Market leader Voltas may hike price by 3-5% this month

Market researcher GfK-Nielsen's latest survey showed that Voltas has become the number one player in air conditioner market with largest market share.

The company tipped LG to gain the top slot. LG's volume market share in multi-brand outlets stood at 17.7% in May against 18.3% of Voltas, the survey said.

Pradeep Bakshi, executive vice president and COO, UPBG, Voltas told CNBC-TV18 that though the industry is going through a phase of slowdown, the company is gaining momentum.

"Voltas has notched certain more points over last 3-4 months. We have become the market leaders as far as secondary sales are concerned. We have gained by almost 3.5-4% over our previous market shares," he said in an interview.

Meanwhile, the consumer durables player is confident of ending this year with a minimum 15% growth. On the back escalating input costs Voltas is likely to hike price by 3-5% in July, Bakshi said.

Below is the edited transcript of Bakshi’s interview with CNBC-TV18. Also watch the accompanying video.

Q: Could you just outline for us what exactly has happened in terms of market share for Voltas? Is it true that you are up to number one now and how much incremental market share have you been able to gain over the last few months?

A: Voltas has gained momentum in last couple of months. Though industry has not done so well, but Voltas has notched certain more points over last 3-4 months. We have gained by almost 3.5-4% over our previous market shares. We have reached to 18.3% market share as far as secondary sales is concerned, the GfK-Nielsen survey which is a 3rd party survey on (multi-brand outlet counter) MBO shows this.

As far as Voltas' share is concerned, we have been leaders for almost a year. The journey began about 4-5 years back and we have gained grounds over the years, we have changed all 5 Ps of our marketing (product, price, place, promotion, people), we have done lot of work on this. Therefore we have been able to gain grounds. If we talk about in particular only about last 4-5 months our market share has grown from 14.5 to 18.3%.

We have become the market leaders as far as secondary sales are concerned. We have been leaders in primary sales for almost about a year across the country.

Sales have been pretty good as far as Voltas is concerned. In June particularly, we grew by almost 94% in AC category and overall in the first quarter we have grown by 18% for our AC category. Commercial refrigerators, deep freezers, water coolers and all these products put together we have grown by 20%. So things look quite buoyant for us during this quarter.

Q: Do you think you can maintain this 20% growth because many analysts argue that despite a market share gain, the AC segment in general is seeing sedate volume growth? In the next couple of quarters what kind of growth you think it can hold up?

A: You rightly said so because I have just now said this industry has not been doing so well and it is difficult to sustain this kind of growth. Economy is not doing well, inflation is going through the roof, and customer sentiments are down because of inflation, economic conditions and people’s increment have not been so good. 

Therefore, definitely there is a pressure on this kind of growth. However, we have slated to grow by 15% over this year. I am quite confident we should end up this year with a 15% growth minimum. 

Q: What are the margins that Voltas currently enjoys in the AC business and how much pressure do you think the margins could face because of cost escalations on account of rupee depreciation, imports etc?

A: The first quarter is just over so results are still not announced so I may not be able to exactly say as to what kind of margins have been made. You will get to see them very shortly in the month of July itself. However our margins have remained same though there is a pressure at the moment. 

We have already had a price increase in the month of January- February because commodity prices are quite fluctuating as well as fuel and dollar is appreciating against rupee.

Therefore there are cost pressures. We’ll have to have another price increase in this month of roughly around 3-5%. All in all the cost has gone up; prices have gone up by roughly 10-15% in last five-six months for the AC category.

Q: How much did unit cooling products contribute to both the top and bottom-line in the last quarter? Do you expect to see a significant improvement in that in the next one?

A: I can't comment on this because results are still not announced. But, room air conditioning division contributes to roughly around 30% of our revenues.

Q: Can you give us a sense of where you think there will be a greater push in the coming months? Are you sensing more elbow room in terms of improving prices as you just indicated or do you think volumes per se are headed for a higher trajectory?

A: Volume as well as revenue both are going to grow. It may not grow to the tune of 25-30%, but surely we will continue to grow. Industry will remain about the same or industry may witness around 10% growth this year. However, we are definitely looking at more than 15% growth over this year.