Godrej Appliances Increases Indigenisation Efforts, Expects AC Demand To Surge

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With regards to the company’s own indigenisation efforts, it has gone for backward integration for residential AC and now, components such as heat exchangers, IDU, ODU are manufactured by it 

Consumer electronics brand Godrej Appliances estimates that the indigenisation ratio of components for products like air-conditioners is likely to go up to 75 per cent in the coming three to five years along with a spike in the local value addition. 

A company official added that the production-linked incentive (PLI) scheme for air-conditioners which is initiated by the government to encourage the brands to invest and create a component ecosystem into the country towards making it self-reliant will support the indigenisation. 

According to a report by PTI, the appliance company is also expecting around 15 per cent of growth in sales this year in comparison to 2019, boosted by factors like work from home and pent-up demand.  

Kamal Nandi, Business Head and Executive Vice-President at Godrej Appliances, told PTI, “We expect around 15-20 per cent growth (in value terms) in the AC market this year in comparison to 2019.”

The company had previously opted to increase prices in order to ward off inflationary pressure on the raw material inputs and implied that it may go the same route given the prices continue to surge. 

Talking about how the recently imposed curfew around various parts of the country would impact sales, Nandi said a reduction of 15 per cent could be anticipated, although it could be covered once the market reopens. 

With regards to the company’s own indigenisation efforts, Nandi explained that currently, it has gone for backward integration for residential AC and now, components such as heat exchangers, IDU, ODU are manufactured by it. He added that the company is still dependent on a lot of imported components such as compressors and electronics and is working towards indigenising them. 

The company expects that after the PLI scheme announced by the government, several brands operating here would invest in components. “Over a period of the next 3-5 years, we should be able to increase the value addition from the current 35-40 per cent to 70-75 per cent,” he added.

Godrej Appliances currently imports crucial components like inverter PCBs and compressors but expects to buy them locally very soon. “With the PLI scheme coming for AC, there would big and small investments coming in this country, and we should either locally purchase them or indigenise them,” he said. 

Nandi added that now, the firm has almost completed the indigenisation process for its refrigerator segment, where except for a few electronic components, everything is sourced domestically.

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