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GST Rate Cut To Help Electrical Firms To Diversify

With the GST rate cut from 28 to 18 percent being largely passed through, the price differential between branded and non-branded products appears to be shrinking, Jefferies pointed out.

Buoyed by the price reduction following the recent GST rate cut on consumer durables, core electrical segment players are diversifying into other product categories to fill up the vacuum for organized companies in such areas.

Such a favorable price decline is expected to fuel volume growth across durable categories such as fans, refrigerators and washing machines over the medium term, Jefferies said in a recent note. Product categories such as switches, cables, lightings and stabilizers have only 50-60 percent penetration of organized players, leaving immense headroom for them to benefit, the note said.

While companies such as Havells and V-Guard have already diversified into appliances, Finolex has recently forayed into heaters, switch gears, PVC conduits. The latter has appointed about 900 distributors for its new products, over and above the 3,500 existing ones in its core business. Havells, which acquired Lloyd durables in May 2017, plans to expand on this front by capitalizing on its robust pre-existing distribution network.

With the GST rate cut from 28 to 18 percent being largely passed through, the price differential between branded and non-branded products appears to be shrinking, Jefferies pointed out. Prior to the implementation of GST and the e-way bill, non-branded products were about 15-20 percent cheaper across many electrical categories. – Financial Express

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