India's room AC market likely to touch $5 billion by FY28: Voltas

New Delhi: The Indian room air conditioner market is likely to reach $5 billion by FY28 with a compound annual growth rate (CAGR) of 10 per cent, according to Tata group firm Voltas.

The company expects to be at the forefront of this growth. Voltas, an industry leader in the segment with a market share of 21.6 per cent in FY23, remains "very optimistic" about the room air conditioner business and is investing in augmenting its capacity, the company said in its latest annual report. It will reap the benefits of the growth drivers, including hotter summers, rising disposable incomes and aspiration for a better lifestyle.

"Easy access to consumer finance has provided a much-needed boost to this category and will continue to do so in the future," it said. "The Indian room air conditioner market is expected to reach $5 billion by 2027-28, with a CAGR of ~10 per cent. Voltas, being the industry leader with a market share of 21.6 per cent (2022-23) in this segment, is expected to be at the forefront of this growth," the company said. Its product range, brand positioning and channel network will allow it to capitalise on several trends forecasted to shape the industry's future, it added.

According to the company, rural demand is expected to pick up in the coming years on the back of stability in the overall macroeconomic environment, including the tapering of inflation and higher consumer confidence. "The company is setting up a backward integrated manufacturing facility in south India in line with the government's policy of promoting 'make in India'," it said, adding the government's Production Linked Incentive (PLI) scheme, which the company has availed, has provided traction for the industry to establish manufacturing capacities across India.

On its joint venture Voltbek Home Appliances, the Tata group firm said it is among the fastest-growing sectors in the Indian market. The growth is driven by large and small appliances. Voltbek sells products under the brand name Voltas Beko. It is an equal joint venture between Voltas and Turkey-based Arçelik, one of Europe's largest household appliance manufacturers. "Voltas Beko brand has sold over 3.3 million units of home appliances, including refrigerators, washing machines, microwaves and dishwashers, thus becoming one of the first few new brands to reach this landmark in a short tenure," the company said.

Voltbek has a manufacturing unit in Sanand, Gujarat, and is focusing to expand distribution in the organised trade network, especially in the south and west Indian markets. The in-house manufacturing of products allows Voltbek to produce customer-centric products. "In addition, it aims to expand its reach and penetration by focusing on organised retail and increasing reach and extraction from distribution channels," said Voltas.

Moreover, the increased affordability of home appliances due to rising disposable incomes and the range of financing options available to an Indian consumer has generated robust demand for this segment.

Voltas, however, cautioned that the monetary policy measures to control the soaring inflation rates have resulted in a tightened spending environment which can result in muted consumer sentiment. It is posing a threat to the sale of discretionary goods and services. "The rise in input costs due to supply chain disruptions has influenced the margins of leading manufacturers," it added.

Voltas, which reported a total income of Rs 9,667 crore in FY23, operates in various categories, such as unitary cooling products, in which it has products like room AC, chest freezers, medical refrigeration, ducted AC, variable refrigerant flow, cassette AC, tower AC chillers, etc. The segment contributed 85.54 per cent of Voltas' business. According to various reports, currently, the room air conditioner market is estimated to be nearly $3 billion.