Unseasonal rains in most parts of the country delayed the onset of summer, dashing the hopes of air-conditioner (AC) makers who had stocked up in anticipation of a repeat of last year’s bumper sales.
Manufacturers such as Voltas, Blue Star, and Havells are now recalibrating expectations for the first quarter, dialling down growth expectations amid erratic weather patterns observed in March and April.
Last year, surging temperatures caught room AC and water cooler makers off guard, leading to a severe supply crunch and an estimated shortfall of 4-5 million AC units. This year, however, manufacturers are warning of an inventory glut across most brands, leaving little room for price hikes or margin expansion.
"April had not been a month which delivered in line with that outlook. The first problem was in March, when materials were lifted in significant quantities, which resulted in, in my estimate, more than 4 million units in the market. In my view, it was anywhere between 1.5 million and 2 million units more inventory than what should have been there," said Blue Star managing director B Thiagarajan.
While companies reported strong March-quarter results, driven by robust demand for cooling solutions, their cautious outlook for the June quarter spooked investors and triggered a sell-off. Voltas Ltd, the Tata group's AC and engineering services firm, said that while January and February saw encouraging trends, weather disruptions in March and April hit secondary and tertiary sales.
"It's very difficult to give you any kind of guidance as to what kind of percentage growth we will be able to achieve," said Pradeep Bakshi, chief executive officer and managing director of Voltas.
Hopes of extended summer
Companies are now hoping that a spike in temperatures after mid-May will trigger a surge in demand, helping them meet their full-year growth targets.
"The initial few days have been a bit challenging because summers are setting a bit late in most part of the country. However, we are confident that the last few days of summer are picking up, and we will probably gain from the extended summer. Double-digit growth is definitely going to be there, but it's difficult to say whether it is going to be 15 percent or 20 percent. It depends on the season," Bakshi said in a post earnings call with analysts on May 8.
Blue Star concurred, stating that April growth fell short of expectations. For FY26, Blue Star sees 7.5 percent growth for the commercial air-conditioning business and an 8.5 percent growth for room AC and commercial refrigeration. "We will attempt to take it to 9 percent, though that will be quite difficult, especially if the summer isn't strong. We want to grow faster than the market, but we weren’t satisfied with our room air conditioner performance in Q1," said Thiagarajan.
Havells, which sells ACs under the Lloyd brand, said that slower consumer offtake in March and April is likely to impact first-quarter primary sales, even though channel stocking was strong earlier in anticipation of a hot summer.
Discounts on hold
Companies are banking on an extended summer to revive sales in May and June. While unsold inventory remains a concern, most manufacturers are holding off on discounts for now, though some see competitive actions to protect market share.
“The industry isn’t at a point of desperation yet, but if demand remains muted, we will rather manage the inventory than try to play with the prices. There could be some schemes in order to keep your market share,” said Thiagarajan.
"At the end of the day, summer will be there, maybe it is a bit delayed, and hopefully, it is going to be a longer one. So, I don't think it is appropriate to talk about discounting at this moment. And as of now, nobody has resorted to that particular discounting element," said Bakshi. The companies are also not looking at initiating price hikes.
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