Orient Electric expects 4–5% increase in product prices in the next few quarters

Orient Electric expects four to five per cent increase in product prices in the next one or two quarters. The company, which has two-third of its revenues coming from fans, expects to touch pre-Covid levels of sales by the end of Q4FY23 backed by a steady rise in demand and upgradation to energy efficient fans.

The company’s total turnover during FY21 stood at ₹2,033 crore.

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According to Atul Jain, Executive Vice President, Orient Electric, there has been near 20 per cent increase in fan prices over the last one and half years but the rise in input cost has been much more than that. Geopolitical tensions have further affected sentiments and led to a spike in commodity prices.

“There is a need to increase prices by around four-to-five per cent and this is likely to happen over the next one quarter or so,” Jain told BusinessLine.

Positive tailwinds

The ₹8,000 crore fans market in India had been impacted due to the Covid-induced slowdown over the last two years. People had put on hold their purchases, thereby creating a huge pent up demand.

The growth so far during this fiscal has been “healthy” as compared to last year.

“Some of the pent up demand is likely to come in and this will augur well for the industry. Another driver for growth will be the opportunity to have more energy efficient products,” he said.

The mandatory BEE energy efficiency norm for fans in July is expected to bring a transformation in the industry as it would enable consumers to save a “substantial amount” on electricity.     

“With increasing environmental consciousness and sharply lower payback periods, a massive shift is expected to take place towards energy-efficient fans akin to the LED adoption in the lighting industry,” the company said in its latest annual report.

Rising input costs

While the pent up demand and upgradation to energy efficient fans would work as tailwinds, the increase in input cost and the resultant rise in prices might pose headwinds. The prices of some of the key raw materials including copper, steel and aluminium have witnessed a surge due to the recent geo political tensions.

Orient Electric is looking to improve margin profile through a mix of localisation, commodity substitution and premiumisation to counter increasing commodity prices, the report said.

This apart, the cost of energy efficient products is likely to be higher by around 15-20 per cent, making them more expensive for consumers.

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