Pre-GST: Air conditioner companies left battered?
Business

Pre-GST: Air conditioner companies left battered?

19 Jun 2017 | By Sneha Johny

GST impact: AC manufacturers to clock less revenues

With the new GST tax rates, dealers are scrambling to destock the old inventories to sell products that were bought earlier.

Air-conditioner manufacturers like Blue Star and Voltas are set to see their earnings dip for the quarter ending June due to the old stock being cleared.

The June quarter is pitched as the peak summer season that help the companies garner higher earnings.

Timeline

19 Jun 2017: GST impact: AC manufacturers to clock less revenues

Aggressive sales: Discounts and sales cheer consumers, dampen earnings

Discounts and sales cheer consumers, dampen earnings

Initially, April had clocked strong sales and high earnings for the AC manufacturers due to summer settling in.

However, with the GST tax structure, dealers offered massive sales and discounts ranging from 25-50%.

This was triggered due to the new GST rule which stated that the inventory bought before 30 June would require input credit to be claimed separately, which could range from 60-100%.

GST impact: What about post GST?

While dealers are hesitant to obtain fresh stock before GST is implemented, reports suggested that after the GST is affected, stocks for AC manufacturers should not face any issue.

Research reports stated that they lowered the sales forecast for AC manufacturer Blue Star from 25% to around 17% for FY18, while Voltas is expected to face the same fate.

Fact: Post GST: Consumers to shell out more for air conditioners?

Air conditioners are expected to face a 1% rise in tax rates with the onset of GST, which might trickle down to consumers as the firms resort to hiking prices of the goods. Analysts forecast the move will help the manufacturers better their earnings.