Large air-conditioner manufacturers were optimistic about increased demand for their products due to the expected hot summer but unseasonal rains played spoilsport and added to uncertainties. That coupled with lower discretionary spending and intense pricing pressure led to tepid sales for these white good makers.

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The standout performer was clearly Blue Star in quarter four with over 20 percent revenue growth and more than 40 percent EBIT growth in the AC segment on a year on year (YoY) basis.

The next company, which delivered a strong performance on both revenue and profitability front was Voltas. Whirlpool and Hitachi struggled. Lloyd and IFB saw some market share gains but struggled to turn profitable.

Voltas has been the market leader for long but it looks like other players are now catching up, especially Blue Star. If one sees the data from the last three years, on a compounded basis, in the large appliance segment, Blue Star has seen a revenue growth of close to 30 percent and profitability of close to 35 percent.

Lloyd also has grown at a significantly faster pace compared to peers but the aggressive pricing has led to compression on profitability. Voltas, on the other hand, has seen slower growth compared to the other two with 20 percent compounded revenue growth and profitability growing at only 6 percent.

If one looks at the market share in the last 5 years, Voltas has been gradually losing market share. In fact it has lost close to 180 basis points (bps) of its share and Blue Star, on the other hand, has gained 120 bps.

Voltas has been facing intense competitive pressure from domestic and MNC players as peers are investing aggressively on capacity expansion and strengthening their distribution capabilities.

Voltas is looking at a hybrid model adding own manufacturing facilities over and above EMS model but this will take time to reflect in its performance. The capex for manufacturing also seems to be substantially lower compared to its peers.

It looks like a new leader is in the making among large AC manufacturers and people are taking note of it. In the last one year, Blue Star stock has gained close to 60 percent and Voltas is down close to 16 percent.

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First Published:Jun 21, 2023 2:14 PM IST