Daikin India expects to do away with imported components in two-to-three years

Shobha Roy | Updated on: Feb 10, 2022
An employee works on an outdoor unit of a split system air conditioner at the Daikin Air Conditioning India Pvt. factory in Neemrana, Rajasthan. (File picture)

An employee works on an outdoor unit of a split system air conditioner at the Daikin Air Conditioning India Pvt. factory in Neemrana, Rajasthan. (File picture) | Photo Credit: BLOOMBERG

Commencement of production at its third unit in Andhra Pradesh will help in reducing use of imported components

Daikin Air-conditioning India Pvt. Ltd.( DAIPL), a subsidiary of Daikin Industries Ltd, Japan, expects the share of imported components in its total manufacturing to come down to close to zero from current levels of around 40 per cent once its proposed third unit in Andhra Pradesh commences production.

According to Kuldeepak Virmani, Director & Senior Vice-President, Daikin India, work on the unit commenced at the beginning of this month and commercial production is expected to start by August-September 2023. The company, which is investing close to Rs 1,000 crore on the unit in the first phase, entirely through internal accruals, is looking to make a similar investment on the project in the second phase.

The expansion, which is a part of its investment proposal under the PLI scheme for AC components, would cut imports from its own factory by 15 per cent . Further reduction in imports would be facilitated by similar investments being planned by other companies in the industry. The new facility will augment its capacity from the current 1.2 million RA units to 2.5 million units.

 “The total import component for the industry as a whole stands at around 40 per cent. Given the kind of investments being done by various players, including Daikin, under the PLI scheme, we expect the share of imports in components to come down to near zero in the next two-to-three years,” he told BusinessLine on the sidelines of a press conference to announce the launch of its new range of split room ACs here on Thursday.

While the reduction in imports would help boost the company’s bottomline, it would also help grow the market as the benefit in cost reduction would be passed on to consumers to the extent possible, thereby, leading to higher customer acquisition, he pointed out.,

Growth in business

The residential AC market in India, which was estimated at 7 million units per annum in FY-20, dropped to 5.5 million units in FY-21 due to the Covid-19 pandemic. However, there has been a steady recovery in demand post June 2021.

Sales should be back to pre-pandemic levels by the end of this fiscal, he said, and added that Daikin India is hopeful of clocking five-to-seven per cent growth in sales over 2019-20 levels.

The company is likely to register over 20 per cent growth in turnover at around Rs 5,200 crore during the current fiscal, up from Rs 4,300 crore in FY-21 (when the entire industry was affected by the pandemic-induced slowdown).

“As per industry estimates, most of the companies are at 90-95 per cent of their FY-20 numbers as of end-December. We expect the fourth quarter of this fiscal to be good in terms of growth because the third wave ended swiftly and the summer is expected to be good and the overall economic situation is projected to be good. The industry is expected to achieve 2019-20 levels and we are expecting 5-7 per cent growth over FY-20,” he said.

Growth would also be driven by the low penetration of ACs in India, estimated at 6-7 per cent. The industry is estimated to grow by 12-15 per cent in 2022-23, driven by low penetration and higher demand, he added.

Published on February 10, 2022
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