NEW DELHI
The consumer durables sector is set for 8-10 per cent revenue growth in FY24, supported by premiumisation and steady growth in urban demand. This will be on the back of a healthy volume-led, post-pandemic growth of 18 per cent last fiscal. Operating profitability will also improve this fiscal due to softening of raw material prices, reversing two years of contraction but it will still remain below the pre-pandemic level, amid intense competition.
Some examples of premiumisation are large-screen TVs with smart features and inverter technology-based air conditioners that are more energy efficient. The demand for premium appliances is expected to gain traction, playing out in three ways, suggests Mohit Makhija, Senior Director, CRISIL Ratings. First, rising demand for appliances with smart technologies that integrate seamlessly with other home appliances. The second way is up-trading to higher capacity/sizes at limited incremental cost and third, efficient appliances that lower the operating costs. Appliances such as air conditioners and television (TV) sets will benefit more due to this trend, a CRISIL Ratings analysis of eight companies accounting for around half of the market in value terms, indicates.
Demand will also be fuelled by a near 67 per cent growth in residential real estate area sold in the top six cities over the past two years. Improved residential real estate sales typically trigger demand for appliances after a lag, which is likely to play out this fiscal.
On the other hand, demand for non-premium or basic appliances will remain modest. Demand for such products is typically driven by rural or semi-urban areas and purchasing power of consumers in these areas will be affected by high inflation and the impact of erratic monsoon on income levels.
Credit profiles will remain stable, backed by strong balance sheets, despite