A short summer, prolonged monsoon and deferred buying in anticipation of the goods and services tax (GST) cuts have weighed heavily on the makers of air conditioners and refrigerators, which are grappling with unsold inventory, company executives said.
The inventory glut is particularly concerning, as companies have to compulsarily sell products under the new rating norms for January 1. From 2026 onwards, the Bureau of Energy Efficiency (BEE) is implementing stricter, revised star rating standards for several appliances, including refrigerators, ceiling fans, air conditioners, deep freezers, and domestic LPG stoves. The new norms raise the energy efficiency benchmarks, meaning that many products will receive a lower star rating than they held under the previous standards.
In quarterly post-earnings calls, executives pointed out elevated inventory levels across channels, cautioning that there is already enough stock in the field that must be liquidated before fresh production picks up.
What companies are saying
For market leader Blue Star, it is particularly daunting, as its inventory days climbed to 65 days, up from a normal level of 34 days in the same period last year. Inventory days measure how long, on average, it takes a company to sell the inventory it holds.
Blue Star also flagged that dealers’ working capital constraints could limit their ability to take on new products in the coming quarter, adding to the pressure on manufacturers to manage supply carefully. The company's unitary cooling products (UCP) segment, which includes room airconditioning sales, declined 10 percent year on year (YoY) during the second quarter.
Rival Havells, which operates across the electrical infrastructure and home consumer appliance markets, with its Lloyd brand being central to the white goods category, also flagged the same issue.
"Inventory levels are at a higher level at the end of the second quarter, particularly air conditioning inventory. It is higher than even fans," said Havells managing director Anil Rai Gupta.
Second summer fails
Although the revised GST rates lifted sales in September, it still stays sub-par for the electronics consumer durables segment, according to analysts. This comes as the so-called “second summer” which is a brief spike in October demand, driven by post-monsoon heat, failed to materialise, with rains lingering across large parts of the country and dampening sales.
"There is usually a small second summer, which, this time, did not pan out. And that's why I said in the beginning that we see a muted number in October also," said Vishal Chadha, chief operating officer, Bajaj Electricals.
Manufacturers usually begin building inventory from December to prepare for the summer season. But this year, with high stocks already lying with both companies and dealers, production is being tightly regulated to ensure whatever is made can be sold. Dealers must liquidate existing inventory before summer, while manufacturers also need to start producing new models with updated energy labels.
"I doubt, at this moment, going by what is happening in the market, and considering the inventory levels of room air conditioners that are in the market, one would think that if we close the year with industry being flat (being flat? Check sentence), we should be very happy. I don't think we will be able to grow over the previous year at all, given that it was a huge growth year," Blue Star managing director B Thiagarajan had told analysts earlier this month.
Bureau of Energy Efficiency challenge
Liquidating the old inventory ahead of the revised BEE (Bureau of Energy Efficiency ) ratings is crucial as manufacturers will need to re-design and re-label their current products to match the enhanced rating standards.
"If the December inventory levels don't come down, we could see the continuing bottom in the company's value. That's how it's going to be," said Nikhil Sohoni, chief financial officer, Blue Star.
Companies are looking to pocket more sales in the third quarter while also leverage on the summer pre-buying.
"The channel can sell that inventory to the consumers in the coming quarter as well. But the manufacturers will limit their production to that extent as it can be liquidated during the third quarter. That's why I'm saying that the inventory, at least at the manufacturer level, will normalise by the end of the quarter," said Gupta.
Meanwhile, Godrej Appliances flag optimism in clearing the inventory citing robust demand from consumers.
"During this transition phase of the new BEE star rating norms, our key focus has been on driving higher festive and now wedding related sales to ensure a smooth phase-out of existing inventory. Our trade partners are also optimizing this period by offering attractive pricing on products with the current star ratings, which has helped accelerate sell-outs ahead of the new norms coming into effect," said Kamal Nandi, Business Head & EVP at Appliances Business of Godrej Enterprises Group.
"We don’t foresee liquidation pressure in the quarter. Thanks to good growth, our channel stock pipelines are in control. Dealer confidence remains high, and we anticipate steady offtakes as partners continue to push sales in anticipation of higher market operating prices under the new star ratings," Nandi added.
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