Industry Forecast

During FY17, market size for air conditioning in India was estimated at Rs 18,500 crore (US$ 2.76 billion),
while market for room air conditioners was estimated at around Rs 12,000 crore (US$ 1.79 billion).
During 2017-18, production of air conditioners in India increased 4.9 per cent year on year to 3.19
million units.

Air conditioner market in India is expected to reach 7 million units by 2020 from 5.5 million units 2018.

High income growth and rising demand for split ACs are the key growth drivers

The air conditioner market is divided into two segments i.e. residential and commercial. Residential or
room air conditioners are further sub-divided into window air conditioners and split air conditioners.
Window air conditioners are comparatively cheaper than split air conditioners; however, their market is
on a decline with the popularity of spilt ACs in the country.

The commercial segment is also catching up with the increase in demand of commercial plots, offices,
stores, factories and business apartments. This segment is subdivided into light commercial, ducted &
packaged, VRF and chillers. High wall splits, cassettes, window, and concealed duct able splits are some
of the types of light commercial air conditioners.

In the next few years, e-commerce sale of ACs will outgrow all other modes of sale of AC. Though e-
commerce currently contributes around 2% of the total sale, it is expected to contribute up to 7 per cent
of their total sales in next 2- 3 years and expect it to increase because of smartphone penetration and
availability of free data.

The penetration is AC in India is very low- only in about 4% houses. The industry size is about 50 lakh
units which is growing on an average of 10-15% every year. The air conditioning market in India is
forecast to grow at 15% CAGR over FY18-20.

Per capita GDP of India is expected to reach US$ 3,273.85 in 2023 from US$ 1,481.56 in 2012.

Non metro markets namely Vishakhapatnam, Bhopal, Vadodara, Chandigarh etc. have grown rapidly in
regard to consumption, becoming the main target markets, posing a huge potential transforming
themselves into new business centers as compared to metro cities.

Although, cost of ACs has gone up by 10 to 15 per cent in 2018 due to the implementation of new ISEER
(Indian Seasonal Energy Efficiency Ratio) ratings, makers are unfazed about it and are expecting that the
inverter technology-based units would record three times growth and contribute 30-35 per cent of the
total sales.

Change of energy efficiency tables has made the cost of acquiring an AC dearer. However, the forecast
of a hot, tropical summer, low penetration of ACs in India coupled with an increase in purchasing power
of the consumers would propel the category.
Voltas Ltd. Forecast

By making an entry into the ₹35,000-crore consumer durable segment through an equal joint venture
with Turkey-based Ardutch (a subsidiary of Arçelik, part of the Koç Group making the Beko brand),
Voltas is moving from being a single product company making air-conditioners to having a complete
consumer durable portfolio.

Voltas has to work hard towards distribution, penetration and the upcountry markets where it does not
have adequate presence, to have a significant share. While it may be a strong brand, even getting a 2-3
per cent share will be a big deal for Voltas.

But compared to the MNC brands, Voltas may have relatively lower prices with a ‘value for money’
proposition for its Voltas Beko range of consumer durables.

Voltas is expected to enter white goods such as refrigerators and washing machines which will get
imported directly from Beko’s manufacturing facilities and can ride on its existing air-conditioner
distribution.

Voltas, the market leader in room air-conditioners has held on to its position with a 23 per cent share in
multi-brand outlets. While it hopes to increase its share, it has yet to gather significant volumes in the
inverter segment.

The inverter market will grow no doubt and currently it is at 20 per cent of the air conditioning category.
the shift to the inverter category will be gradual and not overnight.

Secondary department in Q2 in upcoming years could be affected due to pre-buying in June and
prolonged monsoon.