Key takeaways of the meet

The electric residential water purifiers market in the country is currently pegged at about Rs 5000 crore, increasing at a CAGR of 8-9%. Interestingly around 15-20% of the overall market comprises replacement market. In terms of volume about 4 million units of electric water purifier is sold every year.

The company targets a water purifier volume of 120000 units for FY20. The company expects the water purifier business to clock a sales revenue of Rs 120 crore in FY20 up from Rs 70 crore in FY19. The company expects to spend about Rs 30 crore in advertisement and sales promotion in case of water purifier business for FY20 up from Rs 20 crore spent in FY19.

The peak season (Jan-June) of CY2018 for room air-conditioner witnessed a de-growth of 15% and that of CY2019 is expected to register a growth of 15%. The peak season accounts for about 70% of annual sales of the industry. The industry that registered a fall of 5% in FY19 is expected to register a growth of 10-12% for FY20.

Current peak season for room air-conditioners has turned out to be good. Post seasonal demand the current liquidity issue is likely to have an impact on sales of room air-conditioners. But the company expect the government set the liquidity issues right by the start/during of Q3FY20.

Conservatively the company expects the unitary cooling products division to sustain the FY19 EBIT margin of about 8.2% in FY20 as well. The company expects the negative impact of water purifier on unitary cooling product margin for FY20 will be about 100 bps.

The company is also test marketing a range of commercial water purifiers to cater to the growing demand of purified water in offices, restaurants, clinics, and other commercial establishments.

The company is modernizing an expanding its manufacturing plant at Wada, Maharashtra. Apart from shifting the water coolers facility from Himachal to Wada plant the company is investing about Rs 80 crore in capacity for deep freezer. Towards this the company will be recruiting additional manpower of 200 people at Wada. The company is currently having about 1000 numbers of in store sales representatives at multi-brand retail outlets and by end of the year the company will be adding another 250 people to its total store sales representatives count.

The company has brought all water purifiers under the business division of room air-conditioners and air purifiers and renamed the business division as cooling and purification division. This is part of rationalization of cost as well as leveraging the retail presence and take advantage of cross sell opportunities.

The bottom of pyramid players consisting of Godrej, Whirlpool, TCL etc., accounts for about 15-20% of room air-conditioners market. These players turn very active during peak season as it fetches some additional revenue without any incremental cost as they are market leaders such as refrigerators; washing machines etc. thereby have wide retail market presence.

The EMP business sitting with healthy order book is expected to see strong traction in project execution in current fiscal.

NGT has recommended a water recovery of 60% for water purifiers as standard. Unlike energy labeling there is no certification authority as of now. Moreover with usage the water recovery capability of membranes will also goes down. So implementation of this 60% recovery norm will take time.