MOSL: INDIA DURABLES-Restocking picks up in August-Inverter ACs constitute 35% of AC sales in April-June quarter

​INDIA DURABLES: Restocking picks up in August; Inverter ACs constitute 35% of AC sales in April-June quarter

We met one of the largest electronics retail chains in North and West India. Our key takeaways:

Restocking picks up in August post a weak July

• ​With impending GST implementation from July, the electronics retail chain initiated a discount sale (10-12% margin v/s the normal 20%) in mid-May to clear old inventory. Strong demand helped it to clear old stock by mid-June; for the industry, discount sales continued well into end-June.
  
• End-June to early July, manufacturers had stopped production due to GST transition. This, along with weak secondary sales in July/early-August, led to slow restocking; however, by mid-August restocking was complete in most retail outlets. Restocking for washing machines, refrigerators and LED TVs led to inventory normalizing. However, as the peak summer is behind, ACs and air coolers would see meaningful restocking only in September (before the festive season).
  
• Air conditioners: No price hikes have been taken by any brand post GST. Price hikes could come through before the festive season starting mid-September.
  
• Washing machines / refrigerators: There have been price hikes of INR150-500 across brands and price ranges.
  

Inverter ACs at 35% of sales in May-June; Voltas has a low share

• ​Inverter ACs constituted ~35% of AC sales in May-June. Bestselling brands are Daikin, LG and Panasonic. Daikin inverter (1.5-ton, 3-star) ACs were sold at INR36,000/unit, in line with LG. Given the unanticipated surge in demand in June, LG had run out of stock which benefited Daikin and Panasonic.
  
• Voltas' share in inverter ACs is still quite low (<5%). It has launched an installation scheme at INR499 for inverter ACs v/s INR1,200-1,500 for fixed-speed ACs to promote its inverter range.
  
• The share of inverter ACs should increase significantly post the ratings change from January 2018.