India witnessed a sweltering month of May and that brought some relief to the air-conditioner (AC) companies reeling under pressure for the last two years. Carrier Midea India Managing Director Krishan Sachdev tells Digbijay Mishra he is still not sure if the worst is over for the industry and it is more likely the industry would see a growth of 10-15 per cent over the next five years. Edited excerpts:
After two real bad years how has this year been for you?
2010 was a boom year and in 2011 the market saw a decline primarily due to a lame summer. We are an industry that does well if consumers feel hot. Till April, it felt like we were heading into another bad year, but May has been good. The North India market, the biggest for consumer ACs has done well. So it will be from a negative to positive growth. We will do the evaluation to know how much it is.
What are your plans for this year?
70 per cent of the consumer AC business happens in the first six months and that has been good for us.
Yes, you do plan for the future, but for business growth where we are going to focus, in the second half, is the institutional sales for room air conditioners and then light commercial segments. We are aiming to clock in a top line of Rs 1,000 crore this year. Also we are in the process of becoming a home appliance company from a consumer AC focused company, so the business in the next year would be more broad-based throughout the year.
After the gloomy spell, would it be right to say that the worst is over?
A If you ask me to give a prediction over a long term basis , I would say the AC market will grow 10-15 per cent CAGR and there will be some price increases that people will have to absorb for energy labelling norms which may have an impact. However, I can not say if the worst is over because I am not sure what will happen next year as there are few variables.
How is the currency weakness impacting you?
The rupee's fall is very concerning. It has already started impacting costs. The forward cover that we are doing now is at higher cost. From 54 level to 58, it's a huge jump.
Will this (currency weakness) impact your targets that you have estimated for the year?
The depreciation of rupee in June will have little impact on our sales target but it may have a bigger impact on profitability. Pricing decisions can only be communicated once we take them.
You said, in the second half you are going to focus on commercial business, how?
We are a product manufacturer, not a project-executing company. You cannot sell product alone when we talk about commercial AC. You need project partners, we are looking for engineering companies who are capable of designing, selling, servicing all of this.
The BEE (Bureau of Energy Efficiency) upgrade is due next year, what impact would it have on consumers?
Our experience has been that upgrade makes it about anything from five to 10 per cent costlier. When you increase efficiency you will have higher cost and need to pass it on to the consumer.