Before A Lost Summer, Voltas Stood Out
Employees work on the outdoor units of split system air conditioners on an assembly line. (Photographer: Prashanth Vishwanathan/Bloomberg)

Before A Lost Summer, Voltas Stood Out

Makers of air-conditioners, coolers and fans lost out on peak summer sales as Covid-19 pandemic froze economic activity. Still, Voltas Ltd. managed to outperform peers in the fourth quarter.

The Tata Group firm reported a 20% year-on-year growth in revenue for the cooling segment in the quarter ended March, according to a filing with the stock exchanges. That compares with an 8% growth for Symphony Ltd. and 13% and 15% decline for Havells India Ltd. and Blue Star Ltd., respectively, in the segment.

The market leader pushed stocks to dealers ahead of the nationwide lockdown, and a better distribution network in Tier II and III cities helped it to liquidate inventory, according to reports by brokerages, including Emkay Global, Edelweiss Securities, Motilal Oswal and HDFC Institutional Research.

Higher demand for inverter air-conditioners also helped, the brokerages said. Inverter ACs, which vary their cooling or heating capacity by adjusting power supply to compressors, accounted for 70-80% of Voltas’ total AC sales as of March 2020, according to an exchange filing.

The virus struck India’s economy when it was already growing at its slowest pace in over a decade. The lockdown, effective March 25, stalled businesses, barring essential services, and capped consumption. That pushed the economy to what may be its first full-year contraction in more than four decades.

Consumer durables output contracted for the third straight month in March. The industry, especially AC makers, faced a huge pile-up of inventory last year on account of unseasonal rains and energy rating changes.

Still, Voltas’ market share in the air-conditioner category improved 50 basis points over the last two months to 24.2% as of February, it said in a post-earnings conference call.

The company’s margin for the unitary cooling segment, mostly comprising air-conditioners, rose to the highest in eight quarters in the three months ended March, according to an exchange filing, aided by higher sales ahead of the lockdown, cheaper input costs and a favourable base. Among peers, Symphony’s margin rose the most during the fourth quarter.

Symphony’s domestic sales of air coolers, too, increased during the quarter, aided by inventory push. But the benefit was offset by poor sales in international markets, according to a media statement.

Havells’ Lloyd segment, mostly comprising air-conditioners, saw a dip in pre-buying from dealers in March. Also, there was an impact of Rs 225 crore on revenue because of the Covid-19 pandemic, according to an exchange filing.

Blue Star’s unitary product segment was impacted by lower offtake in March and higher advertisement spends hurt margin.

Challenges & Way Ahead

With most of the summer lost due to the lockdown, the cooling industry now hopes to recoup some losses in the remaining months.

Brands are getting competitive, doling out discounts and incentives to generate demand, according to Amit Mahawar, analyst at Edelweiss Securities. “With excess inventory (60-90 days) in hand, particularly for room air conditioners, dealers are unlikely to restock before the second half of the fiscal 2021,” he said in a report.


Inventory with dealers, shorter season period, and aggressive pricing may pose challenges in covering up the lost sales in the coming months, according to a media statement. The demand pattern and behaviour of consumers might change, and spend toward discretionary products may be withheld, it said.

Havells India

The lockdown has caused significant loss of production and sales in March and April, according to an exchange filing. Recovery in revenue in the last few weeks has been encouraging, especially in the non-metro towns, it said. But metro and urban areas are still under stress with limited business activities.

The company has deferred some capital commitments as well and has also guided for lowering of future advertisement expenditure.

Blue Star

For the fiscal ending March 2021, a drop in air-conditioner sales in the summer season will be anywhere between 30% and 50% as there is a very little window left, Managing Director B Thiagarajan said in a post-earnings conference call.

He expects stability to return from September, and the current situation won’t pinch the supply chain as planning for summer is done in November and December. The company will mainly focus to liquidate inventory at the earliest and convert it into cash, he said.


The company’s equipment makers are facing production constraints because of labour shortages and logistic bottlenecks, it said in a conference call.

Production is expected to normalise by the third quarter of the ongoing financial year. The company has witnessed a sudden spike in sales to high-end homes and commercial coolers to offices, it said. Its international arms have not been impacted, barring China.

Analyst View

About 70% of analysts tracking Voltas have a ‘buy’ rating. That compares with 63% for Symphony, 52% for Blue Star and 42% for Havells India.

The average of 12-month price targets tracked by Bloomberg implies an upside of 5.4% for Voltas. That of Symphony is the highest among peers at 7.5%.

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