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India’s AC Import Ban Seen Unlikely To Hurt Voltas, Blue Star And Havells India

But it will hurt those companies which depend on regional sourcing from Thailand.

An employee works on an outdoor unit of a split system air conditioner on an assembly line. (Photographer: Prashanth Vishwanathan/Bloomberg)
An employee works on an outdoor unit of a split system air conditioner on an assembly line. (Photographer: Prashanth Vishwanathan/Bloomberg)

Analysts don’t expect India’s move to ban imports of air conditioners to hurt large listed AC makers such as Voltas Ltd., Blue Star Ltd. and Havells India Ltd.

But companies such as Mitsubishi and Toshiba, which depend on regional sourcing from Thailand, are likely to take a hit, brokerages, including IIFL and Dolat Capital said in their notes.

India has amended the import policy of air conditioners with refrigerants from free to prohibited, the Directorate General of Foreign Trade said in a notification on Oct 15., as the nation aims to promote domestic manufacturing and cut imports of non-essential items. This adds to the list of curbs on imports of certain new pneumatic tyres used in motor cars, buses, lorries and motorcycles. Besides, prohibitions were placed on imports of items ranging from televisions to select defence equipment.

Here’s what brokerages have to say:

IIFL On India’s AC Import Ban

  • Applicable to all types of split AC systems as well as window ACs units.
  • Industry was expecting import restrictions similar to LED TV panels.
  • Smart move to target cheap imports coming through the FTA route.
  • Neutral to positive for brands with local manufacturing.
  • Impact on large AC players, such as Voltas, LG, Hitachi, Daikin, Lloyd, Blue Star, not meaningful.
  • Import of CBUs and of outdoor units of split AC is minimal for larger AC players.
  • Players like Mitsubishi, Toshiba, Sharp, etc. will have significant impact due dependence on regional sourcing from Thailand.
  • Growth prospects for original design manufacturers like Amber Enterprises will significantly increase.
  • Original design makers to gain if brands decide to step up local manufacturing or sourcing.
  • SRF, Navin Fluorine and Gujarat Fluorochemicals stand to gain if import of ACs with refrigerants is prohibited.

Dolat Capital On India’s AC Import Ban

  • Positive for Amber Enterprises.
  • Move will increase opportunities for contract makers like Amber that can see higher assembly work.
  • No significant impact on listed players like Voltas, Blue star, Havells (Lloyds).
  • The companies are likely to import outdoor units without refrigerants.
  • Impact on foreign brands, which rely on direct imports, like Mitsubishi/General.
  • This comes in the off season.
  • Voltas remains preferred AC play.

Jefferies On Voltas

  • Maintains ‘buy’ with a target price of Rs 750 apiece
  • AC import ban not material
  • Rs 3,600 crore is the upper end impact of the ban as per FY20 data
  • Value segment implies less than 15% of the overall AC industry size in India
  • Value segment AC players like Voltas, LG, Samsung could see some marginal market share gains