India’s consumer durables market is seeing uneven growth this festive season, with premium products outperforming mass-market items. While festive sales rose, weak replacement demand remains a concern for manufacturers. Brokerage firm Motilal Oswal sees opportunities in companies with strong premium segments and industrial demand, spotlighting Polycab India and LG Electronics.
The Indian consumer durables sector is currently witnessing a split recovery. While festive season sales during Navratri showed a 25-30% year-on-year increase, the overall health of the industry remains inconsistent. Strong growth in premium categories is being overshadowed by a slowdown in mass-market demand, driven by higher product prices and a change in how consumers spend their money.
One of the biggest concerns for manufacturers is a sharp drop in replacement demand. Many households are choosing to delay replacing their old appliances. Industry data shows that the rate at which consumers exchange old products for new ones has fallen significantly, dropping to 12% from 30% just a year ago. This trend suggests that consumers are becoming more cautious about their discretionary spending, opting to keep existing appliances for longer periods rather than upgrading.
Temperature-related products, such as air conditioners, have recorded a 60% surge in volumes. However, this growth is largely linked to weather conditions rather than a permanent change in consumer buying habits. Similarly, the television segment shows a sharp polarization. While there is strong demand for large-screen premium TVs, the price of these units has risen by over 20% due to costlier electronic panels and semiconductors. This price hike has effectively made premium TVs unaffordable for the mass market, pushing many buyers to postpone their purchase decisions.
In this environment, brokerage firm Motilal Oswal has identified specific companies that are better positioned to navigate these challenges. For investors, Polycab India is highlighted for its strong focus on institutional business. The company benefits from robust demand in the industrial and real estate sectors. Its diversification into the fast-moving electrical goods segment and investments in high-voltage capacity are seen as factors that could help the company withstand broader consumption volatility. Investors should note that Polycab’s recent performance has been supported by its ability to capture market share in industrial sectors, which are less affected by consumer sentiment than household appliances.
The report also points to LG Electronics as a company with a strong outlook due to its aggressive focus on the premium segment. However, it is important for retail investors to note that LG Electronics India is a private company and is not listed on Indian stock exchanges. Therefore, it is not available for direct retail investment.
Moving forward, the sustainability of the sector's growth will likely depend on a genuine revival in replacement demand rather than temporary promotional offers like zero-cost EMIs. Investors should monitor raw material costs, particularly for semiconductors and display panels, as well as the company’s ability to maintain profit margins while balancing the shift toward higher-value products.