The Hindu Business Line : Voltas not to hike price of air-conditioners

Mumbai, March 25 Voltas from the Tata Group will not hike the prices of its air-conditioners despite rising input costs, but counter it through high volume growth, Mr Sanjay Johri, Executive Vice-President and Chief Operating Officer, Unitary Products Business Group, told Business Line.

While its competitors have announced passing on the burden of extra input costs to the consumers, Voltas wants to play the waiting game.

“Even though we are feeling some of the cost pressure, we are going to hold onto the price line. Our estimates say that the increasing metal prices globally will correct themselves in the next two months,” said Mr Johri.

Steel, copper and aluminium contribute to 70 per cent of the input cost of an AC at a selling price of Rs 100. Due to the inflation of metal costs globally, four to five per cent of the sales revenues of the AC manufacturers in India have been affected, he said.

“In an industry, where the profit margins are as low as six to seven per cent, a three to four per cent increase due to high input costs creates severe pressure,” he explained.

But the company is positive that price correction will happen in two months’ time and will not immediately transfer the prices to the consumers.

“We are able to do this, partly because of the reduction in excise duty in the Budget from 16 to 14 per cent,” he said. But as the season (summer) for maximum sales has just set in, it is an inopportune time for margin pressure to occur, he added.

Calling it a delicate balancing act, Mr Johri said that the company would counter it through focused volume growth.

The company commands 17 per cent of the domestic market share in room ACs, which it plans to increase to 20 per cent by next year. While the domestic room AC market has been estimated at 20 lakh units during the financial year ending March 2008, and is growing at the rate of 30 per cent, Voltas’ volume growth in room ACs is at 40-45 per cent.

The AC products, which constitute 70 per cent of the company’s unitary products, are growing at a faster rate than its refrigeration business.

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