EVEREADY EVEREADY INDUSTRIES LIMITEDINDUSTRIES LIMITED

Performance Study: An Economic Perspective

GROUP BAbhishek Raj (08EP-001)

Amit Manchanda (08EP-006)Ravi Purwat (08EP-046)Pallavi Sen (08EP-038)

Siddhartha Madra (08EP-053)Tanvir Zaheer (08EP-059)

ObjectiveObjective

To understand the various To understand the various economic factors affecting economic factors affecting profitability of profitability of Eveready Eveready Industries Ltd.Industries Ltd.

To suggest measures for To suggest measures for economic viability.economic viability.

Company ProfileCompany Profile formerly known as formerly known as Union Carbide India, Union Carbide India,

LimitedLimited is the flagship company of the B.M. is the flagship company of the B.M. Khaitan Group. Khaitan Group.

Established in 1905.Established in 1905. Manufacture and market of batteries, flashlight Manufacture and market of batteries, flashlight

cases, electrolytic manganese dioxide and arc cases, electrolytic manganese dioxide and arc carbons. carbons.

Also manufactures photo-engravers plates/strips Also manufactures photo-engravers plates/strips for printing, castings, hard facing and tube rods, for printing, castings, hard facing and tube rods, carbon electrodes and other related products. carbon electrodes and other related products.

Produces and markets tea (tez) and mosquito Produces and markets tea (tez) and mosquito coils (Poweron). coils (Poweron).

Business SegmentsBusiness Segments

revenue from segments

5138

9 11

batteries

tea

flashlight cases

electrolytic manganesedioxide

purchased products

Battery Industry BasicsBattery Industry Basics

Battery

Primary (non rechargeable)DRY CELL

Secondary (Rechargeable)

UMI (D Segment, large sized) UM2 (middle sized AA)

UM3 (small AAA)

Major Players Major Players EVEREADYEVEREADY INDO NATIONAL – NIPPOINDO NATIONAL – NIPPO MATUSHITA LAKHANPAL – MATUSHITA LAKHANPAL –

NOVINO PANASONICNOVINO PANASONIC GILLETTE- DURACELLGILLETTE- DURACELL SHERAVANI INDUSTRIAL SHERAVANI INDUSTRIAL

SYNDICATE- GEEPSYNDICATE- GEEP

Dry Cell Battery : Market Dry Cell Battery : Market shareshare

Dry Cell Battery : The UM1 segmentDry Cell Battery : The UM1 segment

• Basic demand of UMI the large sized from rural

areas

• With electrification retard in growth of UMI

batteries

• Growth of cheaper led batteries in this demand

category

• Weightage of UM1 declined from 87% in 1996-97

to 59% presently However potential huge that

cannot be ignored in Indian market

Dry Cell Battery Dry Cell Battery UM2 Segment almost non existentUM2 Segment almost non existent UM3/AAA batteries demand grown UM3/AAA batteries demand grown

from 4% in 1996-97 to 38% nowfrom 4% in 1996-97 to 38% now Attributed to growth of remote Attributed to growth of remote

control device, quartz wall clock and control device, quartz wall clock and other such low drain equipmentother such low drain equipment

Cost EscalationCost Escalation Zinc is the primary raw materialZinc is the primary raw material Prices of zinc have increased substantially in the Prices of zinc have increased substantially in the

last 3 yearslast 3 years Zinc consumption in Indian increased in last few Zinc consumption in Indian increased in last few

yearsyears Prices of zinc determined by London stock metal Prices of zinc determined by London stock metal

exchangeexchange Raw material costs account 50% of the salesRaw material costs account 50% of the sales Zinc accounts for 335 of input costsZinc accounts for 335 of input costs International zinc prices raised from about $1,010 a International zinc prices raised from about $1,010 a

tone in 1998-99 to $tone in 1998-99 to $27842784 in 2007-08 in 2007-08

Zinc Price MovementZinc Price Movement

Source: London Metal Exchange

With growth in demand for high energy drainproducts alkaline batteries will be the futureIndia is in a transition stage of battery consumptionAlkaline batteries account for only 2% of battery market shareWhile 90% in developed countriesHowever price premium is high

With growth in demand for high energy drainproducts alkaline batteries will be the futureIndia is in a transition stage of battery consumptionAlkaline batteries account for only 2% of battery market shareWhile 90% in developed countriesHowever price premium is high

Alkaline BatteriesAlkaline Batteries

Alkaline BatteriesAlkaline Batteries

growth in demand for high energy drain products

alkaline batteries will be the future India is in a transition stage of battery

consumption Alkaline batteries account for only 2%

of battery market share While 90% in developed countries However price premium is high

Future: Alkaline Future: Alkaline BatteriesBatteries

With growth in demand for high energy drain

India is in a transition stage of battery consumption

Alkaline batteries account for only 2% of battery market share

While 90% in developed countries However price premium is high

Research Gaps Contd--Research Gaps Contd-- Consumption and manufacturing of alkaline Consumption and manufacturing of alkaline

batteries not well documentedbatteries not well documented No industry association issues documentationNo industry association issues documentation Neither the company website nor the various Neither the company website nor the various

data sources illustrate decline in salesdata sources illustrate decline in sales It is from the company website and news It is from the company website and news

reports the decline in sales in batteries has reports the decline in sales in batteries has been brought out.been brought out.

As company’s income and expenses has been As company’s income and expenses has been clubbed from various product categories the clubbed from various product categories the battery analysis is difficult to dobattery analysis is difficult to do

Research GapsResearch Gaps

Main data source Main data source CMIECMIE Company websiteCompany website New ReportsNew Reports Financial analysis websiteFinancial analysis website

Decline in Profits: an Economic PerspectiveDecline in Profits: an Economic Perspective

Increase in the Total Variable Cost & Increase in the Total Variable Cost & Decline in Total RevenueDecline in Total Revenue

The Total variable cost of the company has The Total variable cost of the company has increased leading to fall in total revenues increased leading to fall in total revenues due to rise in cost of inputs i.e. zincdue to rise in cost of inputs i.e. zinc

Decline in Demand with rise in prices of Decline in Demand with rise in prices of batteriesbatteries

As the cost of inputs increased company As the cost of inputs increased company went for a price increase which led to fall went for a price increase which led to fall in demand of UM1 batte%ries.in demand of UM1 batte%ries.

Demand of the product is price sensitiveDemand of the product is price sensitive

Data AnalysisData AnalysisNet ProfitNet Profit

Net Profi t

-0.38

46.31

79.66

-13.43-19.32

-40

-20

0

20

40

60

80

100

2004-03 2004-05 2005-06 2006-07 2007-08

YR

Net Profi t

Operating ExpensesOperating ExpensesTotal Expenses

828.31

574.03

644.11

727.58

784.9

0

100

200

300

400

500

600

700

800

900

2004 2005 2006 2007 2008

yr

Total Expenses

Input Costs EscalationInput Costs Escalationcost of raw materials-EVEREADY BATTERIES

253.09

258.49

255.53

285.1

303.13

335.21

461.82

429.22

453.91

0 50 100 150 200 250 300 350 400 450 500

raw material

r s in cr

Dec-08

Dec-07

Dec-06

Dec-05

Dec-04

Dec-03

Dec-02

Dec-01

Dec-00

Problem AreaProblem Area

The revenue of the company is The revenue of the company is inversely proportional to the cost of inversely proportional to the cost of inputs. However these factors are inputs. However these factors are external to the company and beyond external to the company and beyond its control. The company however its control. The company however needs to take measures to improve needs to take measures to improve its profitability. For the last two its profitability. For the last two years the company has been running years the company has been running in losses.in losses.

The Road Ahead: The Road Ahead: SuggestionsSuggestions

Steps to capitalize on growth of alkaline Steps to capitalize on growth of alkaline batteries and set up latest manufacturing batteries and set up latest manufacturing facility for it. facility for it.

Good real estate valuations can be Good real estate valuations can be unlocked. unlocked.

manufacturing units should be set up in manufacturing units should be set up in new tax free zones like Uttaranchalnew tax free zones like Uttaranchal

The company can also diversify into The company can also diversify into other battery segments catering to other battery segments catering to automobiles UPS, CFLs, lighting automobiles UPS, CFLs, lighting equipment and other electrical energy equipment and other electrical energy products.products.

Thank You