Cooling Off: Large Appliance Revenue Growth Slows Amid Market Challenges

Crisil Ratings projects a moderate 5-6% revenue growth for large appliance manufacturers this year, amid declining demand and higher competition. Despite this, investment in compressor capacities rises. GST cuts on ACs and TVs are expected to spur consumer demand, especially during the festive season.

Manufacturers of large appliances are bracing for a slower revenue growth of 5-6% in the current fiscal year, as the sharp 16% increase recorded last year becomes a challenging benchmark. According to Crisil Ratings, a dip in demand for cooling products in the first half, caused by an early monsoon, will be partially offset by the goods and services tax (GST) reductions on air conditioners and large televisions, just ahead of the festive season.

Falling revenue growth, coupled with mounting competition and rising raw material costs, is projected to trim operating margins by 20-40 basis points, Crisil stated recently. Nevertheless, manufacturers are not expected to shy away from escalating capital expenditure across all categories. The air conditioning segment, in particular, will witness a significant increase in investment focused on compressor production capacity, as new Bureau of Indian Standards (BIS) import regulations commence in April 2026.

Credit profiles are likely to remain manageable due to minimal reliance on debt, as per Crisil's analysis of interactions with seven large manufacturers, accounting for over half of the Rs 130,000 crore large appliances industry, which includes air conditioners, refrigerators, televisions, and washing machines.

Shounak Chakravarty, Director at Crisil Ratings, noted, "With the GST reduced to 18% for ACs and large-screen TVs, sectoral revenue—about 58% of it—will benefit, resulting in Rs 3,000-6,000 savings per unit." Chakravarty added that this could lead to product premiumisation for cost-conscious consumers. Furthermore, this price reduction is expected to bolster consumer spending ahead of the festive season, driving sales growth between 11-13% in the latter half of the year, partly through GST-related boosts.

Improved consumer sentiment is likely to drive growth across other appliance segments as well. Refrigerators, which make up 31% of the sector's income, recorded nearly flat sales in the first half, but could see low double-digit growth later, encouraged by higher demand for larger models amidst increasing frozen food consumption. The early monsoon proved beneficial for washing machines, a segment making up 11% of sector revenues, as they cater to the need for dryers.

The increasing working population and evolving washing habits, like weekend laundry, sustain the demand for fully automatic and larger-capacity washing machines, maintaining a growth rate of 7-8% as stated by Crisil. Despite subdued revenue growth forecasting, Crisil envisages companies augmenting capacities, driven by the long-term growth potential owing to the low penetration of these appliances in India. The report also cautions on price volatility in key raw materials like steel, copper, and aluminium, alongside the level of competitive pressure in the industry.

(With inputs from agencies.)