This Company Gains From India’s Summer Power Woes

As Indians brace for a summer with power fluctuations and outages, one firm stands to make cool gains.

V-Guard Industries Ltd., the maker of voltage stabilisers, is expected to see a surge in demand as consumers look to protect appliances from electricity swings, according to dealers BloombergQuint spoke with in Bengaluru, Hyderabad, Kozhikode, Thiruvananthapuram and Chennai. They expect volumes to jump up to 25 percent this year, more so after an extended winter and an erratic summer hurt demand last year.

Sudden changes in voltage and power outages are common outside metropolitan cities in the summer as people switch on air conditioners and coolers, drawing more than usual even though supply also increases. The weather department, in its outlook till May, predicted normal to slightly above-normal heat wave, especially in the regions of coastal Karnataka, Kerala and Arunachal Pradesh. V-Guard, according to its filings, gets about 63 percent of its revenue from the southern states.

The dealers BloombergQuint spoke with have started getting the orders ahead of Holi, usually considered the beginning of summer. Most of the demand is for V-Guard’s units.

Shares of V-Guard fell 21 percent till Feb. 15 this year, but have since rebounded 18 percent, outpacing the 10 percent jump in the BSE Consumer Durables Index during the period. The company’s stock trades at 11.8 times its 2018-19 book value compared with its two-year average of 13.3 times, according story Bloomberg data. Eleven out of 21 analysts have a ‘Buy’ rating on the stock, four recommend while ‘Hold’ and six suggest ‘Sell’.

The Kochi-based maker of electrical appliances and cables, according to its investor presentation, has a 51 percent share in the voltage stabiliser market across India. The business contributes around 20 percent of its total revenues, and the segment’s sales more than doubled in the last eight years growing at an annualised rate of 13.06 percent.

The company didn’t immediately respond to BloombergQuint’s emailed queries. In the investor presentation, Managing Director Mithun Chittilappilly said a stronger rupee against the dollar in the last two months will also help as it imports around 20 percent of its components. That’s expected to aid margins.