Revenue of the organised electrical and kitchen appliances industry is expected to grow 8-10 per cent this fiscal, driven by greater consumer preference for branded products.
The growth will be supported by increasing usage of smart technologies, and similar buying behaviour among rural and urban consumers towards such products, according to Crisil.
The implementation of the Goods and Services Tax in July 2017 helped manufacturers in the organised sector to streamline their supply chains, operations, and distribution networks to benefit from input-tax credits, cost-efficient logistics, and uniform taxation of final products across states.
A Crisil Rating analysis of eight companies accounts for around half of the ₹62,000-crore industry.
Cost increase
“Electrical appliances makers increased product prices by 12-14 per cent last fiscal, limiting the impact on operating profitability. This fiscal, too, operating margin is expected to see a marginal decline of ~50 bps despite elevated input prices, highlighting stable demand and the ability of players to pass on increased input costs. Furthermore, deleveraged balance sheets and improved liquidity position will support the credit profile of players,” said Anand Kulkarni, Director, Crisil Ratings.
Even as prices of key raw materials — copper, aluminum, steel, and polypropylene — surged last fiscal, stable demand enabled companies to pass on increases in raw material prices to a large extent, as per Crisil.
“The perception that purchase of electrical appliances is a low-involvement decision is fast changing. Kitchen equipment, lighting solutions for home, electric fans and coolers are now increasingly bought after careful evaluation of brands on functionality, technology, ease of use, and strong after-sales service,” said Mohit Makhija, Senior Director, Crisil Ratings.