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The consumer durables sector’s revenue in India is likely to grow 15-18 per cent to Rs 1 lakh crore in the current financial year on back of 10-13 per cent increase in volume, CRISIL said in a release.
Despite margin pressure, credit risk profiles comfortable due to balance sheet strength.
Demand will be driven by both urban and rural segments, though rural demand will come into play in the second half of the fiscal. For the record, the industry had crossed the pre-pandemic mark in value terms last fiscal; this fiscal it will scale past the pre-pandemic volume mark by 3 per cent.
“In the last two fiscals, pandemic-led disruptions had impacted consumer sentiment and peak season demand. This fiscal, healthy growth in urban income and higher crop prices, which are expected to sustain farmer incomes, will push demand for consumer durables. Shorter replacement cycles, uptrading, increasing finance penetration, and changing weather patterns will support a volume growth of 10-13 per cent,” said Pushan Sharma, Director, CRISIL Research.
Profitability will decline marginally due to higher raw material prices and adverse foreign exchange movements.
However, the credit risk profiles of players will remain comfortable due to their strong balance sheets, as reflected in low leverage and healthy liquidity.
A CRISIL analysis of eight companies that account for half of the sector revenue indicates as much.
“The players’ ability to increase prices was constrained due to fragile demand during the pandemic. This has impacted profitability, which is expected to return to normalcy next fiscal. Nonetheless, low leverage, healthy cash accruals, and strong liquidity will ensure credit profiles remain stable,” said Anand Kulkarni, Director, CRISIL Ratings.
–IANS
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(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
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