Voltas Says It Remained Immune To Consumption Slowdown

Voltas Ltd. said it remained undeterred by the consumption slowdown that rocked makers of consumer goods to cars and appliances.

India’s room air-conditioner industry continues to defy the broader economic slowdown, partly supported by a favourable base, according to an HSBC note that collated key takeaways from Voltas’ meeting with analysts this week. Also, the festive season for the market leader begun on a good note with its decent performance during Onam even as floods in Kerala curtailed growth, a separate report by Antique Stock Broking said. The inventory levels have “normalised” and the company isn’t witnessing any incremental pricing pressure, it said.

Apart from favourable base, the makers of cooling appliances were able to beat the slowing consumption on the back of higher sales of inverter air conditioners—which vary their cooling or heating capacity by adjusting power supply to compressors. That aided the revenue growth of the cooling segment for appliance makers in the quarter ended June, BloombergQuint had reported earlier.

While Voltas said consumers continue to shift towards energy-efficient air conditioners, other categories such as refrigerators, too, haven’t seen any slowdown in demand yet. And that may have prompted the company to maintain its margin guidance for the ongoing financial year at 11 percent, according to the brokerages.

The company also expects to receive “healthy” order inflows from water, metro and rural electrification space even as it witnessed a “slower pace of execution in urban infrastructure projects (metro) and experienced delayed payments”, the brokerages said in their reports.

Rural electrification, urban infrastructure and heating, ventilation and air conditioning, according to Voltas, each contribute one-third to its domestic project business order book.

Besides, Voltas’ joint venture with Beko will be able to expand its product portfolio after its plant at Sanand gets commissioned, Antique Broking’s note said. The joint venture, Voltas said, is expected to remain in an investment phase for the next three to four years.

“The product rollout will remain slow until the commercialisation of the Sanand plant as the company is not catering to 70 percent of the market in refrigerators and 55 percent in washing machines as its portfolio doesn’t have direct cool refrigerators and semi-automatic washing machines,” according to a report by DBS.

The commissioning of Voltas’ another plant at Tirupati, according to HSBC, too, is progressing as planned.

Price Hikes

Voltas said it struggled to increase prices due to the prolonged monsoon.

Demand during the festive season will be the deciding factor for selective price hikes for some products and in some regions, said Naval Seth, analyst at Emkay Global Research. Any adverse currency and commodity impact will not leave any option for the industry other than price hikes to protect margins, Seth said in a report.

The price hikes, according to HSBC, are needed to offset the increase in custom duties and the impact of promotional schemes on profitability.