ICRA forecasts 20-25% growth for Indian room air-conditioner industry in FY25

The Indian room air conditioner (RAC) industry is set for remarkable growth, with YoY sales volumes projected to increase by 20-25% to reach record levels of 12-12.5 million units in the financial year 2024-25, according to a study by ICRA. Sales are expected to grow by 10-12% in the 2025-26 fiscal year. This growth will be driven by rising temperatures, increasing demand for multiple RAC units per household, urbanization, higher disposable incomes, and favourable consumer financing options.

The domestic RAC industry has already surpassed pre-COVID peak sales volumes in the financial year 2023-24, fuelled by changing climatic conditions and favourable consumer trends, noted Senior Vice President and Co-Group Head of Corporate Ratings at ICRA Mr. Srikumar Krishnamurthy, the average number of heatwave days per year has been steadily increasing over the last three decades. The recent summer season saw a robust YoY volume growth of 40-50% for most original equipment manufacturers (OEMs). However, ICRA anticipates moderate growth to about 10-12% in the financial year 2025-26. On the supply side, domestic household RAC capacity is expected to increase by over 40% in the next three years as key OEMs and contract manufacturers rapidly expand their capacities to meet rising demand. The government's production-linked incentive (PLI) scheme for component manufacturing in the consumer durable sector has also significantly contributed to increased localization in the Indian RAC industry. ICRA's sample set of three key listed RAC brands reported a YoY revenue increase of approximately 53% in the first quarter of the current financial year, driven by strong demand during the peak season. The agency expects a healthy YoY revenue growth of about 25% for the same set this fiscal, compared to approximately 17% in the previous financial year. Despite intense competition and fluctuations in input costs, the industry's operating profit margin (OPM) is projected to expand gradually, benefiting from operating leverage.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.