Havells Stock Analysis


Havells is one of the most trusted brands in India and is the owner of prominent brands like Crabtree, Lloyd, Standard Electric and Promtech. It was founded by Qimat Rai Gupta in 1958 and has grown leaps and bounds. It is one of the largest electrical equipment companies in India having a diverse line of products ranging from home and kitchen appliances, lighting for domestic, commercial and industrial applications, LED lighting, fans, modular switches and wiring accessories, water heaters, industrial and domestic circuit protection switchgear, industrial and domestic cables and wires, induction motors, and capacitors among others.

Ratio Analysis
• Liquidity Ratio fell from 2.04 to 1.47 signifying that there has been a significant cash crunch. The same can be ratified by the quick ratio which fell to 0.81 from 1.44. However, this may be due to the capital Intensive plans the company looks to implement for a sustainable long-term growth
• Havells has a P/E ratio of 51.5. When compared to its peers- Finolex as a P/E ratio of 20.4 whereas Voltas has a P/E ratio of 29.9 which clearly shows that the shareholders expect a higher growth rate than its competitors.
• The P/B ratio of Havells is quite high- 11.2 when compared to its peers Voltas- 4.5 and Finolex -2.9. It raises questions such as the stock might be a bit overvalued
• Net Profit Margin- Havells has a net profit margin of 8.3 whereas Finolex has a net profit margin of 11.7 and Voltas has a net profit margin of 9
• Return on Assets- Havells has an ROA of 10.6 which is similar to its peers. Finolex has an ROA of 11.9 whereas Voltas has ROA of 8.1
• Return on Equity and Return on Asset- Havells has the highest Return on Equity and Return on Capital when compared to its peers- 18.1 & 26.3 respectively. Finolex and Voltas stand nowhere to Havells in this metric as both have an ROE of 13.6 and 14.8 respectively. Finolex has ROC of 22.7 whereas Voltas has ROC of 20.9

Management Views

The Chairman has accepted the future growth and prospects have diminished due to weakness in the economic situations of the European Union and the Indian economy due to which he expects not to maintain the 17-20% year on year growth. He has also taken a contrarian view of placing his bets on the Havells version of the brick and mortars- Havells Galaxy which he believes helps in developing their presence in various markets and also helps them in connecting directly with their end customers. They plan to target the rural area now more than ever with the Reo range of conventional switches and they think that their strong distribution chain would make it seamless.

In manufacturing, Havells will continue with their strategy to invest in capacity, quality and precision systems. In his address to the shareholders, the Chairman said,” We are fast reaching the point where all our products will be manufactured in-house under our close supervision. During the year, we set up our lighting fixtures plant at Neemrana which is the first large-scale lighting fixtures plant of the country. Equipped with most modern technology and infrastructure, the plant boasts of India’s first roll forming and robotised bending machines. Similarly, our Baddi plant is amongst best switches and switchgear plant globally and currently is in the process of doubling its production capacity. We are also in the process of integrating our research and development capabilities globally.”

Lloyd-Havells Deal & Q2 FY19 Results

In 2017, Havells acquired the Consumer Durable Business of Lloyd Electrical and Engineering for a mammoth Enterprise of 1,600 crores. Lloyd is the third largest player in terms of market share in the AC segment after LG and Voltas. The main rationale is given that the deal would give a long-term scalability to Havells’s own consumer durable appliances business. It would also strengthen its distribution network by giving it access to over 10,000 direct and indirect dealer. The acquisition got mixed reactions from the market with some analysts were of the opinion that the price paid was too rich for their taste while others were optimistic because of the synergies the deal created.

The company posted yet another strong topline growth in the Q2. There was a 23% growth in YOY revenue from 1,777 to 2191 crores but EBITDA just increased by 1 crore from 257 crore to 258 crore which was mainly due to a higher marketing expenditure and a higher input costs.
The meteoric rise in the cost of Copper has severely affected the margins in the Cables and wire segment as it has declined to 14 % from 20%. Although there has been an increase in revenue by 35% in the above-mentioned segment it can be accredited more to price hikes than volume.

Lloyd isn’t having the best of its quarters. The Chairman and Managing Director, Anil Rai Gupta feels that It is due to adverse seasons, FOREX headwinds and channel inventory but was quick to mention that they also expect a strong recovery as the new plant would start manufacturing items related to the AC segment. The top line reduced by 4%.
The management wants to stabilise the Lloyd portfolio by reducing its import dependency and a diversified portfolio. Around 60% of the capital expenditure budget would be used to set a 6 lakh unit air conditioning manufacturing facility for Lloyd which is expected to be functional at the end of the year and cost around 300 crores.


Havells has been successfully growing in double digits for the past few years. From the long-term perspective, most analysts believe that it would be a great buy as it has been creating wealth for the shareholders. The management under Anil Rai Gupta is an experienced one and trust can be placed on him on steering Havells towards the right direction. The lucrative AC segment which has been growing exponentially due to rising living standards is expected to be tapped in by Lloyd especially after the start of the functioning of the new plant.