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Revenue of organised electrical, kitchen appliances industry to grow by 8-10 pc this fiscal: Report

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According to a report, it is expected that the revenue of organised electrical and kitchen appliances industry will grow 8-10 per cent in this financial year

Mumbai: With growing consumer preference for branded products, the revenue of organised electrical and kitchen appliances industry is expected to grow 8-10 per cent in this financial year, a report said on Monday.

This 8-10 per cent revenue growth expected during this fiscal will also be supported by increasing usage of smart technologies and similar buying behaviour among rural and urban consumers towards such products, according to a report by Crisil Ratings.

The report further stated that the implementation of the Goods and Services Tax (GST) in July 2017 helped the organised sector manufacturers 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, it noted.

“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,” Crisil Ratings Senior Director Mohit Makhija said.

The industry did not face material disruption during the second Covid-19 wave, in contrast to the first, said the report.

The resilience is underlined by limited cyclicality in demand and relatively smaller ticket sizes of purchases compared with consumer durables, it stated.

Even as prices of key raw materials like copper, aluminium, steel and polypropylene surged during the last fiscal, stable demand enabled companies to pass on increases in raw material prices to a large extent, it said.

“Electrical appliances makers increased product prices by 12-14 per cent last fiscal, limiting the impact on operating profitability. This fiscal, too, operating margin is expected to see a marginal decline of 50 bps (basis points) despite elevated input prices, highlighting stable demand and ability of players to pass on increased input costs. Furthermore, deleverage balance sheets and improved liquidity position will support credit profile of players,” Crisil Ratings Director Anand Kulkarni said.

Liquidity (cash and cash equivalents) of the players is estimated to be above Rs 4,000 crore this fiscal compared with Rs 3,000 crore four years ago, it added.

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