Even with scorching heat, the summer season failed to bring much cheer to the cooling products makers in India. Blue Star expected 25 percent year on year growth in room air conditioners business for April, but the actual demand stood much lower. Similarly the month of May witnessed marginal growth in demand year on year, compared with the expected 20 percent growth.

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To add to the lagging demand, rising competition is creating pressure on operating profitability. Blue Star's peer, Voltas is sailing in the same boat with rising challenges. This has disappointed street expectations and the stock received a sharp downgrade. UBS cuts the target price for Voltas from Rs 1,200 per share to Rs 840 per share. The air conditioning and refrigeration products maker is consistently losing market share with the scale up in operating profit margins being a tough task to achieve.

What worked in favor of Voltas in the past decade is not expected to play out in future, as there are significant challenges at sight. The rising competition has created pressures on margins and hence UBS has cut the earnings expectations for FY24 and FY25.

To add to it, the company is looking at a profitable ramp up in refrigerators and washers by FY26, which UBS believes is a tall ask. Also the ramp up in joint venture is progressing, but at a much slower pace and hence the street is cautious on this stock. UBS has assigned a Neutral rating to the scrip.

Voltas has not been able to generate any returns for its investors in the past one year, with 20 percent decline in its share price. Blue Star on the other hand, has rewarded its shareholders with 68 percent returns in the same period. Since the start of calendar year 2023, Voltas declined 2 percent, while Blue Star rose 35 percent. On June 23 morning, Blue Star is trading in the green, while Voltas is nearly 3 percent lower.

Vijay Sales in an interaction with CNBC-TV18 on June 22 reiterated that a decline in air conditioners and refrigerators demand this summer season, was owing to unseasonal rains in April and May. The retailer expects industry growth rate at 5 to 6 percent in the first quarter of FY24, which will elevate to 10 to 12 percent in the second quarter. This largely attributes to strong demand for electronic items like laptops, mobiles and televisions. Post covid, consumer trends are changing and are upgrading themselves. Air conditioners sales has seen a de-growth of 8 to 10 percent for Vijay Sales.