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The early onset of summer has made consumer durable players hopeful of recovering from the demonetisation effects on the back of at least 20 per cent growth from the seasonal air-conditioner segment.
However, this is a reasonable mark down in growth expected this season compared to last year when sales had surged nearly 35 per cent.
With low penetration at 4 per cent, players in the ₹15,000-crore air-conditioner category are looking forward to the season when sales reach the peak.
Market leader Voltas witnessed de-growth of 11 per cent in secondary sales (from the retailer to customer) due to de-stocking by retailers as sales dropped post-demonetisation.
It is now expecting better operating margins after slow offtake and order bookings in the recent past.
“There has been de-growth due to demonetisation but now we should be able to bounce back. Last season, we grew by 80 per cent during summer, but it will be challenging to get the same levels of growth this season,’’ said Pradeep Bakshi, VP & COO, Unitary Cooling Products, Voltas.
Central air-conditioning major Blue Star is also hoping for a turnaround in the segment. “Demonetisation did lead to a gap between primary and secondary sales, but we are hoping it will again be a record summer like last year. Last year growth peaked at 35 per cent during summer and we hope to see similar levels this year,” said B Thiagarajan, Joint Managing Director, Blue Star.
Despite summer beginning early this year, there is also a fear of a ‘El Nino’ impact leading to intermittent rains, which could dampen the growth. Sanjeev Bakshi, Country Head, Air Conditioners, Videocon Industries, said: “Demonetisation led to almost 35 per cent drop in sales. So far AC sales are expected to grow by 15 per cent but there could be factors like El Nino, which can impact the growth of the category.”
GST effectBesides, the GST (Goods and Services Tax) regime is expected to push up prices and unless air-conditioner sales perk up this season, it would get tough to absorb the price increase for the consumer durable majors.
“Commodity prices are already going up and the GST will also lead to increased prices. Unless summer sales are good, it would get difficult for the companies to contain prices,” observes Thiagarajan.
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