India's large appliance manufacturers, who have been riding a wave of impressive growth, are likely to see a moderation in their revenue expansion over the next fiscal year, according to a recent analysis by CRISIL Ratings.
The Growth Trajectory: From Highs to Moderate Gains
The sector, which includes major players manufacturing essential household items like air conditioners, refrigerators, and washing machines, witnessed a robust revenue growth of approximately 14-15% in the fiscal year 2023-24. However, this pace is expected to ease significantly.
CRISIL predicts that revenue growth will slow down to 7-9% in both fiscal 2025 and 2026. This projection is based on an analysis of six leading companies that account for a substantial half of the sector's revenue, valued at around ₹77,000 crore.
Why the Slowdown? Key Factors at Play
This anticipated moderation is attributed to a combination of factors that are set to impact consumer demand.
- High Base Effect: The industry is coming off a period of very strong growth, making further high-percentage increases challenging.
- Normalizing Demand: The pent-up demand post-pandemic has largely been satiated, leading to a more normalized consumption pattern.
- Rural Market Challenges: Demand from rural areas, a significant growth driver, is expected to remain subdued compared to urban markets.
A Silver Lining: Stable Credit Outlook
Despite the headwinds for revenue, there is positive news regarding the financial health of these companies. CRISIL Ratings emphasizes that the credit profiles of major appliance makers are expected to remain 'stable'.
This stability is underpinned by several factors:
- Healthy Profit Margins: Operating margins are projected to hold steady, supported by easing raw material costs and the benefits of operating leverage.
- Prudent Capital Expenditure: Companies are expected to manage their capital expenditure carefully, ensuring it is largely met through internal accruals without straining their balance sheets.
- Strong Market Position: The leading players have established brands and distribution networks, providing them with resilience.
The Bottom Line for India's Appliance Sector
While the era of blistering double-digit revenue growth may be pausing, the large appliance sector in India is transitioning into a phase of stable, albeit slower, expansion. The focus for manufacturers will likely shift towards sustaining profitability, managing costs, and innovating to stimulate demand in a more competitive landscape.
