Even though 60-70 percent of sales in the first quarter (April-June) of FY22 were washed out due to pandemic regional lockdowns and restrictions, markets – certain pockets – that have reopened appear to be on the rise. Durable items like refrigerators and washing machines are driving demand while summer items like air coolers and air conditioners are slowly declining, says Kamal Nandi, business head and executive VP at Godrej Appliances.
Godrej Appliances is part of Godrej & Boyce Manf Co Ltd.
According to Nandi, who is also president of CEAMA (the top board of consumer electronics and home appliance manufacturers), nearly 40 percent of markets across India are currently opening – either fully or with some restrictions – with better and higher visitor conversion rates. A comparison between June 2020 and June 2021 across markets that have opened shows better recoveries, mostly in large appliances.
Peak demand
Most markets are expected to fully open by the second half of June, and sales should start to recover from the second quarter (July – September). However, peak demand is expected to unfold in the third quarter (October-December) and fourth quarter (January-March) of the fiscal year.
FY21 has rallied mostly in the October-December festival season, with January-March sales due to an increase in the cost of raw materials such as copper, aluminum, steel and so on. (The 20% rise in the price of raw materials was observed in the second half of the last fiscal year, which was factored into the fourth quarter prices.)
“Initially it was a lockdown in Maharashtra, which accounts for 10 percent of the market. The industry and we at Godrej were able to sell in the first half of April, with only Maharashtra being affected. However, by the second half of the month, nearly all states were coming in for lockdowns and sales were hurt. Almost all markets were closed in May. There was some opening on June 1st and we saw strong rests in pockets, especially with large items like refrigerators and washing machines. New product launches, including premium products that we announced at the beginning of the fiscal year, are attracting sales, ”he told BusinessLine.
Best seller in summer
The April-June months of a fiscal year account for 36 percent of sales, and almost 60-70 percent (20-25 percentage points) of that has already been hit. Summer product sales are already low as the monsoons have hit either on time or “in advance” in major markets of North, South and West India. Factors such as an increase in the MSP and a good harvest will affect demand in the second half of the fiscal year.
“Recovery is expected from the second quarter onwards, as stability sets in. Aside from festival season sales, rallies will also be felt in the fourth quarter as price pressures are not expected as in the last fiscal year. Commodity prices have consolidated and we expect a downward trend around December, ”said Nandi.
Production in all production facilities has resumed and has a capacity of 40 percent. By the second half of the year (after September) capacity utilization should be 70-100 percent again, depending on demand.
“Godrej Appliances was performing maintenance on its units while production of vaccine refrigerators in the Shirwal unit and freezers in the Mohali unit, which serves the medical segment, was ongoing,” he said.
Outlook FY22
According to Nandi, an immediate sales forecast is “difficult” in view of the “change scenario”. However, with new product launches planned, the company is hoping for a faster recovery.
Godrej Appliances reported FY21 sales of ₹ 4,000 crore; and expects growth of 25 percent in FY22. “However, sales in the first quarter were hit. However, we are hoping for a significant rebound in the third and fourth quarters driven by new product launches, ”he added.
E-commerce sales account for 5-6 percent of total sales, while plans are being made to enter the small appliance segment alongside microwaves and Viroshield (a disinfection device based on UV-C technology).
