Consumer durable firms set to hike product prices as rupee slides

Consumer electronics firms expect to raise prices by up to 10% as the rupee weakens and input costs rise, while food companies watch the currency closely before adjusting prices

As the rupee has been on a downward slide and crossed 90 a dollar, consumer electronics firms are looking to raise prices of products ranging from air conditioners (ACs) to television panels up to 10 per cent. 

 

Makers of consumer durables too are experiencing a sharp increase in the cost of raw materials such as memory chips and commodities. 

 

Food companies, however, are still in wait-and-watch mode as they closely track the movement of the currency as they are still holding on to inventory. 

 

“Makers of durables are affected by sustained currency depreciation, high commodity costs, and a scheduled changeover in the energy regime, which cumulatively will lead to a significant cost increase in cooling categories, with ACs being most affected. In the immediate context, the price increase linked to the changeover, 5-7 per cent for ACs and 3-5 per cent for refrigerators, looks likely.  We will aim to hold off the commodity-linked price increase and monitor the impact over next quarter,” Kamal Nandi, business head and executive vice-president (appliances business), Godrej Enterprises group, told Business Standard. 

Contract manufacturers too are looking at price increases.

 

“While domestic-market policies are supportive of demand, depreciation in the rupee plays spoilsport and may neutralise the impact of the reduction in prices due to lowering rates of goods and services tax,” said Avneet Marwah, chief executive officer, Super Plastronics Pvt Ltd. He added the company would increase prices 7-10 per cent. 

 

Marwah referred to a 400 per cent increase in prices of memory chips, seen over the last three months. It has pushed up prices of finished products. 

 

The sector is largely dependent on imports from China for components, which are used in manufacturing consumer durables and appliances. 

 

“The Indian electronics market, from durables to small appliances, is largely dependent on imports, most of which are from China. If the trend of the fall in the rupee continues it will lead to an almost 5 per cent impact on the bill of material costs,” an industry executive told Business Standard.

 

The executive went on to add that such an increase in input costs will not be possible for brands to absorb, thus forcing them to raise prices by 8-10 per cent in the coming future, provided the trend persists.

 

Edible oil major AWL Agri Business (formerly known as Adani Wilmar) is sitting on at least a week’s inventories, due to which it will not immediately look at increasing prices of its packaged edible oils. 

 

“If the rupee stays over ₹90 a dollar after a week, then we will have to consider increasing prices. If it corrects, we will not make any changes,” said Angshu Mallick, executive deputy chairman. 

 

For ethnic snacks maker Bikaji Foods, the impact won’t be felt immediately.

 

“We don’t just use palm oil and are hedged for the coming couple of weeks. If rupee depreciation continues, we will not see an impact on the bottom line in the near future,” said Manoj Verma, chief operating officer.

 

Even after the hedging period is over, the impact on the cost of goods sold would be less than 1 per cent, he said, which can be easily managed and won’t have a sizeable impact on margins.

 

Another company making fast-moving consumer goods said the impact will not be felt immediately because commodities had been bought in advance.