A recent 10-percentage-point GST cut on air-conditioners and large-screen TVs—announced just before the festive season—is expected to provide a temporary lift, spurring 11-13% second-half growth and offsetting the first half’s weakness.
“The GST reduction will translate to savings of ₹3,000-6,000 per unit, prompting buyers to upgrade to premium models,” said Shounak Chakravarty, Director, Crisil Ratings.
Still, operating margins are expected to shrink by 20-40 basis points to around 7.1-7.2% due to rising raw material costs and intense price competition, particularly in steel, aluminium, and copper.
Despite margin pressures, manufacturers are pressing ahead with higher capital expenditure, especially in the air-conditioner segment, as new BIS norms for imported compressors take effect from April 2026. Crisil estimates sectoral capex will jump 60% to ₹2,400 crore this fiscal, with the AC segment accounting for nearly half.
Other product lines show mixed trends: refrigerators are expected to see low double-digit growth in the second half on the back of increased demand for larger models, while washing machines—buoyed by early monsoon-driven dryer demand—are set to maintain 7-8% growth.
Credit profiles across the sector remain robust thanks to low debt reliance, with interest coverage above 20 times and net cash accrual-to-debt ratio around 2.5-2.6 times, Crisil noted.
“Despite near-term headwinds, the long-term story remains strong given India’s low penetration levels in major appliance categories,” said Prateek Kasera, Team Leader, Crisil Ratings.
