Summary
Bajaj Electricals Limited - Q3 FY26 Earnings Call Summary Monday, February 9, 2026, 16:00 PM IST
Event Participants
Executives 5 Rajesh Naik (COO - Lighting Solutions), Sanjay Sachdeva (MD and CEO), Shekhar Bajaj (Chairman), Suketu Shah (Finance Controller), Vishal Chadha (COO - Consumer Products)
Analysts 5 Alok S (360 One Asset Management), Anuj Sehgal (Manas Capital), Manan Goyal (ICICI Securities), Manoj Gori (Equirus Capital), Natasha Jain (Phillip Capital)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Lighting Revenue Growth | +9% YoY | Accelerated from +6% in H1; driven by high mix of ceiling and outdoor lights. |
| Lighting EBIT Margin | 7.0% | Significant improvement from 2.0% YoY; best-in-class performance. |
| Consumer Products Revenue | -25% YoY | Sharp decline due to deliberate channel inventory normalization and weak seasonal demand. |
| Consumer Products EBIT | Negative | Impacted by high operating deleverage and promotional costs to clear trade stock. |
| Channel Inventory (CP) | -30% (in days) | Significant reduction in inventory days to improve channel health and secondary offtake. |
| Operating Cash Flow | ₹211 crores | Strong generation resulting from inventory reduction and freed-up working capital. |
| Cash & Cash Equivalents | ₹620 crores | Provides financial flexibility for growth capital and innovation investments. |
| Price Hike | 2% to 5% | Effective February 1, 2026, to mitigate the impact of commodity inflation. |
Geographic & Segment Commentary
Lighting Solutions: Delivered strong 9% revenue growth, outperforming the broader market. Management focused on expanding adjacencies, specifically switchgear (launched Q2) and solar solutions (announced Q3). The segment achieved an EBIT margin of 7%, benefiting from a strategic focus on outdoor and ceiling lighting categories.
Consumer Products (CP): Performance was severely impacted by a conscious decision to pause primary billing for inventory normalization. While primary revenue fell 25%, tertiary offtake remained stable, with summer-related products (coolers/fans) seeing the most significant impact. Management is shifting the cultural approach from a volume-led “push” to a demand-led “pull” model.
Company-Specific & Strategic Commentary
Channel Normalization & Hygiene: Management undertook a strategic cleanup of trade inventory, reducing inventory days by 30% in CP. This move aimed to reduce dealer carrying costs, improve ROI for trade partners, and eliminate high-cost incremental sales practices.
Portfolio Expansion: The company is aggressively entering fast-growing electrical adjacencies, including Switchgear, Solar Solutions, and the newly launched Wires category (Feb 2026). These categories leverage Bajaj’s existing brand equity and distribution depth to drive long-term TAM expansion.
Operational Efficiency: Ongoing initiatives include logistics optimization, redistribution of godown space, and a shift toward “secondary-offtake-led” execution. Management is also reviewing fixed costs and variable expenses like product demonstrations and trade schemes to improve margin quality.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue & Profitability | Improvement from Q4 FY26 | Corrective actions and cost reductions are expected to yield tangible results in the immediate quarter. |
| FY27 Performance | Substantial Improvement | Full-year benefits of structural changes in distribution and lower inventory carrying costs to reflect in FY27. |
| Consumer Products | Normalization by Q4 FY26 | One more quarter required to fully normalize summer-related product inventories in the channel. |
| Wires & Switchgear | Strategic Growth Pillars | Internal 3-year plans are being finalized; outlook remains positive based on early trade traction. |
Risks & Constraints
| Risk | Context |
|---|---|
| Seasonal Volatility | The CP business remains highly sensitive to summer/winter patterns; poor summers in FY26 led to elevated cooler/fan inventory. |
| Commodity Inflation | Rising input costs necessitated a 2-5% price hike in February 2026; inability to fully pass on costs may pressure margins. |
| Competition & Transition | BEE regulatory changes in 2026 for fans pose a transition risk, though management claims better preparedness than the 2023 cycle. |
| Execution Risk | The shift from “Primary-push” to “Secondary-pull” involves cultural changes that may impact short-term revenue predictability. |
Q&A Highlights
Consumer Products Margin & Inventory
- Question: Why was the decline in CP margins so severe compared to peers despite the winter season? (Natasha Jain)
- Answer: The drop was temporary and driven by flushing out stock and running promotions to move inventory to trade. Underlying margins will be healthier post-normalization (Sanjay Sachdeva).
- Answer: Tertiary offtake for water heaters remains strong with high single-digit growth in instant heaters (Vishal Chadha).
Strategy for Wires Segment
- Question: What is the moat in the crowded wires business, and will it be outsourced? (Natasha Jain)
- Answer: The strategy leverages the existing FMEG channel overlap and brand trust. While currently exploring outsourcing, products are not “off-the-shelf” and adhere to Bajaj’s quality specifications (Rajesh Naik).
Channel Correction Rationale
- Question: Why take the correction now, and were inventory levels higher than peers? (Manoj Gori)
- Answer: Lower-than-expected summer demand left the channel with high inventory (coolers down 38-40%). It was prudent to correct this before the new financial year to restore channel health (Vishal Chadha).
Distribution Model (RREP)
- Question: Are we returning to the pull-based Range Reach Expansion Program (RREP)? (Anuj Sehgal)
- Answer: We are following the philosophy of RREP but with a more cost-effective approach. Instead of visiting every outlet weekly, we are prioritizing high-value outlets to manage costs while focusing on secondary sales (Shekhar Bajaj).
Key Takeaway
Bajaj Electricals reported a mixed Q3 FY26, characterized by high growth in Lighting but a deliberate 25% contraction in Consumer Products (CP) revenue to facilitate channel inventory normalization. Management reduced CP channel inventory days by 30%, resulting in a strong operating cash flow of ₹211 crores and a cash balance of ₹620 crores. Strategically, the company is pivoting from a “volume-push” to a “demand-pull” model while expanding into high-growth adjacencies like Wires, Switchgear, and Solar. While negative EBIT in CP reflected temporary operating deleverage and promotional costs, the Lighting segment achieved best-in-class 7% margins. Management expects structural cost reductions and improved channel hygiene to drive substantial margin expansion and sustainable growth starting in FY27, backed by a 2-5% price hike to counter commodity inflation. Following a transitional Q4, the company is positioned for a leaner, secondary-sales-driven recovery.
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