The room air-conditioner (RAC) segment is poised for a decent show in the June quarter (Q1FY27). April and May saw strong RAC demand driven by heatwaves in many parts of India. Dealers channel check by Centrum Broking showed that, in Q1FY27, within white goods, AC was the best-performing category with 40% volume growth, partly aided by a favourable base; refrigerators, washing machines, and televisions saw 10-25% growth. The delayed arrival of the south-west monsoon due to El Niño conditions, which causes high temperatures, is good for near-term RAC demand. In fact, on 21 June, Voltas said its AC sales for FY27 have surpassed 1 million units in record time (compared with nearly 2.25 million units in FY26), aided by robust demand and marketing initiatives.
India’s domestic RAC industry hit an all-time high of around 12.5-13 million units in FY25, clocking a 20–25% year-on-year growth, supported by an early and intense summer, with heatwave days rising sharply that year (see chart). However, unseasonal, above-normal rainfall and high channel inventory played spoilsport in FY26. A high base and pre-stocking in Q3FY26 ahead of the Bureau of Energy Efficiency (BEE) transition led to subdued January-February primary sales, resulting in flat year-on-year sales growth for key RAC-selling companies in Q4FY26.
Higher prices to protect margins
Companies raised prices following the revision of BEE star-rating norms in January, which negated the benefits of GST rate cuts. BEE norms are periodically updated to ensure that manufacturers adhere to higher technology-efficiency standards. Now, war-driven input cost inflation in raw materials such as copper, aluminium, and plastic, as well as freight costs, requires further price hikes to offset margin pressure. Blue Star management said that changes to BEE norms and a sharp rise in commodity prices have pushed production costs up by around 13%.
“Q4 and Q1 are crucial quarters accounting for around 70% of annual RAC sales. During March-April, pricing across the RAC industry increased by 5-12% ( ₹2,000-5,000 per unit depending on model and brand),” said Praveen Sahay, analyst at PL Capital. On average, LG Electronics, Samsung and Daikin have implemented relatively higher price hikes of 10-11% versus 6-8% by Blue Star and Voltas, but this quantum is unlikely to provide sufficient cushion against margin erosion in Q1FY27, he added.
Low penetration and premiumization trends are seen as structural demand drivers for RAC, even as it is a discretionary expenditure. So, absorption of elevated prices is crucial as high retail inflation could dent the consumer’s purchasing power. The premium and mid-premium RAC segments are witnessing relatively stronger demand, as shown by channel checks from Motilal Oswal Financial Services. In contrast, demand for entry-level products remains weaker as customers are more cautious about higher prices; some are postponing purchases while waiting for better offers, it said.
Inventory levels are expected to have normalized in Q1FY27, with the liquidation of old stock and stronger sales during peak summer. Generally, dealers tend to be cautious on inventory build-up ahead of the monsoon season. But a rising tide may not lift all boats. “Near-term performance is likely to be driven more by regional heat intensity, product mix, scheme offerings, and execution quality than by a pan-India volume upcycle,” said a Motilal Oswal report dated 24 June. So far in 2026, stock returns for most large appliance companies that sell RACs have been unimpressive. Voltas, Blue Star and Whirlpool of India down 7-10%. LG Electronics India is up 5% due to a more diversified portfolio.