Voltas Ltd Q4FY22 Business Segment Review

Recently Indian multinational home appliances company, Voltas Ltd reported its Quarterly results for the quarter end of FY2022.

In its quarterly results, Voltas Ltd reported that its Unitary Cooling Products (UCP) business registered a sharp decline in its operational performance both in revenue as well as margins front. Revenue stood at Rs.18.2 billion, with a growth of 10% YoY which was impacted by market share loss witnessed by the company in the South region and margins witnessed pressure during the quarter on account of intense competitive pressure and rising commodity prices which materialized over the last one year. 

Demand for Refrigeration and Air Conditioning (RAC) Segment continued to remain strong due to the intense summer conditions prevailing currently. Voltas expects to regain its lost market share in Q1FY23 and has worked out a strategy for the same. To scale down its dependence on China, Voltas in its Joint Venture with Highly has planned to set up a compressor manufacturing unit with a 1 million unit capacity and has also received a PLI license and planning to invest Rs.1 billion under the PLI scheme. Voltas plans to incur CAPEX of Rs. 4.5 to 5 billion over the next two years in the RAC segment.

The Electro-Mechanical Projects (EMP) segment registered a revenue with a decline of 21% YoY to Rs.6.9 billion impacted by lower availability orders in hand for execution and also as few orders were near completion and new project are yet to pick up momentum, however, margins were ahead of expectation due to execution of better margin order. Margins for the quarter stood at 6.9% ahead of normalized levels of 5 to 6%. Order booking was stable at Rs. 20 billion for FY22 given limited order finalization and the selective approach adopted by Voltas to ensure better margin orders flow in. Order book stands healthy at Rs. 54 billion.

Voltas Beko reported a loss for FY22 stood at Rs. 1.1billion as against Rs. 0.6 billion in FY21 and it has been able to scale up the in-house production and has been able to produce 1 million units in FY22 with revenue booking of Rs. 10 billion. 

The Market share of Voltas Beko in the Refrigerator category stands at 3.5% whereas in the washing machine category stands at 4%. Voltas Beko has been able to ramp up the production of the DC refrigerators and also take up the production of Frost Free Refrigerators, and Top load automatic washing machines in the Sanand factory. With 1400 billing points and 6,000+ touchpoints for Voltas Beko and the company remains on track to meet its 10% market share target by FY25 and also expects to break even.

Given the sharp increase in commodity prices and intense competitive intensity, management expects margins to remain under pressure in the near term.