Voltas Ltd management’s recent interaction with analysts to update about business environment and outlook brings no cheer for its investors. The stock fell almost 3% on Monday.
The problem? The management noted room air conditioner (RAC) sales have continued to languish so far in the September quarter (Q2FY26) as well amid elevated channel inventory (two to three months currently) and an extended monsoon. Moreover, consumers deferred purchases after the goods and services tax (GST) rationalization was initially announced on 15 August.
The GST rate on RACs has been reduced to 18% from 28% effective 22 September. The company hopes consumers will start purchasing now. This, combined with the upcoming festive season boost, pent-up demand from weak sales in the first half of FY26 (H1FY26), and pre-buying ahead of the BEE (bureau of energy efficiency) rules change in Q4, is expected to spur growth in H2FY26.
Still, the path ahead may not be easy. “In our view, despite an around 8% cut in AC prices on lower GST, elevated channel inventory may dampen primary sales channel build-up in Q3FY26 before new BEE ratings kick in from January 2026,” said Nomura Financial Advisory and Securities (India).
Note that the weather remains pleasant, for now, which could well discourage AC purchases in Q3, unless of course the country experiences severe October heat. Stiff competition in the sector is another sore spot.
Also, the net benefit for consumers would be nominal by Q4FY26; thus demand would remain contingent on the upcoming summer season, added Nomura. Hence, the positive impact of the above-mentioned factors is likely to be more pronounced in FY27.
Recall Voltas’s Q1FY26 had been miserable with revenue from its unitary cooling product (UCP) segment, which comprises RACs and other cooling products, dipping 25% year-on-year to ₹2,868 crore (73% of total revenue) with Ebit margin contracting nearly 500 bps to 3.6%. Q2 growth and margin would be under pressure, too.
Understandably, Voltas’s shares are down 28% in the past one year. It trades at around 58 times FY26 estimated earnings, as per Bloomberg, which is pricey. Motilal Oswal Financial Services said it would closely monitor the festive period and GST cut impact, as key catalysts for demand recovery. How Voltas’s market share (18% in Q1FY26) moves remains critical going ahead.
