“Our channel checks suggest that Consumer Durables retailers saw fewer footfalls post the Holi festival, as many regions had unseasonal rains,” said analysts at BNP Paribas.

Summer sales are crucial, and they set the tone for annual growth expectations for consumer durables, especially cooling products, during a year. Festival demand during the December quarter also lagged expectations, resulting in high channel Inventory. The changes in energy ratings applicable from 1 January, further meant that fans and other products saw impact on sales as these products became costlier. Thus, all efforts have been on liquidation of existing stocks and adding fresh inventory in the March quarter.

February and early March had been, slightly encouraging with dealers starting to build AC inventory levels, and channel partners turning optimistic of a demand revival for seasonal products like ACs and refrigerators, said analysts. However, March as a whole saw subdued sales as rains lashed several parts of the country in the second half of the month.

“We spoke to 9-10 dealers/retailers across regions. Most dealers have cited improved demand for fans, AC and coolers in February and early March. However, unseasonal rains in March have dampened offtake, especially in ACs,” said analysts at Jefferies India Pvt. Ltd in a 28 March report.

Now, it remains wait-and -watch for sales to pick up, said Harshit Kapadia, analyst at Elara Securities (India) Pvt. Ltd. Sales of consumer durables, electricals and even smaller appliances wasn’t very encouraging earlier during the quarter, too, with sales growth likely in single digits or at best in early double digits in certain segments. The much-hoped for revival in sales in March didn’t happen.

The challenges are high for larger ticket size consumer durables such as ACs, refrigerators and even coolers as inflation-led price hikes have made them costlier, impacting sales. Interest rates, too, have risen sharply, putting further pressure on sales. Even for manufacturers, a higher interest rate environment isn’t favourable as it inflates working capital costs with higher interest outgo.

Demand recovery is also vital for exhausting high-channel stocks, and it is only after liquidation of inventories that primary sales (from manufacturers to dealers) can see an increase now.

ACs and air coolers have seen channel filling ahead of summer; inventory is now higher than normal, the analysts at Jefferies said. Normal inventory is considered to be 3-4 weeks.

Analysts at JM Financial Institutional equities said, “For ACs, primary sales is expected to witness growth in 4Q23 given pre-stocking by dealers (80- 90 days) in anticipation of strong summer, secondary sales is expected to pick up from mid-March, but due to unseasonal rains in North and West India has slowed momentum.”

Pickup in sales and liquidation of inventory is also necessary for producers to be able to take more price hikes, pointed out Kapadia. Though prices have been raised continuously, it has been gradual and associated with energy rating changes.

More price improvement is necessary to help improve margins. Further higher inventory also leads to higher discounts.

Analysts at Jefferies highlight that discounts in the AC segment are now higher than 6 months back. Though the models have changed in the AC segment, normalization and liquidation of inventory thereby is necessary.

The aggressive strategies to gain market share in AC segment too may also be leading to aggressive pricing and discounts. Lloyds, Daiking and Voltas are following aggressive strategies to gain market share. Even aggressive to gain market share as per Kapadia. Even analysts at Jefferies point out that Havells (Lloyd) is emerging as an aggressive player in ACs, with avg prices a tad lower than peers for similar SKUs. Also, Air Coolers is a highly competitive market, with the presence of many local manufacturers. Though Symphony is the market leader, and Crompton Greaves Consumer Electricals, Havells, V Guard are also key manufacturers.

Competition is also rising in the Appliances segment and post Butterfly acquisition, Crompton is now focusing on appliances’ portfolio, where Havells is an existing key manufacturer. Polycab, V Guard etc are enhancing their penetration in appliances.

Polycab is giving strong competition to Havells in cables and wires, by virtue of the former’s deepening distribution, highlighted Jefferies. Competition is higher in Pumps, especially in Agri pumps and Crompton has slashed Pumps prices by 5-10%, coupled with launching new SKUs in pumps – most sales are in the residential category, added Jefferies.