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Electrical and kitchen appliances industry to report 8-10% revenue growth in FY23: Crisil

Kitchen equipment, lighting solutions for home, electric fans and coolers are now increasingly bought after careful evaluation of brands on functionality, technology, ease of use, and strong after-sales service. (Photo: iStock)Premium
Kitchen equipment, lighting solutions for home, electric fans and coolers are now increasingly bought after careful evaluation of brands on functionality, technology, ease of use, and strong after-sales service. (Photo: iStock)

The resilience is underlined by limited cyclicality in demand and relatively smaller ticket sizes of purchases compared with consumer durables. Even as prices of key raw materials--copper, aluminum, steel, and polypropylene--surged last fiscal, stable demand enabled companies to pass on increases in raw material prices to a large extent

NEW DELHI: The organised electrical and kitchen appliances industry is expected to report 8-10% growth this fiscal, driven by greater consumer preference for branded products, according to a note by Crisil Ratings.

This will also be supported by increasing usage of smart technologies and similar buying behaviour among rural and urban consumers for such products. Crisil Ratings analysed eight companies which account for around half of the 62,000 crore industry.

The pandemic boosted the usage of such products as consumers, stuck at home for longer periods, bought household appliances.

“The perception that purchase of electrical appliances is a low-involvement decision is fast changing. Kitchen equipment, lighting solutions for home, electric fans and coolers are now increasingly bought after careful evaluation of brands on functionality, technology, ease of use, and strong after-sales service. We believe increased demand for smart appliances will push manufacturers to invest in technology research and development," said Mohit Makhija, Senior Director, Crisil Ratings.

Meanwhile, analysts at Crisil said the industry did not face material disruption during the second wave of the pandemic. Additionally, most manufacturers passed on price increases in key input materials.

“The resilience is underlined by limited cyclicality in demand and relatively smaller ticket sizes of purchases compared with consumer durables. Even as prices of key raw materials—copper, aluminum, steel, and polypropylene — surged last fiscal, stable demand enabled companies to pass on increases in raw material prices to a large extent," Crisil said in the note.

Electrical appliances makers increased product prices by 12-14% last fiscal, limiting the impact on operating profitability, said Anand Kulkarni, director, Crisil Ratings. “This fiscal, too, operating margin is expected to see a marginal decline of 50 bps despite elevated input prices, highlighting stable demand and ability of players to pass on increased input costs. Furthermore, deleveraged balance sheets and improved liquidity position will support credit profile of players."

To be sure, operating margin for these companies declined by approximately 130 basis points (bps) to 11.5% last fiscal, albeit on a higher base of fiscal 2021 that had seen a significant increase aided by pent-up demand.

This fiscal, the margin is expected to moderate to 11%, but will still be higher than the historical level of 10-10.5%.

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