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Consumer electronic companies Inventory: Consumer electronics firms begin to increase inventory, anticipating a recovery in demand in coming quarter

Consumer electronic companies have started to build higher inventory – both of the components and finished product — expecting demand to recover in next quarter and to ensure no impact on their operations due to possible supply chain disruptions in China as it was in the last few months due to a surge in Covid cases there.

Executives of several companies told analysts in their earning calls and to ET that such a build-up is after the pre-Diwali days with demand slumping majorly post Diwali due to high inflation and retailers too cutting down on inventory levels.

“We are running full production capacity for most products such as AC and refrigerator. Stock of finished products and components are being built up since demand has picked up from this month itself with some products like AC already growing sales at double digit year-on-year,” said Deepak Bansal, vice president at LG India, the country’s largest appliance manufacturer.

Tata-owned appliance maker Voltas senior executives said in its earnings call earlier this month that due to possible supply chain disruption on account of Covid and learning from the past, the company is building higher inventory levels to avoid any risk during the upcoming summer season.

The industry had cut production by 40-50% due to sudden drop in demand post Diwali which remained subdued till the Republic Day sales in the week leading to January 26. However, post that demand has also picked up for mass products which was weak since the onset of the pandemic that has made the industry bullish about the outlook.

Air conditioner maker Blue Star managing director B Thiagarajan told analysts that the industry shall hold 20-25% more inventory than the previous year in anticipation of market growth and there has been an increase in lead time for some of the components that is leading to an increase in inventory holding.

Consumer goods manufacturers have said demand — including rural markets – will pick up from April due to expectations of a high summer temperature and moderating of the inflation. Godrej Appliances business head Kamal Nandi said demand for mass products have started to pick up from this month itself.Supply chains of the companies were disrupted in December and January due to a surge in Covid cases in China which has improved from this month. However, companies are not taking any chances this year to ensure no loss in sales due to unavailability of stock.

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