While the price erosion in LED bulbs may be a good news for customers, it will impact the topline of the consumer durables firms. A rise in competition in the market has led price crashing by 20-25 percent over the past one year.
Companies like Syska, Havells, Crompton Greaves Consumer Electricals, Bajaj Electricals, Surya Roshni and Philips operate in the lighting segment.
The impact already reflects in the revenues of the listed companies. For instance, Crompton Greaves Consumer Electricals saw a 3.9 percent year-on-year (YoY) degrowth in the lighting business in Q2FY20.
The company said that the LED portfolio continued to face price erosion driven by market forces.
Similarly, Havells saw a 2 percent degrowth for its lighting and fixtures segment to Rs 280 crore in the September quarter. The company said segments like professional luminaires had experienced a muted growth.
“With the entry of several unorganised players into the LED bulb segment, there has been a direct hit on prices for larger player. This will also impact margins in FY20,” said the chief financial officer at a mid-size electrical goods firm.
The retail lighting segment is considered to be a Rs 7,000-crore market. Here, the majority of lighting solutions are LED bulbs.
In 2015, Prime Minister Narendra Modi launched the Unnat Jeevan by Affordable LEDs and Appliances for All (UJALA) scheme to promote energy-efficient lighting in houses through light-emitting diodes or LEDs.
This led to a push for LED lights even though the prices fell to Rs 80 apiece from Rs 150-160 earlier. Now, LED prices have dropped to as low as Rs 60-65.
Industry estimates state that about 150 million CFL bulbs are produced annually compared to 450-470 million LED bulbs.
Since Q3FY19, the lighting segment has seen a degrowth for the industry. The focus on premium lighting has only shown partial results.
Even while the light prices are already low, intense competition has forced companies to engage in an all-out price war that has impacted margins. Through this move, the attempt is to gain volumes and, thereby, have higher margins.
The massive online discounts have also eroded the price further, and players have resorted to selling only multi-pack bulbs online to help bridge the revenue gap.