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Photo: Hindustan Times
Photo: Hindustan Times

Potential market share gains for Voltas after AC import ban

Big firms largely import compressors and refrigerants, not the entire unit, so they won’t see a huge impact

Shares of Voltas Ltd rose more than 4% on Friday on NSE. One reason for the optimism is that the government’s ban on import of air conditioners (ACs) with refrigerants is expected to lead to small market share gains for bigger companies engaged in the AC business. Further, this import ban is not expected to have a big impact on large listed companies such as Voltas, Blue Star and Havells (Lloyd). That’s because these companies do not import full AC units, said analysts.

At the same time, shares of Amber Enterprises India Ltd touched a new 52-week high, closing the day with 9% gain on expectations the AC import ban will boost demand for the company.

Analysts from Jefferies India Pvt. Ltd said in a 15 October report: “Major players in India such as Voltas/ Blue Star primarily import compressors and refrigerants versus the entire unit and will not see a material impact."

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Smaller firms which import the entire AC unit are likely to be adversely affected. This, in turn, may lead to some market share gains for the bigger players. “Value segment AC players like Voltas/LG/Samsung could see some marginal market share gains," points out Jefferies.

After Friday’s gain, the Voltas stock is about 4% below its pre-covid highs seen in February. This isn’t too bad considering the pandemic-led demand disruptions the industry has faced. Voltas’ June quarter results were better than expectations with its unitary cooling products (UCP) segment witnessing market share and margin gains. As such, the stock’s valuations at around 34 times estimated earnings for FY22 suggest investors are factoring in these positives. It also remains to be seen if the company is able to deliver strong results after the June quarter as well.

Meanwhile, commenting on Amber Enterprises, Harshit Kapadia, analyst at Elara Securities (India) Pvt. Ltd, said, “This is a positive move for domestic OEMs (original equipment manufacturers) such as Amber (listed), E Durables (unlisted), etc. as branded AC companies (40+ brands in market) largely small and regional brands are likely to outsource to domestic OEMs." “Government’s move to prohibit import of ACs with refrigerant clearly states its strong intent to promote domestic manufacturing in electronics," Kapadia said.

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