Consumer durables sector likely to witness double-digit volume growth in FY23: Crisil
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The ratings agency Crisil in its latest report has said that despite increasing margin pressure, the consumer durables sector is likely to witness a double-digit volume growth, pushing its revenue up by 15-18 percent to Rs 1 lakh crore this fiscal (FY23). It also said a 10-13 percent spike in demand/volume, which will be driven by both urban and rural segments -- led mostly by the AC and refrigerator segments, though rural demand will come into play in the second half of the fiscal.
According to the report, a 10-13 percent spike in volume will boost the top-line of the sector by 15 to 18 percent this fiscal, taking past the size of the durables industry to over Rs 1 lakh crore, which will be 3 percent above the pre-pandemic size. However, it said margins are under pressure given the run-away commodity prices of inputs like copper, aluminum, steel, and polypropylene, but not to the extent of last fiscal when it fell by 180-200 bps.
The report, however, didn't quantify how much the margins will be hit. Another reason for margin compression is the rupee depreciation, which also will shave off profitability as 45-50 percent of the raw materials are imported. But the report, based on the analysis of eight companies that account for half of the sectoral revenue, said that industry profitability will decline marginally due to higher raw material prices and adverse foreign exchange movements. However, the credit profiles of the key players remain comfortable due to their strong balance sheets, as reflected in low leverage and healthy liquidity.
