Voltas’s woes have no quick fix, and competition is heating up

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₹3,360 crore. Growth can be attributed to the decent performance of its unitary cooling products (UCP) and electro mechanical product and services (EMPS) businesses. The UCP segment—a major revenue generator—comprising room air conditioner (RAC) and other products, clocked 16% revenue growth last quarter.

Thanks to the aggressive sales push, Voltas achieved 15% volume growth in the RAC segment, higher than the overall industry growth, the management said in the earnings call. However, its market share in RAC continued to drop in Q1 to 20.6% with the competitive intensity heating up. This could act as a headwind.

“Although Voltas continues to focus on recovering its lost market share (additional thrust on south and east regions), but we believe overall share recovery will be tough as well as slower," said analysts at HDFC Securities Ltd. The chase for volumes among consumer durables makers is likely to continue as companies add capacity to benefit from the PLI scheme, thus keeping competitive pressures elevated. What is more, Q2 is a seasonally weak quarter for the consumer durables industry.

The management expects dem-and to revive in a run-up to the festival season, but cautioned that RAC industry margin is expected to be in single-digits. “The top three-four companies in the RAC segment are opting for steep price discounts/schemes to push sales, so Voltas’s ongoing market share loss is a negative. The management is betting on the upcoming festive season, but with competitors’ aggressive pricing strategies the downside risk to market share in RAC remains," says Praveen Sahay, analyst at Prabhudas Lilladher.