Voltas sees growth picking up but margin concerns remain

The growth in the AC segment was driven by sales of inverter air conditioners, which augurs well for the company’s margins. Voltas occupies the top position in the room air conditioner business with a market share of 25.9% as of August, the company highlighted. segment revenue grew 34% and was ₹1,007 crores. Segment profit up 19% year-on-year ₹102 crores.

However, the Electro-Mechanical Projects and Services (Projects) segment reported a softer performance, which was slightly disappointing. Segment revenue for the quarter was ₹536 crores, less than ₹744 crore in the year-ago period. The project business is facing execution challenges with delays in certification of projects. Segment’s carry-forward order book ₹5,803 crore, however, led to some optimism with hopes of a speedy recovery. The company remains selective and is taking only projects with good margins.” Analysts at HDFC Securities Ltd said recovery in project business is likely in the second half of FY22, both in terms of orders and execution.

Meanwhile, rising commodity costs are adding to the challenges for manufacturers like Voltas. Though the company did hike some prices in October, it remains to be seen whether they were substantial. Analysts say trade channels have stocked up on inventory and also secured raw materials due to supply chain uncertainties. Analysts, however, added that “margins could see near-term pressure”.

People at Yes Securities also feel that in the current hyper-competitive environment it will be difficult to gain further market share and this needs to be monitored.

The company is doing well in its white-goods joint venture. Analysts at Yes Securities said its Voltbeck JV has started gaining market prominence and local production is expected to increase efficiency and reduce losses.