AC Industry is going to grow at a rapid pace in the next 4-5 years: Pradeep Bakshi, Voltas

Pradeep Bakshi, COO, Voltas, talks to ET Now about the state of Indian Air Conditioning industry and mentions how the price of raw material has increased but the cut-throat competition has kept the price in check.

Edited excerpts:

What is in store for Indian companies in summer of 2017 and the market which has become hyper-competitive now?
Indian AC industry is poised for a big growth in the years to come because Indian industry is very less penetrated as far as AC is concerned. It is something 3 per cent or 4 per cent and it is cluttered with almost all the multinationals and domestic players with more than 20-25 players already there.

Summers is also setting in while at this time it is a bit delayed. In February end or March beginning there was a bit of a summer we thought probably summers are setting in then in between 15-20 days again the winters came back and now last four-five days we have been seeing across the country there are heat waves starting so hopefully and we have as per the if we were to believe the weather forecast they have been saying that April is going to be very very scorching summers and in case that happens April-May we would get good summers and this as I said in the beginning industry is poised for a big growth in the coming months.

Are you confident that you are going to maintain your top market leadership position at 21 per cent; With GST, do you sense that market share for players like you is only bound to increase in the next few months? We are market leaders for more than five years continuously right from 2011 onwards if you look at and our market share as of end of this year it is hovering around 22 per cent on an average and while new entrants are coming in, competition is hotting up but as I said there is enough of scope and space in this industry.

It is least penetrated even if you look at other neighbouring countries and all China, for example, has more than 55 per cent penetration as against our 3-4 per cent so there is a scope and we have been continuously doing very well for ourselves. We have introduced long and wide range of our products including the air conditioners and air coolers even DC invertors.

We are trying to offer all kinds of solution for our consumers and I am confident that we will be able to maintain our leadership position despite all source of competition.

What is your understanding of pricing in the air conditioning market, could there be a price war also in the summer season?
Commodities have been playing very adversely. If you look at all the contents of ACs, copper, aluminium or steel all of them have gone through the roof in last few months. All these metals have gone up by 20 to 25 per cent minimum and therefore there is a bit of a pressure on the margins as well as temptation to increase prices.,

However, competition is also getting stiffer and there are new technologies which are coming up. DC inverter is another category which is growing very fast and all sorts of gimmicks are being played by all the brands actually to have a larger share in the pie.

So there is competition hotting up same time there is a reverse pressure from the commodity price increase and therefore it is very difficult to sustain that kind of a pressure at this juncture and there is a temptation always but we have been right now trying to do bring about lot of R&D and value engineering in our products so that we are able to sustain the pricing and we are able to offer best of our products and services to our consumers for now at the same prices unless until there are greater pressure which may become difficult to sustain but as of now we have been holding back on the price increase.

So just yes or no does it seem like you could see a 15 per cent CAGR for room AC market or segment rather?
If you look at the industry in the year 2016 would have grown by about 10-12 per cent and I would expect and believe that industry is going to continue to grow in next four to five years with the similar kind of CAGR of about 15 per cent if not more and in particular if we talk about 2017 in case summers are going to be as scorcher and as extended one, we will have industries seeing a growth of minimum 15 per cent to 20 per cent that is what is being anticipated.