Executive Summary-Household Appliances

Contents

Sections Executive summary 1 Colour Television 3 Refrigerators 5 Washing machine 7 Air conditioners 9 Profitability outlook 11 Small towns and villages drive CTV growth 12 Annexures 16

Box

CRISIL Research’s demand forecast method 13

Figures CTV: Product mix 3 CTV - Value-wise market share (per cent) 4 Refrigerator: Product mix 6 REF- Value-wise Market share (Per cent) 6 Washing machine: Product mix 7 Washing Machine - Value-wise Market share (Per cent) 8 Air conditioner: Product mix 10 Air conditioners - Market share 10 Appliance-wise profitability 11 CTV: Volume distribution 14 CTV: Average realisations 14 Refrigerator: Volume distribution 14 Refrigerator: Average realisations 14 Washing machine: Volume distribution 15 Washing machine: Average realisations 15

Tables Colour Television: A snapshot 3 Refrigerator 5 Washing machine- A snap shot 7 Air conditioner 9 Household penetration 12 Household Appliances: Industry size 16 Colour television: Sales volume 16 Colour television: Sales value 16 CTVs: Volume-wise Market share 17 Refrigerators: Sales volume 17 Refrigerators: Sales value 17 Refrigerator: Volume-wise market share 18 Washing machines: Sales volume 18 Washing machines: Sales value 18 Washing machine: Volume-wise market share 18

Highlights Early signs of revival in consumer

demand supported by excise duty cuts

of 4 per cent and 2 per cent inDecember 2008 and February 2009,

respectively

CTV and AC volumes to grow rapidly in

2009-10; LCDs and FCTVs to drive CTV

growth; strong summer sales (April-May 2009) to lead to growth in AC

volumes

Household appliance margins to

improve in 2009-10 on account ofdeclining raw material prices

Small towns and villages (population of

less than 1 lakh) to drive CTV growth;

refrigerators and washing machines tobe predominant in large towns

(population of greater than 1 lakh)

Small towns and villages to drive CTV growth, albeit at lower realisations

Household appliances

This document has been prepared by Sudip Mukherjee, Asmeen Shariff and Sridhar C (Head of Research). For any queries, please get in touch with our client servicing desk. ([email protected]; Phone: 022-66913561)

June 2009

Industry Information Service Industry Information Service presents a detailed and comprehensive analysis of the current trends and the long-term performance outlook on 47 industries in India. It covers the evolution of an industry, the regulatory environment, cost structures and the extent of competition. It also provides the key success factors and an analysis of the global trends along with statistical information on capacities, production, imports-exports, domestic and international prices, and consumption patterns and player profiles. The parameters are updated on an annual and monthly basis. About CRISIL Limited CRISIL is India's leading Ratings, Research, Risk and Policy Advisory Company. CRISIL offers domestic and international customers a unique combination of local insights and global perspectives, delivering independent information, opinions and solutions that help them make better informed business and investment decisions, improve the efficiency of markets and market participants, and help shape infrastructure policy and projects. Its integrated range of capabilities includes credit ratings and risk assessment; research on India's economy, industries and companies; global equity research; fund services; risk management and infrastructure advisory services. About CRISIL Research CRISIL Research is India's largest independent, integrated research house. We leverage our unique, integrated research platform and capabilities spanning the entire economy-industry-company spectrum to deliver superior perspectives and insights to over 600 domestic and global clients, through a range of subscription products and customised solutions. Disclaimer CRISIL Research, a Division of CRISIL Limited has taken due care and caution in preparing this Report. Information has been obtained by CRISIL from sources which it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. CRISIL is not liable for investment decisions which may be based on the views expressed in this Report. CRISIL especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of this Report. CRISIL Research operates independently of, and does not have access to information obtained by CRISIL’s Ratings Division, which may, in its regular operations, obtain information of a confidential nature which is not available to CRISIL Research. No part of this Report may be published/reproduced in any form without CRISIL’s prior written approval.

CRISIL RESEARCH HOUSHOLD APPLIANCES UPDATE: JUNE 2009, 18 PAGES 1

Executive summary

Durables demand shows signs of revival in the fourth quarter of 2008-09; overall growth to be around 4 per cent in 2009-10 While the first half witnessed robust growth across products such as colour televisions (CTV), refrigerators and washing machines, consumer sentiment weakened from the third quarter impacted by the global economic slowdown. Festive sales during Diwali in 2008-09 were lower year-on-year (y-o-y), resulting in a decline in volumes for CTVs and refrigerators. Third quarter CTV and refrigerator volumes declined by 9.4 per cent and 2.5 per cent, respectively. Air conditioner volumes also declined 10 per cent y-o-y in November 2008. Consumer demand showed signs of revival with CTV volumes growing marginally (around 2 per cent y-o-y) in the fourth quarter of 2008-09. Benefits of the excise duty cuts of 4 per cent and 2 per cent announced in the fiscal stimulus packages in December 2008 and February 2009, respectively were partly passed on to consumers by manufacturers, thereby contributing to the revival in demand. CRISIL Research expects the household appliances industry to register moderate growth of 4 per cent in 2009-10. While demand growth in refrigerators and washing machines is expected to remain at 3 per cent in 2009-10, CTV volumes are expected to exhibit a higher growth at 5 per cent led by LCD and FCTV sales. Air conditioner sales had declined in the third quarter of 2008-09, however they have revived on account of strong sales in summer. Thus we anticipate air conditioner volumes to grow by 5 per cent in 2009-10, primarily led by growth in Split AC sales. In 2010-11, we expect the industry to grow by around 9 per cent with CTVs registering a growth of around 11 per cent.

Profitability to improve as prices of raw materials decline The profitability of household appliance manufacturers is likely to improve over the next 1 year. We expect raw material prices of copper, aluminum, steel and plastics to decline in 2009-10, resulting in an improvement in operating margins by around 220-300 basis points (bps) across appliances like refrigerators, washing machines and ACs. Colour picture tubes (CPT), accounting for a significant part of input costs for CTVs are likely to remain at their current levels due to the levying of anti-dumping duty on picture tubes from Indonesia in March 2009, combined with the continued impact of higher import costs after anti-dumping duty was earlier levied on CPT imports from China, Thailand, Malayasia and Korea in July 2008. These countries together account for almost 90 per cent of CPT imports. However, the input prices of other raw materials such as plastics are anticipated to decline resulting in a marginal improvement in CTV margins by around 60-100 bps. Small towns and villages will drive CTV growth, albeit at lower realisations as consumers are price sensitive We have observed that small towns and villages (with a population of less than 1 lakh) contribute significantly towards CTV sales. CTVs, being higher up in the consumer asset preference hierarchy as compared to refrigerators and washing machines, enjoy higher penetration levels. With high CTV penetrations (of 63 per cent) in larger towns (with a population of more than 1 lakh) manufacturers will have to look towards smaller towns to drive volume growth. The challenge here is that the market comprising of smaller towns is more dispersed and therefore the players will have to employ a more extensive distribution network to establish presence. Nevertheless, the number of households that can purchase CTVs in smaller towns and villages is fairly large. For instance, of all the households falling in the 1.2 lakh to 2.6 lakh income bracket, across India, approximately 47 per cent are under the rural category.

2 CRISIL RESEARCH HOUSHOLD APPLIANCES UPDATE: JUNE 2009, 18 PAGES

Therefore, CTV demand will largely stem from the small towns and villages (with a population of less than 1 lakh) – comprising 52 per cent of the total volumes in 2012. However, players focussing on the CTV market in smaller towns and villages may have to make-do with lower realisations as consumers here are more price sensitive. Products like refrigerators and washing machines still have relatively lower penetration levels in larger towns, (47 per cent and 18 per cent respectively) offering scope for further expansion. Further, the lifestyle of small towns and villages coupled with problems such as sporadic power supply hinder the growth of appliances such as refrigerators and washing machines. Thus, manufacturers will continue to focus on larger cities to drive sales of refrigerators and washing machines. We expect these markets to contribute towards 68 per cent and 78 per cent of the demand for refrigerators and washing machines, respectively in 2012.


Colour Television CTV – Industry review and outlook The CTV industry was valued at around Rs 110 billion in 2008-09. Its share in the total value of the household appliances industry is expected to remain stable at 48 per cent in 2009-10. CTV volumes increased by 17 per cent in 2008-09 (y-o-y). While volumes grew by 54 per cent y-o-y in the first half of 2008-09, they declined by 5 per cent in the second half. The poor performance in the second half can be attributed to a degrowth in the third quarter. The third quarter (being festive season) sales for CTV industry — accounting for 30-35 per cent of total sales — recorded degrowth of around 9 per cent y-o-y in 2008-09. Since then, demand has picked up during the fourth quarter partly aided by the excise duty cuts of 4 per cent and 2 per cent announced in the fiscal stimulus packages in December 2008 and February 2009, respectively. Table 1: Colour Television: A snapshot CTV 2007-08 2008-09 2009-10 P 2010-11 PVolume growth 1 17 5 11Change in realisation 0 -2 -2 -1 - Change due to prices -15 -14 -13 -12 - Change due to segmental mix 15 11 11 11Value growth 0 15 3 10

P: Projected Source: CRISIL Research

Sales value growth for the year 2008-09 has lagged behind volume growth due to a decline average realizations. High-end TVs (mainly LCDs) geared for take-off Figure 1: CTV: Product mix

Segmental mix

25

18

14

14

12

62

62

54

54

49

13

19

32

32

39

27

25

27

31

39

67

65

67

65

59

16

10

6

3

1

2006-07

2007-08

2008-09

2009-10 P

2010-11 P

CCTV FCTV High-end

Source: CRISIL Research, Industry High-end TVs are expected to contribute around 32 per cent of total CTV sales in 2009-10. Over the past few years, a shifting of preferences towards liquid crystal display (LCD) has been observed, which is expected to become more pronounced going forward as buyers are increasingly opt for high-end TVs [includes LCD, plasma


and rear projection televisions (RPTV)]. Reduced focus on the conventional colour TV (CCTV) segment, price reductions in LCDs and declining price difference between flat colour televisions (FCTV) and high-end TV segments are propelling this shift. In 2005-06, LCDs were, on an average, priced eight times higher than FCTVs, which has now come down to a mere four times. In 2009-10, FCTV growth is expected to moderate to around 3 per cent, whereas CCTV volumes are expected to decline owing to the overall economic slowdown. We expect a shift in consumer preferences from CCTV to FCTV on account of a narrowing price differential between them. Thus, FCTV is expected to constitute around 54 per cent of the total CTV market in 2009-10. High-end television, fuelled primarily by LCD TV sales, is expected to constitute around 39 per cent of total CTV sales by 2010-11. Market share: Review Figure 2: CTV - Value-wise market share (per cent)

25

21

89

18

29

2524

8 9

1618

LG Samsung Onida Sony Videocon* Others

2007-08 2008-09

Source: CRISIL Research, Industry

In 2008-09, while most major companies maintained their prevailing market share, Samsung gained market share by nearly 300 bps. This gain in market share is attributable chiefly to the increase in sales of the LCD segment, where Samsung is the market leader and hence was the major beneficiary.


Refrigerators Refrigerators – Industry review and outlook The refrigerator industry was valued at around Rs 51 billion in 2008-09 and constitutes around 20 per cent of the total value of the household appliances industry. Refrigerator volumes grew by around 4 per cent y-o-y in 2008-09. The first half of 2008-09 saw volumes increasing by 10 per cent y-o-y while the second half saw volumes decline by 3 per cent. Weakening consumer sentiment in view of the global economic slowdown was primarily responsible for a decline in refrigerator volumes. Industry volumes to grow by 2 to 4 per cent, realisations to improve marginally in 2009-10 While volumes declined in the second half of 2008-09, the summer season (April-May) saw volumes picking up. In 2009-10, the refrigerator segment is expected to register a growth of around 3 per cent in volume terms, with the direct cool segment growing at 1 per cent and frost free growing at 6 per cent. Whereas in value terms, the industry is expected to grow by around 4 per cent, with direct cool growing by 3 per cent and frost free growing by 5 per cent. Table 2: Refrigerator Refrigerator 2007-08 2008-09 2009-10 P 2010-11 PVolume growth 11 4 3 6 - Change in realisation 6 2 2 1 - Change due to prices 5 2 1 1 - Change due to segmental mix 2 1 1 1Value growth 18 6 4 7

P: Projected

Source: CRISIL Research

Realisations are expected to improve marginally due to higher sales of star rated products. Star rated products consume less power and hence command a premium in pricing. Segmental mix is expected to improve in favour of the frost free segment, thereby supplementing value growth. The shift in segmental mix is mainly attributable to the reducing price differential and changing consumer preferences.


Product mix to shift in favour of frost free refrigerators Figure 3: Refrigerator: Product mix

Segmental mix

43

45

45

46

47

57

55

55

54

33

32

31

31

28

67

53

68

69

69

72

2006-07

2007-08

2008-09

2009-10 P

2010-11 P

Frost free Direct cool

Source: CRISIL Research, Industry Market share: Review In 2008-09, most major companies more or less maintained their market share. However, Godrej gained market share by nearly 200 bps, attributable to the increasing sales of frost free refrigerators and the introduction of new models; while Whirlpool (India) lost market share by around 200 bps. Figure 4: Refrigerator - Value-wise market share (per cent)

26

18

1613

24

3

25

19 18

12

22

5

LG Samsung Godrej Videocon * Whirlpool Others

2007-08 2008-09

* Videocon includes Electrolux Source: CRISIL Research, Industry


Washing machine

Washing machine – Industry review and outlook The washing machine industry was valued at around Rs 21 billion in 2008-09, and constitutes around 9 per cent of the total value of the household appliances industry. In 2008-09, washing machine volumes grew by around 5 per cent (y-o-y). While volumes grew by around 12 per cent y-o-y in the first half, they declined by around 2 per cent in the second half of the year as a result of weakening consumer demand.

Volumes to increase by 2-4 per cent in 2009-10 The washing machine segment is expected to register a volume growth of around 2-4 per cent in 2009-10, with the semi-automatic segment growing at approximately 1 per cent and the fully automatic segment growing by around 5 per cent.

Table 3: Washing machine- A snap shot Washing machine 2007-08 2008-09 2009-10 P 2010-11 PVolume growth 13 5 3 6 - Change in unit realisation 6 1 1 1 - Change due to prices 2 0 0 1 - Change due to segmental mix 3 1 1 0Value growth 20 6 4 7


Realisations are expected to improve marginally in 2009-10 on account of an excepted shift in segmental mix towards fully automatic washing machines. While the fully automatic segment constitutes only around 35 per cent of the total washing machine industry in volume terms, it constitutes more than half the industry in value terms owing to higher realisations. We expect this trend to continue going forward, with the contribution of the fully automatic washing machine segment increasing consistently.

Gradual shift in product mix towards fully automatic machines

Figure 5: Washing machine: Product mix

Segmental mix

53

48

46

45

45

47

52

54

55

64

64

65

67

70

36

55

36

35

33

30

2006-07

2007-08

2008-09

2009-10 P

2010-11 P

Semi automatic Fully automatic



Market share: Review Figure 6: Washing Machine - Value-wise Market share (Per cent)

27

16

10

16

5

16

11

25

17

10

16

5

15

12

LG Samsung IFB Videocon * Godrej Whirlpool Others

2007-08 2008-09

Source: CRISIL Research, Industry The washing machine industry is highly concentrated with the top 4 players occupying almost 70 per cent of the market share. LG India, though still the market leader, lost market share by around 200 bps. On the other hand, Samsung gained market share by 100 bps, supported by relatively higher realisations in the fully automatic category.


Air conditioners Air conditioners – Industry review and outlook The air conditioner industry was valued at around Rs 47 billion in 2008-09 and constitutes almost 22 per cent of the total value of the household appliances industry. In 2008-09, air conditioner volumes grew by around 10 per cent. Table 4: Air conditioner Airconditioners 2007-08 2008-09 2009-10 P 2010-11 PVolume growth 25 10 5 10- Split AC 50 17 9 15- Window AC 7 3 1 4Value growth 27 11 6 11- Split AC 44 16 8 14- Window AC 6 3 1 4


In 2008-09 the split air conditioner (SAC) segment grew by around 16 per cent, as against the window air conditioner (WAC) segment, which grew by 3 per cent. The industry’s value growth at 11 per cent has been greater than its volume growth on account of a gradual shift towards the split air conditioner segment, thereby improving industry’s realisations. We expect the air conditioner industry to grow by 4-6 per cent in 2009-10. Value growth is expected to be higher than volume growth on account of an increased shift towards SACs coupled with higher realisations from star rated models. Even though air conditioner sales declined in November 2008, sales picked up in the fourth quarter of 2008-09. Based upon the decline in sales in November and inventory build up seen in the third quarter, we projected a decline in air conditioner volumes in our previous update. However, volumes grew by around 6 per cent in the fourth quarter of 2008-09, with the growth momentum continuing through summer (April-May). Against this backdrop, we have revised our outlook on air conditioners upwards for 2009-10. Steady shift towards the split the air conditioner segment continues There has been a gradual shift towards the split air conditioner segment, due to steady erosion of the price differential between the two segments of air conditioners. This has encouraged not only the up-graders, but also the first-timer users to opt for entry level SACs over WACs.


Figure 7: Air conditioner: Product mix

Segmental mix

56

63

66

68

67

44

37

34

32

57

54

53

49

41

43

33

46

47

51

59

2006-07

2007-08

2008-09

2009-10 P

2010-11 P

Split ACs Window ACs

Source: CRISIL Research, Industry Market share: Review Figure 8: Air conditioners - Market share

20

4

88

1415

33

24

46

7

15

27

17

0%

5%

10%

15%

20%

25%

30%

35%

LG Voltas Samsung Videocon MIRC Whirlpool Others

2007-08 2008-09



Profitability outlook CRISIL Research expects the profitability of household appliance manufacturers to improve in 2009-10. A decline in raw material prices is expected to greatly benefit manufacturers since they typically account for around 70 per cent of the total input cost. Realisations for the refrigerator and washing machine segments are likely to see a marginal improvement, whereas those of CTVs are expected to decline slightly. We expect raw material prices of copper, aluminum, steel and plastics to decline in 2009-10, resulting in an improvement in operating margins by around 220-300 bps across appliances like refrigerators, washing machines and ACs. CPT, accounting for a significant part of input costs for CTVs are likely to remain at their current levels due to the levying of anti-dumping duty on picture tubes from Indonesia in March 2009, combined with the continued impact of higher import costs after anti-dumping duty was earlier levied on CPT imports from China, Thailand, Malayasia and Korea in July 2008. These countries together account for almost 90 per cent of the total CPT imports. However, the input prices of other raw materials such as plastics are anticipated to decline resulting in a marginal improvement in CTV margins by around 60-100 bps. Figure 9: Appliance-wise profitability

2.0

3.0

4.0

5.0

6.0

7.0

8.0

2006-07 2007-08 2008-09 2009-10 P

AC WM CTV Ref

Operating margins (%)

Source: CRISIL Research


Small towns and villages drive CTV growth In this report we have attempted to analyse the contribution of small towns and villages (with a population of less than 1 lakh) towards the demand for CTVs, refrigerators and washing machines. Further, the larger cities (with a population of over 1 lakh) have been segmented based upon their population into the following categories: • Population between 1 to 10 lakh • Population between 10 to 40 lakh • Population greater than 40 lakh We observed that small towns and villages tend to have a larger contribution towards the demand for CTVs vis-à-vis that for refrigerators and washing machines. CTVs, being higher up on the consumer asset preference hierarchy as compared to refrigerators and washing machines, enjoy higher penetration levels. Further, the lifestyle of small towns and villages coupled with problems such as sporadic power supply hinder the growth of appliances such as refrigerators and washing machines. The penetration levels enjoyed by CTVs, refrigerators and washing machines are as below: Table 5: Household penetration (Per 100 households) CTV Refrigerator Washing machine Pop > 1 lakh Pop < 1 lakh Pop > 1 lakh Pop < 1 lakh Pop > 1 lakh Pop < 1 lakh2004-05 49 12 41 6 13 12005-06 53 13 42 7 14 22006-07 58 14 44 7 15 22007-08 59 17 45 7 17 22008-09 63 19 47 7 18 2Source: CRISIL Research

In case of refrigerators and washing machines, larger cities still offer a substantial scope for growth given the relatively lower penetration levels. On the other hand, CTV manufacturers will have to fine tune their focus on smaller towns in order to drive volume growth. However the market comprising of smaller towns is widely dispersed and therefore will require a more extensive distribution network on the part of the manufacturer. Nevertheless, the number of households that can purchase CTVs in smaller towns and villages is significant. For instance, of all the households falling in the 1.2 lakh to 2.6 lakh income bracket, across India, approximately 47 per cent are under the rural category. CTV demand is expected to stem largely from small towns and villages (with a population of less than 1 lakh). These markets are expected to constitute 52 per cent of the CTV volumes in 2012. Moreover, players concentrating on the CTV market in smaller towns and villages may have to make-do with lower realisations, since consumers in these markets are highly price sensitive. Conversely, large cities (with a population of over 1 lakh) will continue to dominate the demand for refrigerators and washing machines. In 2012, we anticipate large cities to constitute 68 per cent and 78 per cent of the demand for refrigerators and washing machines, respectively.


Box 1: CRISIL Research’s demand forecast method

In order to forecast domestic demand for household appliances, CRISIL Research has first estimated and forecast the stock of each household appliance. The annual differences in the stock represent new demand (including demand for upgrades), to which estimated units of replacement (life expired) are added to arrive at forecast sales. Upgrade demand is assumed to add to the stock of appliances, since in India used durables are purchased by lower income households and hence add to the stock. The stock also includes multiple units owned by a small proportion of households. Stock demand has been forecast using income distribution and penetration forecasts, based on historical data from NCAER surveys of income and ownership. CRISIL Research has forecast income distribution based on economic growth assumptions. In order to project penetrations, it has been assumed that any changes in asset preference hierarchy will primarily depend only upon significant changes in relative-utility-to-cost-of-ownership. Since the price of an appliance is only one component of cost of ownership (the other being recurring expenses), and perceived utility can change only gradually with product changes and market evaluation, this has implied virtually no change in the asset preference hierarchy over the 4-year projection period. It has further been observed that for a given income category, the probability of purchase grows with time and the same has been extrapolated into the future. Replacement demand has been estimated based on assumptions on the life of critical components and average usage, based on interactions with industry sources. Upgrade demand has been projected based on current and expected estimates of average years to upgrade. CTVs – Small towns and villages to drive demand Entry level CTVs are available at far lower price points as compared to refrigerators and washing machines. Also, a relatively lower cost of ownership of CTVs has placed it higher up in the asset preference hierarchy. Currently, small towns and villages contribute towards 49 per cent of the demand for CTVs. By 2012, we expect these markets to contribute to around 52 per cent of the total demand for CTVs. We expect the penetration of CTVs to grow from around 19 per cent in 2008 to 29 per cent in 2012, as income levels rise and CTV prices decline. The penetration of CTVs in cities with population greater than 1 lakh is expected to grow from the current 63 per cent to 76 per cent in 2012. Consequently, volumes in small towns / villages and large cities are expected to grow at a compound annual growth rate (CAGR) of 11.5 per cent and 8.5 per cent (during 2008 to 2012), respectively, leading to an increase in CTV volumes at a CAGR of 10 per cent during 2008 to 2012. Consumers in small towns and villages tend to be price consicious and hence realisations are generally lower in this market. Moreover, branded players have to compete with local manufacturers in these markets, thus making competitive pricing extremely important to garner market share. Players with a larger focus on metros and cities with a population over 40 lakhs enjoy higher realisations with the a larger presence of high-end TVs like LCDs and FCTVs in their product mix. Even though increased presence in small towns and villages helps players drive volumes, it impacts the average realisations of players on account of sales of entry level models at lower price points.


Figure 10: CTV: Volume distribution Figure 11: CTV: Average realisations

52%

49%47%46%

20%

21%23%

24%

13%

13%14%

14%

15%

16%

16%16%

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

2006 2007 2008 2012 P

Population (<1lakh) Population (1-10lakhs)

Population (10-40lakhs) Population (40lakh+)

(Units in '000)

4 year CAGR 10 %

5,000

6,000

7,000

8,000

9,000

10,000

11,000

12,000

13,000

2006 2007 2008

(Rs / unit)

Population (<1lakh) Population (1-10lakhs)

Population (10-40lakhs) Population (40lakh+)

Source: CRISIL Research Source: CRISIL Research Refrigerators: Larger cities still to account for a major market Direct cool refrigerators are more popular in small towns and villages than large citites. In these markets, refrigerators are often purchased for their ice making capability. We anticipate the penetration of refrigerators in small towns and villages to improve from 7 per cent in 2008 to around 8 per cent in 2012. On the other hand, in larger cities, this number is expected to improve from 47 per cent in 2008 to 56 per cent 2012. Consequently, we anticipate volumes in larger cities to grow at a CAGR of 8 per cent, during 2008 to 2012, while that in small towns and villages are expected to grow at a CAGR of 12.8 per cent over the corresponding period. This will result in refrigerator volumes growing at a CAGR of 9 per cent during 2008 to 2012. By 2012, smaller towns and villages will account for around 32 per cent of the total refrigerator volumes.

Given the lower penetrations in small towns and villages, demand in these markets is likely to be driven by first time buyers. Irregular power supply continues to be a hindrance to refrigerator demand growth in these markets. In order to address this concern, manufacturers have responded by introducing models that do not require voltage stabilizers. Realisations in small towns and villages tend to be lower as the product mix is skewed in favour of direct cool refrigerators.

Figure 12: Refrigerator: Volume distribution Figure 13: Refrigerator: Average realisations

32 %28 %27 %25 %

28 %

30%30 %32 %

19 %

20 %21 %21 %

21 %

22 %21 %

22%

0

1000

2000

3000

4000

5000

6000

7000

2006 2007 2008 2012 P

POP (<1Lakh) POP (1-10Lakhs) POP (10-40Lakhs) POP (40Lakh+)

(Units in '000)

4 year CAGR 9 %

8,000

9,000

10,000

11,000

12,000

13,000

2006 2007 2008

(Rs / unit)

POP (<1Lakh) POP (1-10Lakhs)

POP (10-40Lakhs) POP (40Lakh+)

Source: CRISIL Research Source: CRISIL Research


Washing machines: Larger cities to continue to lead We expect the penetration of washing machines to continue to remain relatively low in small towns and villages. The unavailability of continuous water supply and lower employment rate of women has hindered the reception of washing machines in smaller towns and villages. Comparatively, semi-automatic machines find more favour in these markets. Currently, the penetration of washing machines in small towns and villages stands at a meagre 2 per cent, and is expected to improve to 3 per cent by 2012. This will result in volumes growing in small towns and villages at a CAGR of 12.8 per cent during 2008 to 2012. In large cities (with a population of over 1 lakh), penetration levels are expected to improve from 18 percent in 2008 to 23 per cent in 2012. Consequently, volumes in large cities are expected to grow at a CAGR of 8 per cent during 2008 to 2012. Realisations for washing machines in small towns and villages tend to be lower due to higher sales of semi-automatic models, which cost less. Washing machines growth is likely to driven mostly by large cities. By 2012, smaller towns and villages are expected to account for around 28 per cent of washing machine volumes. Figure 14: Washing machine: Volume

distribution

Figure 15: Washing machine: Average

realisations

28 %24 %26 %21 %

27%

28 %30 %34%

20 %

21 %20 %20%

25 %

26 %23 %

25 %

0

400

800

1200

1600

2000

2400

2800

3200

2006 2007 2008 2012P

POP (<1Lakh) POP (1-10Lakhs) POP (10-40Lakhs) POP (40Lakh+)

Units ('000 s)

4 year CAGR 9 %

7,000

8,000

9,000

10,000

11,000

2006 2007 2008

(Rs / unit)

POP (<1Lakh) POP (1-10Lakhs)

POP (10-40Lakhs) POP (40Lakh+)

Source: CRISIL Research Source: CRISIL Research


Annexures Table 6: Household Appliances: Industry size Value (Rs billion) 2006-07 2007-08 2008-09CTV 96 96 110

Refrigerators 41 48 51

Room Air conditioners 33 42 47

Washing machines 16 20 21

Household appliances 186 206 229Source: CRISIL Research

Table 7: Colour television: Sales volume ('000 units) 2007-08 2008-09 Y-o-Y Growth

Player CCTV FCTV High-

end TVs CCTV FCTVHigh-

end TVs CCTV FCTVHigh-end

TVs LG 655.9 1,863.2 79.3 672.7 2,251.5 177.9 2.6 20.8 124.4

Samsung 0.0 1,460.5 142.7 0.0 1,897.4 280.4 - 29.9 96.5

Videocon Brands* 848.2 1,436.6 37.5 837.7 1,516.9 61.4 -1.2 5.6 63.8

Sony 0.0 413.2 55.8 0.0 379.1 121.3 - -8.2 117.2

Mirc ** 447.5 746.2 8.9 411.6 857.3 16.4 -8.0 14.9 84.2

Philips 156.4 296.2 20.9 167.0 399.8 37.8 6.8 35.0 80.6

Others 1,129.0 531.1 12.2 1,245.1 776.2 34.8 10.3 46.1 184.6

Total 3,237.0 6,747.1 357.3 3,334.1 8,078.2 730.0 3.0 19.7 104.3 Notes

1) *Videocon includes Akai, Hyndai, Kenstar, Sansui and Videocon

2) **Mirc includes Igo & Onida


Table 8: Colour television: Sales value (Rs billion) 2007-08 2008-09 Y-o-y growth

Player CCTV FCTV High-end

TVs CCTV FCTVHigh-end

TVs CCTV FCTVHigh-end

TVs LG 3.7 16.2 3.9 3.5 18.1 6.4 -4.1 11.7 64.4

Samsung - 13.0 7.1 0.0 15.6 10.4 - 20.1 47.4

Videocon brands* 4.7 11.4 1.3 4.3 11.4 1.7 -8.5 -0.1 31.4

Sony - 5.1 3.7 0.0 4.5 5.5 - -12.0 50.0

Mirc** 2.6 6.2 0.5 2.2 6.4 0.6 -14.0 3.1 15.0

Philips 1.0 2.8 1.3 1.0 3.3 1.7 0.5 17.1 25.1

Others 5.7 4.8 0.9 6.0 5.9 1.7 4.9 22.4 89.7

Total 17.7 59.6 18.7 17.1 65.2 28.0 -3.5 9.5 49.8

Notes 1) *Videocon includes Akai, Hyndai, Kenstar, Sansui and Videocon 2) **Mirc includes Igo & Onida Source: CRISIL Research, Industry


Table 9: CTVs: Volume-wise Market share (Per cent) 2007-08 2008-09LG 25.1 25.5

Samsung 15.5 17.9

Mirc ** 11.6 10.6

Videocon * 22.5 19.9

Philips 4.6 5.0

Others 20.7 21.1

Grand Total 100 100Notes 1) *Videocon includes Akai, Hyndai, Kenstar, Sansui and Videocon

2) **Mirc includes Igo & Onida


Table 10: Refrigerators: Sales volume ('000 units) 2007-08 2008-09 Y-o-y growthDirect cool 3,049.3 3,132.2 2.7

<= 184 litres 1,943.9 1,815.8 -6.6

185 to 225 litres 838.8 1,009.4 20.3

>= 226 litres 266.6 307.0 15.2

Frost free 1,339.0 1,431.0 6.9<= 225 litres 225.2 219.8 -2.4

226 to 270 litres 642.4 696.1 8.4

271 to 300 litres 174.4 188.5 8.1

301 to 350 litres 199.0 213.7 7.4

>= 351 litres 98.0 112.9 15.2

Total 4,388.3 4,563.2 4.0Source: CRISIL Research, Industry

Table 11: Refrigerators: Sales value (Rs billion) 2007-08 2008-09 Y-o-y growthDirect cool 26.3 27.9 6.0

<= 184 litres 15.2 14.7 -3.3

185 to 225 litres 7.9 9.5 21.2

>= 226 litres 3.3 3.7 12.9

Frost Free 21.8 23.2 6.3<= 225 litres 2.8 2.6 -6.0

226 to 270 litres 8.7 9.4 8.5

271 to 300 litres 2.8 3.1 7.4

301 to 350 litres 3.9 4.2 5.6

>= 351 litres 3.5 3.9 10.9

Total 48.1 51.1 6.2Source: CRISIL Research, Industry


Table 12: Refrigerator: Volume-wise market share (Per cent) 2007-08 2008-09LG 25.1 24.6Samsung 15.5 16.2Videocon * 15.9 14.6Godrej 17.5 18.7Whirlpool 23.1 21.8Others 2.9 4.2Total 100 100Note: 1) * Videocon includes Electrolux, Kelvinator, Akai and Kenstar Source: CRISIL Research, Industry

Table 13: Washing machines: Sales volume (in 000 Units) 2007-08 2008-09 Y-o-y growthFully automatic 708.1 773.9 9.3

Front loading 221.6 259.0 16.9

Top loading 486.5 514.9 5.9

Semi-automatic 1,412.9 1,444.4 2.2Single-tub washer & dryer 19.4 2.3 -88.2

Twin-tub 1,393.6 1,442.1 3.5

Total 2,121.0 2,218.3 4.6Source: CRISIL Research, Industry

Table 14: Washing machines: Sales value (Rs. Billion) 2007-08 2008-09 Y-o-y growthFully automatic 10.3 11.2 8.7

Front Loading 4.5 5.1 13.2

Top Loading 5.8 6.1 5.1

Semi-automatic 9.4 9.6 2.9Single-tub washer & dryer 0.1 0.0 -89.2

Twin-tub 9.3 9.6 3.6

Total 19.7 20.8 5.9 Source: CRISIL Research, Industry

Table 15: Washing machine: Volume-wise market share (Percent) 2007-08 2008-09LG 25.6 22.7

Samsung 16.0 16.7

IFB 4.8 5.5

Videocon * 19.7 19.6

Godrej 6.4 6.5

Whirlpool 15.6 14.8

Others 11.9 14.4

Grand Total 100 100Note:

1) * includes Videocon, Kelvinator, Kenstar & Electrolux


Mumbai 1061, Solitaire Corporate Park Andheri-Ghatkopar Link Road, Andheri (East), Mumbai 400 093. Phone +91 (22) 6758 8035 FAX +91 (22) 6758 8088 New Delhi The Mira, G-1, 1st Floor Plot No. 1 & 2, Ishwar Nagar, Near Okhla Crossing, New Delhi 110 065. Phone +91 (11) 4250 5100, 2693 0117 - 121 FAX +91 (11) 2684 2212/13 E-mail: [email protected]

Bengaluru W-101, Sunrise Chambers, 22, Ulsoor Road, Bengaluru 560 042. Phone +91 (80) 4117 0622 FAX +91 (80) 2559 4801 Kolkata Horizon, 4th floor, 57 Chowringhee Road, Kolkata 700 071. Phone +91 (33) 2283 0595 FAX +91 (33) 2283 0597 www.crisil.com

Executive Summary-Household Appliances

Documents

Transcript of Executive Summary-Household Appliances