Here’s what could offset Voltas’ higher brand equity

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Published: June 22, 2016 6:07:35 AM

Voltas management remains confident of maintaining its leadership in the room AC market despite intensifying competition.

voltasHowever, bulk sourcing through competitive bidding would partially offset Voltas’ advantage of higher brand equity and larger distribution network. (Image Source: Website)

Voltas management remains confident of maintaining its leadership in the room AC market despite intensifying competition. The company is also not much worried on EESL’s plan to source and supply efficient ACs even though it could partially nullify advantages of brand recall and large distribution that drives Voltas’ current 21% market share. In the projects business, recovery in margins would be gradual over FY16-19, linked more to pickup in pace of execution that is yet to fructify. Order inflow visibility is yet to improve significantly both in India and overseas. We cut FY17/18ii EPS by 2%.

A hot 2016 summer combined with a low base of 2015 means that industry growth in FY17 would be robust. Medium-term growth can also sustain at 15%, led by increasing penetration. However, competition is increasing from existing players as well as new entrants. Voltas’ management is relying on strong brand and extensive reach/distribution to maintain leadership. At the same time, focus remains on maintaining healthy returns in the business rather than just leadership.

EESL (Energy Efficiency Services Limited,) has plans to sell efficient inverter ACs to reduce overall power demand in the country. However, bulk sourcing through competitive bidding would partially offset Voltas’ advantage of higher brand equity and larger distribution network.

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