Voltas forays into air cooler business

Muted growth in the air conditioner (AC) business over the last five years has forced Voltas, the largest AC manufacturer in the country, to enter the air cooler business.

Voltas, a Rs 9,500-crore company owned by the Tata Group, announced the launch of four models of air coolers on Tuesday. The coolers are in the 18-70 litre capacity range and are priced between Rs 8,000 and 15,000.

The company plans to launch another six models within a year, some of which would be in the Rs 5,000-6,000 price range. Pradeep Bakshi, president and chief operating officer, Voltas, said in a press conference that organised market accounts for just 30% of the total air cooler market. The company expects the organised sector to grow at 20-30% in the next five years. "Our target is to be one of the top three air cooler manufacturers in the country," he said.

The size of the air cooler market is five million units, out of which 1.5 million units are manufactured by the organised sector. Symphony is the market leader in the air cooler segment with sales of 600,000 units in 2013-14, as shown in the company's annual report.

The company expects to sell 40,000 coolers this year and 100,000 units next year.

"Since our launch got delayed and we are already in the middle of summer, we do not expect large sales volume this year. However, next year we expect sales to be around 100,000 units," he said.

In the next three years, the company expects Rs 150 crore revenue from air cooler business. The company's trailing 12-month (to December 2014) revenue was Rs 5,164 crore. In 2013-14, it posted gross sales of Rs 5,188 crore.

Explaining the rationale for entering the air cooler business, Bakshi said that over the past five years the growth in the air conditioner business has been flat or in low single-digit.

"We have realised that prices of air conditioners have more than doubled in the past five year due to higher raw material cost. As much as 75% of the components used for manufacturing ACs are imported and rupee has depreciated from 40 a dollar to 63 a dollar during the past five years. Power tariffs have also grown during the period, making air conditioners unaffordable for many customers," he said.

According to the company, patchy summers due to frequent bouts of rains triggered by western disturbance have also impacted sales of ACs in India.

AC sales volume of Voltas grew 4% and 6.5% in 2012-13 and 2013-14, respectively.