On the supply side, the domestic household room air-conditioner capacity is likely to increase by over 40 per cent in the next three years from the current level
Driven by factors like rising temperature levels, rising urbanisation levels and improved disposable income, the Indian room air-conditioner (RAC) industry sales volumes is expected to grow by 20 to 25 per cent on a year-on-year (YoY) basis and reach record high levels of 12 to 12.5 million units in the current financial year (FY25), according to a report by Icra.
As per the report, factors like the increasing need for the number of RACs per household and favourable consumer financing options are expected to drive growth in the next few years. Further, increasing replacement demand with a rising preference for energy-efficient models amidst increasing usage and higher energy costs, auger well for the industry.
“The domestic RAC industry surpassed the pre-covid peak levels of sales volumes in FY2024, aided by changing climatic conditions and favourable consumer trends. The number of average heat wave days/year over the last three decades has been steadily rising and calendar year 2024 is likely to report the highest ever thus boding well for RAC demand. This was observed in the recently concluded summer season wherein most of the original manufacturers (OEMs) reported robust volume growth of 40-50 per cent YoY during this period,” stated Srikumar Krishnamurthy, Senior Vice President and Co-Group Head – Corporate Ratings, Icra.
On the supply side, the domestic household RAC capacity is likely to increase by over 40 per cent in the next three years from the current level. The industry is likely to achieve substantial indigenisation of around 75 per cent in the next three to four years through the ongoing backward integration by most industry players.
Icra’s sample set of three key listed RAC brands witnessed a YoY increase of around 53 per cent in revenues in Q1 FY2025 on a YoY basis due to strong demand conditions in the just-concluded peak season led by severe heat waves and a long summer. The industry’s operating profit margin (OPM) is inherently moderate at 6.5-7.5 per cent, led by the volatility of input costs amid intense competition.
Icra expects a healthy YoY increase of around 25 per cent in revenues in FY2025 of the same set, supported by strong volume growth, compared to around 17 per cent in FY2024.
