According to research by CRISIL Ratings, consumer durable manufacturers are anticipated to have a revenue spike of 11–12% this fiscal year, extending their upward trend following a robust 13% gain in the previous fiscal year. It further stated that the growing use of consumer durable finance, which bolsters the premiumisation trend and leads to improved realisations, will be the primary driver.
Additionally, after a robust demand for cooling items throughout this fiscal year’s severe summer, Christmas spending and robust house sales growth could underpin total volumes. According to the research, the operating margin would rise from 6.5% to 6.8% this fiscal year due to stable raw material costs and improved operational leverage. However, it will still be below pre-pandemic levels because of fierce competition.
Consumer durable manufacturers will invest in introducing new features that provide customers with a unique value proposition, even if the overall capital expenditure (capex) for this fiscal year will be comparable to that of the previous fiscal year. According to the report’s conclusions, players’ credit profiles will be supported by robust cash creation and a healthy liquid surplus, which will reduce dependency on external loans. To publish the results, CRISIL Ratings examined eight manufacturers of consumer durable, which together accounted for 55–60% of the market in terms of value.
Director of CRISIL Ratings Limited Shounak Chakravarty stated: “High-value premium purchases are becoming more accessible and affordable due to the growing use of simple financing options like credit card loans, buy-now-pay-later plans, and free equated monthly instalments (EMIs).” After nearly doubling over the previous four years, loans falling under this category are predicted to expand by 18–20% this fiscal year. Rising ambitions, changing lifestyles, and increased affordability are all contributing to the premiumisation trend, which is expected to boost the consumer durable sector’s sales by 11% to 12% this fiscal year and the following.
Demand for consumer durable items compatible with smart homes, have Internet of Things (IoT) capabilities, and integrate seamlessly with mobile devices has been steadily increasing. Additionally, the market for larger capacity appliances is still growing faster than that of entry-level models.
According to the survey, the demand for refrigerators with a greater capacity is rising as a result of shifting purchasing habits and the increased availability of frozen food. Sales of washing machines with larger capacities are also being driven by the growing trend of weekend washing, which is a result of the growing percentage of the working population. The desire for larger screen TVs is being driven by the closing price difference between 55+ inch and 40-43 inch displays, which is helping players increase their average product realisations.
“Healthy revenue growth and range-bound raw material prices (~70% of overall cost) will help players improve their operating profitability this fiscal year and next,” stated Prateek Kasera, Team Leader, CRISIL Ratings Limited. Due to fierce competition in the market, which forces businesses to provide bigger discounts to preserve market share, the amount of improvement will be restricted to 30 to 50 basis points (bps) every fiscal year. Players will also be concentrating on launching items with improved and unique features to surpass the competition.
According to CRISIL, the bulk of this fiscal year’s capital expenditures (between Rs 1,800 and Rs 2,000 crore) would be used to improve the capacity to create cutting-edge IoT-enabled smart gadgets. Good accruals and substantial liquid surpluses (more than Rs 4,500 crore as of March 31, 2024) will strengthen participants’ credit profiles and guarantee that debt levels stay low. It said that the degree of competition in the industry, possible regulatory moves that would limit cheap financing schemes, and price volatility of important raw materials like steel, copper, and aluminium will all be monitored going forward.
