Company

Sales Forecast:

The nation-wide lockdown due to the COVID-19 pandemic has adversely impacted consumer
demand in the consumer durables sector. The revenue for the fourth quarter of FY20 was Rs 536.6
cr, as compared to the revenue in the corresponding quarter of the previous fiscal year which was
Rs.739.7 cr. There is a 27.5% drop in revenue. This indicates that the demand was sluggish even
before the full impact of the lockdown was felt (pre-April). The weak demand stemmed from tight
liquidity and decreased discretionary spending. From the Q1 results of V-Guard for FY20-21, there is
a 42% decline in revenue from the same quarter of the previous year i.e. from Rs.706.65 cr in
Q1FY20 to Rs 408 cr in Q1FY21. The revenue from operations for April 2020 was close to zero. As the
economy started opening up, the revenue saw some relief as that of May and June were 70% and
90% respectively of the revenue of the corresponding periods in FY20. The drop in sales also
indicates piling up of inventory, although during the month of March there was decreased capacity
utilization.

The seasonality of the nature of V-Guard’s business is another key factor. In the consumer durables
and appliances industry, 60% of the total turnover comes from the February to June period. V-
Guard, being the market leader in voltage stabilisers and also having appliances like coolers and fans,
reflects this figure, and historically approximately 53% of it’s total revenue comes from the same
period. The unfortunate coinciding of the lockdown with the period of maximum sales, the expected
revenue for FY21 is expected to show a significant decline. However, the company plans to add
3000-5000 retailers every year for the next five year. This coupled with V-Guard’s diverse product
portfolio indicate that the revenue of the following two fiscal years is expected to bounce back.

The India-China tension also poses a threat to the consumer durables and electronics industry of
India, as India imports 45-50% completely built units worth almost US$60 billion, mainly from China.
However less than 10% of v-Guard’s components are imported, according to the company.

Finally, a drop in GDP indicates a drop in demand. The steep 23.9 per cent contraction in the GDP in
April-June will adversely impact consumer durable and appliance sales. Even with the economy
restarting, owing to increased health spending and reduced disposable income, there will be a drop
in discretionary spending.