Voltas pins recovery hopes on festive demand after Q1 revenue slump

Voltas Q1 revenue fell 20% on unseasonal rains and weaker AC sales, with margins hit; management expects festive season and "second summer" demand to aid recovery

Voltas’ revenues for the April-June quarter (Q1) of FY26 were impacted badly by unseasonal rains. A leader in domestic air conditioners (ACs), the company’s revenues dipped 20 per cent year-on-year (Y-o-Y) to ₹3,940 crore. Earnings before interest, taxes, depreciation, and amortisation (Ebitda) declined 58 per cent Y-o-Y to ₹180 crore and the margin contracted 410 bp Y-o-Y to 4.5 per cent. PAT declined 58 per cent Y-o-Y to ₹140 crore. Depreciation and interest costs increased 38 per cent and 39 per cent Y-o-Y respectively.

 

Management of this Tata group home appliances maker highlighted that growth momentum turned adverse in May. The rains led to a drop in demand for ACs. Voltas said it believes this is temporary, and it is taking corrective actions, like cost-control measures, inventory realignment, and production adjustment. Management remains cautiously optimistic about a recovery in the upcoming festive season. It expects to close FY26 flat or with moderate growth.

 

Unitary Cooling Product (UCP) segment’s revenue declined 25 per cent Y-o-Y to ₹2,870 crore, and earnings before interest and tax (Ebit) declined 68 per cent Y-o-Y to ₹100 crore. The Ebit margin was down 500 bp Y-o-Y to 3.6 per cent. The Electro-Mechanical Projects and Services (EMPS) revenue dipped 3 per cent Y-o-Y to ₹920 crore and Ebit declined 27 per cent Y-o-Y to ₹49 crore. Ebit margin contracted 180 bp to 5 per cent. The PES (product and engineering services) revenue was down 16 per cent Y-o-Y to ₹140 crore, and Ebit decreased 11 per cent Y-o-Y to ₹40 crore. But Ebit margin increased 170 per cent Y-o-Y to 30 per cent.

 

The company’s market share in room ACs stood at 17.8 per cent for Q1FY26 vs 19.5 per cent in Q1FY25, and was 19.3 per cent in June ’25 vs 21.1 per cent in June ’24-exit. The company retains leadership but lost market share. The order book was ₹6,200 crore as of June ’25, with strong revenue visibility. Management said it would bid only for projects with assured margins and secured funding. 

 

Voltas Beko sustained growth momentum, recording a 33 per cent Y-o-Y increase in volumes, and gains in market share in washing machine segments, while the refrigerator category also improved its standing in direct cool models. While the business remains loss-making, gross margin is improving. The goal is to reach 10 per cent market share in washing machines.

 

The global economic backdrop is mixed, with the IMF projecting 3 per cent growth in 2025, weighed down by geopolitical tensions, trade policy uncertainty, and uneven inflation trends. The consumer durables sector faced headwinds after strong growth in FY24, with tightened credit flows and lower electricity consumption. Weather played a role.

 

In UCP, high inventory forced a scale back in production mid-season. Brand-level inventory stands at 3–4 months and channel inventory at 2 months. There’s stiff competition with over 65 brands now in the room AC space. The management clarified that high A&P (advertising and promotion) spends were strategic and would normalise.

 

Commercial AC demand remained steady, led by VRF systems, cassette ACs, and ducted products, though margins were softer and are expected to improve in H2. The upcoming Energy Star labelling regime is expected to increase costs by 4–5 per cent and apart from cost-controls, the management plans to pass on excess costs to consumers. Recovery is anticipated from the festive season, aided by “second summer” demand in western and southern regions. EMPS performance was stable despite the macro slowdown. International projects in the UAE and Saudi Arabia contributed.

 

PES was affected by subdued macroeconomic conditions, weaker demand in some sub-segments, and cautious customer spending. However, the product mix shift was favourable, resulting in better margins. There are stable revenues from operations and maintenance (O&M) contracts.

 

In textile machinery, demand was muted, especially in international markets. The management is focusing on consolidating presence in spinning and post-spinning segments and strengthening service capabilities. PES remains strategically important, diversifying revenue streams and providing a counterbalance to seasonal volatility.

 

The stock market reaction was quite negative with the stock falling 7.78 per cent intraday to ₹1,202.20, before closing with a loss of 4.43 per cent at ₹1,246 on Monday on the BSE. According to Bloomberg, 14 of the 30 analysts polled post Q1 are bullish, while another six are bearish and 10 are neutral. Their average one-year target price is ₹1,350.55.