As initial hopes of online sales channel opening up for products, such as ACs, refrigerators, fans and washing machines, not materialising, this opportunity (estimated at 5 – 7 per cent of revenues) for players such as Havells, Blue Star, and Voltas will be absent in the June quarter. In other words, durable makers may completely lose out on April sales, which, according to ICICI Securities, could lead to business totally lost in the June quarter. According to the brokerage, Q1 accounts for 20–32 per cent of their annual revenues.
A revival from May also hinges on the lifting of the lockdown
and ability of durable makers to extend working capital support to distributors.
Analysts at Nirmal Bang say the focus of dealers and distributors would be to clear their stocks as and when stores open post lockdown, which could put tremendous pressure on the operating margin of manufacturers. Until September 2019, these companies
were in a favourable spot to implement price hikes.
As stress builds up, analysts say the market price of white goods may fall to a two-year low as the focus will shift from profitability to volumes.
Also, with income disruption across the salaried class, replacement and up-gradation demand may be disrupted. “In the near term, people may prefer to repair their appliances instead of buying something new,” says an analyst from a foreign brokerage.
With multiple headwinds, investors shouldn’t be tempted by the correction in stock prices.