Deleveraging, steady demand augur well for credit profiles in the medium term
Revenue of the organised electrical and kitchen appliances1 industry is expected to grow 8-10% this fiscal, driven by greater consumer preference for branded products. This will also be supported by increasing usage of smart technologies, and similar buying behaviour among rural and urban consumers towards such products.
The implementation of the Goods and Services Tax in July 2017 helped manufacturers in the organised sector to streamline their supply chains, operations, and distribution networks to benefit from input-tax credits, cost-efficient logistics, and uniform taxation of final products across states.
These companies have also deleveraged consistently over the past four fiscals and improved their balance sheets, which will bolster their credit profiles over the medium term.
A CRISIL Ratings analysis of eight companies2, which account for around half of the ~Rs 62,000 crore industry, indicates as much.
Says Mohit Makhija, Senior Director, CRISIL Ratings, “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. The industry’s revenue growth this fiscal will be driven by steady demand from rural and urban segments.”