Economy

India Inc is bullish this festival season...

Priya Kansara Mumbai | Updated on January 16, 2018 Published on September 19, 2016

Dipping inflation and stable interest rates are also fuelling discretionary spending   -  The Hindu

Auto, white goods firms see robust sales on good monsoon, Pay Panel recommendations

It’s likely to be a double dhamaka for India Inc this festival season. Companies across a wide range of sectors that ride on discretionary demand are expecting robust growth from rural as well as urban markets. A better monsoon and the Seventh Pay Commission hike are driving this trend.

Soft inflation, stable interest rates, benign fuel prices and optimism on implementation of the Goods and Services Tax are other reasons that could drive consumption. BusinessLine spoke with a range of analysts and industry experts to track the bullish trend in the run-up to this year’s festival season.

Automobile: Automobile majors are the most optimistic about growth in FY17. The Society of Indian Automobile Manufacturers has revised its growth outlook from 6-8 per cent earlier to 10-12 per cent.

“We expect buoyancy in the industry. We have targeted a third consecutive year of double digit growth. Sentiment has improved in the rural market,” said a spokesperson for Maruti Suzuki, which derives around 30 per cent off its sales rom the rural market.

Similarly, Honda Motorcycle and Scooter is confident of maintaining 20 per cent growth in FY17. It aims to aims to sell more than 1 million units in the 2016 festival period and expects the two-wheeler industry to grow around 15-17 per cent by the end of the September quarter.

Consumer Durables: The Consumer Durables industry expects its buoyant growth to extend beyond the festival season. Niladri Datta, Chief Marketing Officer, LG India, expects 30 per cent growth this festival season.

Whirlpool, in its annual general meeting held recently, had pointed out that the GST implementation as well as improvement in rural electrification and other infrastructure may stimulate demand for appliances in semi-urban and rural markets.

“Most of the revival in growth that the home appliance industry is witnessing is being driven by urban demand, fuelled by replacement buyers”, the company said.

Paints: Amit Agarwal, analyst at Kotak Securities, expects healthy volume growth for both industrial and decorative paints. He estimates 13 per cent compound annual growth rate (CAGR) in volume over FY16 to FY18 for Kansai Nerolac.

The company derives 45 per cent of its revenue from the industrial segment (the automotive segment contributes 75 per cent) and the rest from decorative paints (13 per cent growth recorded in the June 2016 quarter).

Jewellery: Jewellery companies earn more than 50 per cent of their revenues during the festival and marriage season.

High gold prices have impacted demand, especially for plain gold jewellery, which forms around 75-80 per cent of revenue for most jewellers. But companies are hopeful of better times in this segment too.

“These are still early days but we do expect consumption to improve with the disbursements. We expect the next quarter to be a much better quarter for plain gold jewellery,” said S Subramaniam, Chief Financial Officer, Titan Company.

Published on September 19, 2016
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