Informist, Tuesday, Oct. 1, 2024
By Avishek Rakshit
KOLKATA – The share of profit of Balmer Lawrie & Co. Ltd. as a percentage of revenue is expected to remain at 8-12% in the next six years even as the company is eyeing to more than double the topline to INR 60 billion by 2030, Chairman and Managing Director Adhip Nath Palchaudhuri told Informist. Most of the revenue and profit growth will be driven by the travel and vacations, and the industrial packaging divisions, even though the company is diversifying its portfolio further and aims to reduce dependence on the government for sales growth.
"Historically, our profit as a percentage of revenue has been in the range of 8-12% and I think this will persist in the coming years as well. However, we will try to increase it (profit as percentage of sales) as we are set to grow the travel and vacations business vertical, industrial packaging, and other lines of business," Palchaudhuri said.
Given this range, the company’s profit could touch anywhere between INR 4.8 billion and INR 7.2 billion by 2030 if the company is able to post revenues of INR 60 billion. During the year ended Mar. 31, its net profit was 2.8 billion rupees.
The industrial packaging business contributes the largest chunk of revenue for Balmer Lawrie at INR 8.3 billion, accounting for 33% of its annual revenues and 19% of its profit. On other hand, the greases and lubricants business accounts for 27% of the consolidated topline and 31% of its profit. The travel and vacations business, however, made for only 8% of its revenues, but accounted for 30% of the profit during the year ended Mar. 31. Balmer Lawrie had reported a revenue of INR 24 billion during 2023-24 (Apr-Mar).
“In the current financial year, the travel and vacations business has become the most profitable business unit which we are very bullish upon, but the revenue share from this business has to grow as well,” the top official said.
While continuing to rely on the government to handle their ticket bookings, the Miniratna company has started to reach out to private companies to grow the revenue from the travel business.
"Currently, ticketing comprises 70% of the revenue from the travel business which all comes from the government, and the rest 30% comes from vacations which are mostly from the private sector. By 2030, we will reverse this and vacation bookings by the private sector will account for 70% of the revenue, and the rest 30% will come from the government," Palchaudhuri said.
The diversified public sector enterprise is aiming for a 20% growth in its travel and vacations business in the current financial year and a compounded annual growth rate of 15-20% in the next six years.
In the industrial packaging business, Balmer Lawrie is the market leader in the 210 litre mid-steel barrel segment, commanding 40% market share. The company is now exploring entering other product categories and also tap export opportunities.
“We will be entering an additional one or two product categories in the industrial packaging space if we need to grow the business; and also, we need to further explore the export market as well," Palchaudhuri said.
Although Balmer Lawrie’s sales of greases in the steel, railways, defence, automobiles, and mining segments are on a growth trajectory, Palchaudhuri said that the company is now intending to tap the potential in lubricants, particularly in the automotive vertical. Without sharing any definitive numbers, Palchaudhuri said that the company was planning to increase its product basket, distribution network, and branding activities.
"In the short-run, there can be some pain on the margins if we scale up our marketing and branding activities, but it will be beneficial in the long-run and is the need of the hour," Palchaudhuri said. During FY24, the company’s operating profit margin was at 8.3%, up from nearly 6.0% in the year-ago period.
The company is also aggressively growing its logistics business. The top official said that Balmer Lawrie will venture into the third-party logistics vertical where it will handle and ship products from private companies right from the factory to the retailer or the place of delivery.
“In the next 6-9 months, we will expand our third-party logistics capacity. We have already taken 10 acres in Dankuni on 15-year lease which will operate on hub-and-spoke model. In locations like Guwahati, Siliguri, and Cuttack, warehouses having an area of 25,000 square feet each are going to come up, and we are also looking for setting up warehouses in tertiary locations," Palchaudhuri said.
The hub-and-spoke model refers to a distribution network that uses a central hub to connect outlying points, or spokes, to one another.
At 1417 IST, shares of Balmer Lawrie traded nearly flat at INR 275.25 on the National Stock Exchange. End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Informist Media Tel +91 (22) 6985-4000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2024. All rights reserved.