the stock has underperformed the market by falling 21%, after reporting weak numbers across all segments. In comparison, the S&P BSE Sensex declined 9.6% in the same period.
The awful performance of once blue chip stocks owes to COVID-19 overhang. In fact, the pandemic has not only undone healthy showing witnessed at the beginning of last quarter, but the supply chain disruptions by end of March further dented the prospects.

According to Havells, the later part of March has a disproportionate effect on the quarter sales, contributing as much as one-fourth of the sales. Growth would have been 9% if wasn’t for the disruption, reckons the company. That appears encouraging, especially when revenues had declined by 1% on year for the nine-month ended December.
Nonetheless, covid-19 has meant about Rs 800 crore revenue loss for Havells in the March quarter.
In the last quarter’s revenues declined by about 20% on year. All businesses, switchgears, cable, lightning & fixtures, electrical consumer durables (ECD) and Lloyd consumer, saw revenues drop from a year ago.
The switchgear and ECD segments were showing good growth, which could not sustain upon lockdown. Lloyd, too, had buoyant growth till operations ceased in mid-March.

However, Havells’ woes don’t end there. The extended lockdown understandably means the road ahead is dim.
Havells has said its operations are gradually being restored since 4 May and that few plants have resumed operations with limited manpower.
Over the medium-term, Havells could well be one of the better placed companies thanks to its robust balance sheet. As on 31 March, Havells had cash worth about Rs 1,100 crore and virtually no borrowings as on date.

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