makers surprises many, who had earlier forecast their margins to remain under pressure due to lack of new launches in construction and infrastructures sectors. During the last few quarters, the electrical goods
manufacturers have changed their business strategies. They have started focusing on institutional sales and replacement markets.
“The new construction is certainly not happening. But, the existing inventory is still selling. That means, secondary sales of inventory is happening but not the primary creation. Also, changing lifestyle requires to replace existing goods installed in the construction in every five years now with new innovative products as compared to fifteen years earlier. Hence, we see huge opportunity in secondary sales and replacement market,” said Manoj Verma, chief operating officer, Polycab India.
To lure customers, however, companies
in the sector have started focusing on customised services to provide complete electrical solutions. Also, new designed and styled innovations in electrical board, wires and cables etc. have yielded higher margins.
“Wire and cable industry
has grown by 23 per cent compounded annual growth rate (CAGR) over FY14 - FY18 in production terms and 11 per cent in value terms from Rs 35,000 crore to Rs 52,500 crore. The growth was largely driven by increase in spend in infrastructure by the government such as smart cities mission, mass transit systems, rural electrification, renewable energy etc. The industry is expected to grow at CAGR of 12.6 per cent in volume terms and 14.5 per cent in value terms over FY18 - FY23,” said a report from SMC Global Securities.
The report further forecasts the growth in wires and cables industry to sustain at 12 per cent, and at 16 per cent for the electrical goods sector in the next two years.
With the wires and cables industry shifting towards modular switches and energy efficient electrical equipment, the prospects look bright, said an analyst.
Meanwhile, a CRISIL report said that replacement demand in line with the design-centric changes as part of the home improvement process is beginning to account for a significant share of the urban demand. “Rising disposable incomes and evolving preferences of urban population are shortening the home improvement cycle which is expected to boost replacement demand especially in the premium and economy fan segments.
The super-premium segment is seeing growing interest from consumers looking for luxury and aesthetics, even though it currently constitutes a negligible share of the electric fans industry,” said the CRISIL report.