While competition is high, Voltas remains well protected, says MD Menon

In an exclusive interview, Mukundan Menon, the managing director of Voltas, talks about protecting its turf in a competitive market

Voltas, a leading brand for ACs, refrigerators and washing machines, expects margins to improve from Q1FY27. Managing director Mukundan Menon, in an interview with Sharleen D’Souza, talks about protecting its turf in a competitive market while increasing the company’s share. Edited excerpts:

 

How will demand pan out given that all factors except weather are positive, and how will you manage pricing in light of the rupee-driven copper cost increases and goods and services tax (GST)-related savings. Will these offset each other enough to keep prices unchanged?

 

The big immediate positive is the 10 percentage point GST slab cut from 28 per cent to 18 per cent, which effectively translates into a 7.8 per cent reduction in consumer prices. This benefit has already been fully passed on to customers. In parallel, a new energy-labelling regime takes effect from January 1, under which manufacturers cannot produce units with the old label after that date, though sales of old-label inventory are permitted for six months, until June. Typically, trade will sell mostly old-label products for the first two months, and then migrate brand-wise to new-label products. This would be in the third or fourth month, depending on stock levels. This new energy table will itself have a pricing impact and the most popular AC categories, three-star models, will likely see a sub-5 per cent price increase. Five-star models could face a significantly higher increase of around 10 per cent, purely on account of the new efficiency norms. When set against the 7.8 per cent consumer price reduction from GST, the net impact will vary stock-keeping unit (SKU)-wise, but at an overall level, the GST cut is clearly supportive of demand. 

On the cost side, there are still pressures from rupee depreciation and higher commodity prices, particularly copper. But costs going up are a reality. The likely timeline for the revised price list will be finalised and released sometime in January. Between now and April, there will be a price increase. 

 

As the market leader in room air conditioners, how challenging is it to defend your market share amid increasing competitive pressure?

 

We are the number one brand in room air conditioners, with a market share of around 17.5 per cent, which fluctuates by about plus or minus 1 per cent on a month-on-month (M-o-M) basis. The next largest player is at around 14–15 per cent, followed by a cluster of brands with around 10–11 per cent. Beyond that, there is another group at 5–6 per cent, and then some brands with a sub-3 per cent market share. While competition is intense, there are a few key levers that work strongly in our favour. First is our distribution reach. We have one of the widest networks in the country, with close to 19,000–20,000 retail touch points selling our products. Expanding this footprint remains a priority, and we typically aim to grow it by about 10–20 per cent every year through a very structured process. Alongside this, we also have a structured plan to increase our share of business. The objective is to consistently increase our share of wallet at these counters. Being the market leader allows us to benefit from efficiencies across procurement, manufacturing, and sales and distribution. Higher volumes help absorb overheads better, resulting in meaningful cost advantages compared to competitors. With the recent GST reduction, this will be the first summer with lower GST rates. We operate firmly in the value-for-money, mass-market segment and not big in the premium end. We are particularly strong with first-time and entry-level buyers. As a result, while competitive intensity remains high, we believe our position is well protected. 

In fact, from January onwards — covering Q1, Q2, and into Q3 of the calendar year — we have already gained close to 2.5 percentage points in market share. This upward trend has been consistent and we expect it to continue through Q4 as well. By the end of Q4 FY26, our market share should rise by around 2.7-2.8 per cent from the starting point, reaching close to 18 per cent from the initial 16 per cent-plus level. This upward thrust continues with a firm commitment to defend and sustain the gained market space without allowing any drop-off.

 

When do you expect strong demand to start again?

 

Generally, the demand picks up from February in South India. There is also a fair amount of pre-buying currently happening at the channel level due to the availability of products under the old energy rating table. Since these models can be sold until June, channel partners are stocking up now to take advantage of better pricing and healthier margins. 

As a result, December should see a positive impact on primary sales. However, January is likely to witness a dip because a significant portion of demand would have already been front-loaded in December. Once February and March arrive, demand should normalise again, depending of course on how the summer shapes up. 

From a base-effect perspective, Q4 of last financial year was actually a strong quarter as the base quarter witnessed strong demand which had supply shortages in the market. This led to higher pre-buying by channel partners. Consequently, primary billings remained strong through March, and the base was not low. 

 

There is a common talk point about the weather being erratic. Does that change your production pattern as well?

 

In our case, air conditioners are a highly seasonal product. Peak demand typically begins from late February and runs through March, April, May, and June. Our billings to channel partners and their consumption generally move in parallel, with a lag of about a month. 

During these peak months, production requirements are very high, and we operate at full capacity, running three shifts. To support this, we start building inventory well in advance, beginning around November. 

This year, however, the situation was different earlier on. There was significant stock overhang both with channel partners and at our end. 

As a result, production levels from the low base of July–September have increased sharply. Compared to those months, current production is three to four times higher. When compared with the same period last year, our production is now approaching about 90 per cent of last year’s levels, even though last year we had started preparing much larger quantities much earlier in anticipation of strong demand.

 

When do you expect the pressure on margins to ease?

 

There are two parts to this. The old rating table products will continue to be under pressure on the margin front. Once the new table products come in and the summer kicks in, additional discounts and schemes will go away. Margins will start to ease from Q1 of FY27. 

 

How is ecommerce changing the channel shift for you?

 

Roughly, this category is around 8 per cent for the AC industry. And, it is similar for Voltas. It will keep moving higher gradually, because this is not a plug-and-play product. 

 

How is Voltas Beko panning out?

 

This is one area where we have performed particularly well, including in the previous quarter, in terms of market share gains. Over the last two to three years, we have consistently grown at around 30 per cent annually. This year, growth has been more subdued at about 15–20 per cent, largely because it has been a softer year for the overall appliances category. Despite that, we have continued to gain market share across several segments. 

Overall, our strategy has been to enter categories through strong value-for-money, entry-level products and then progressively migrate towards higher-value and more premium offerings.

 

What is your distribution reach for Voltas Beko?

 

Out of roughly 20,000–90,000 retail counters, we have currently leveraged only about 30 per cent of our total reach, which means there is still significant headroom for growth. We are now actively mapping each of these outlets and working to place our appliances in the remaining counters. Since these retailers already work with us, adding one more product category becomes much easier. This expansion alone represents a substantial growth opportunity, and we believe it will allow us to continue performing strongly, going forward.

 

How is it that your business-to-business (B-2-B) segment is seeing more customer addition?

 

Our commercial refrigeration business caters to two broad customer segments. One includes retailers who use refrigerators to stock and sell cold products, and the other consists of institutional/original equipment manufacturer (OEM) key accounts, which includes large institutional players. Demand in this segment is closely linked to summer intensity, and if the summer is strong, we expect this business to return to a solid growth trajectory. In ducted air conditioners, variable refrigerant flow (VRF) systems, and large heating, ventilation and AC (HVAC) solutions, we currently have a relatively lower market share and are not yet a prominent player. Recognising this, we have significantly strengthened our channel presence. The number of active channel partners has already doubled from about 150 to 300, and we plan to expand this further to around 600 over the next six months, with a strong focus on Tier-II cities. This channel expansion is a key growth lever for us. 

While several competitors already have well-established channels in this space, we are making a concerted effort to catch up. In chillers, we already have a strong position. However, in ducted and VRF systems, we are not yet among the top three players, and we intend to push aggressively. 

To support this growth, we are also expanding our product portfolio. In the chiller segment, we have added new technologies that were previously not part of our offering by entering into technology partnerships with multinational companies. 

Through these technology transfers, we will begin manufacturing large-capacity chillers used in data centres and district cooling projects. The first of these products may be introduced to the market by June next year.