Bajaj Corp, the leader in light hair oil category with a market share of over 58%, is set to turn debt-free. The consumer good company from Shishir Bajaj group will this month repay debt of Rs 100 crore taken to part-fund the Rs 140 crore acquisition of Nomarks brand last year.
Sumit Malhotra, managing director, Bajaj Corp, said, "We have cash reserves on our books of Rs 408 crore, of which Rs 100 crore will be used to pay off debt while another Rs 112 crore will be used to pay dividend."
On borrowing money despite having cash reserves, Malhotra said, at that time the company was looking for a bigger acquisition and hence did not use cash reserves.
"We want to now focus on business and will not be looking at acquisitions for another two years at least. Besides, it made sense to pay off the debt since we had money now," he said.
Also, the company has recently set up a wholly owned subsidiary in UAE at the Sharjah Airport International Free Zone Authority. This unit will cater to geographies of North Africa, Gulf, Afghanistan and Pakistan. Both hair oil and Nomarks will be sold through this subsidiary. The goods will be sold through a warehouse and the company will look at manufacturing only if it succeeds.
"The UAE subsidiary will start functioning from April this year and will be the beachhead of our foray into the Gulf Co-operation Council and North African markets," said Malhotra.
On price hikes, he said, "Typically, we hike prices in the start of the year and try to maintain the same thought the fiscal. To be higher in the 3-5% range, the new prices will get effective starting April, 2014."
Abneesh Roy, associate director (institutional equities) - research, Edelweiss Securities, in a recent report had said that Bajaj Corp registered 2.71% year-on-year increase in gross margins due to lower priced inventory of light liquid paraffin (LLP). "Recent increase in LLP prices is likely to exert pressure on margins going forward and the company will have to increase prices to counter the same," Roy said.