Consumer durable stocks move up on hopes of extension of excise benefit

Players from the consumer durables sector are keeping their fingers crossed to see if the government will extend the excise duty concession that is due to expire on December 31. The excise duty was first cut from 12 per cent to 10 per cent, during the UPA government’s interim budget in February 2014. Later it was extended by the Modi-led government, to be valid until December 31, 2014.

But with the growth in IIP (Index of Industrial Production) slipping into the negative zone in October, the industry is lobbying for an extension of the excise duty cut. In October, IIP plunged to a negative 4.2 per cent, compared to a negative 1.2 per cent in October 2013. The consumer goods index was down 18.6 per cent (versus negative 5 per cent last year).

Excise duty concession for consumer durable goods and automobiles to expire tomorrow, sources say the government is likely to extend it..

— Rajalakshmi Nirmal (@crajalakshmic) >December 30, 2014

On Tuesday, consumer durable stocks including Blue Star and Whirlpool of India saw stock prices move up 2 per cent and 4 per cent on hopes that the government will extend the excise benefit.

Consumer durable stocks move up on hopes of extension of excise benefit >http://t.co/oiusSrZqGR

— Business Line (@businessline) >December 30, 2014

Speaking to Business Line , Pradeep Bakshi, President, Unitary Cooling Products, Voltas, said, “If the benefit is extended it will help the industry and also consumers at large. In the last one year air-conditioner prices have gone up because of many reasons, including the volatile rupee, increase in cost of imports and change in energy labelling norms. But because of the excise concession, we were able to pass on some benefit to the customer and the industry was able to see some growth"

On the same lines, S. Ravichandran, MD, TTK Prestige, said, “The last six months have been really bad for the industry; demand was poor even during the festive Diwali season. Now that inflation is down and there is possibility of a rate cut, an extension of the excise duty benefit, will help spur demand.”

V-Guard Industries’ however is not too worried about the extension. Almost 60-65 per cent of the company’s production happens in excise free zones in Himachal Pradesh and Uttranchal. Majority of the company’s electric heaters, fans and stabilizers are from excise free zones, says, Mithun Chittilappilly, MD of V-Guard Industries. “We will not be affected, in-fact, if there is an excise hike, it will put us in a sweeter spot, as we will be able to compete better on prices. But, for the industry as a whole, it will be a positive, particularly as rural demand has been subdued over the last few months.”

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