Monsoon Blues for Voltas? Shares Slide Nearly 30% This Year as Unseasonal Rain Sends Chills

While much of India rejoiced in the early arrival of monsoon this year, for Voltas, the drop in temperature rang alarms of caution. With the onset of unseasonal rains eating away demand, shares of the consumer discretionary firm have plunged over 30% so far this year.

Even as Voltas gained market share in April, the overall room air-conditioner (RAC) market cooled off as industry volumes plunged 20–25% year-on-year (YoY). This is majorly owing to unseasonal rains, making the overall outlook for upcoming quarters quite blurry. A similar story emerges on the demand front too as trends remain subdued, with overall room air-conditioner sales staying lukewarm. Taking a blow from faltering demand, Voltas is currently seeing 6–8 weeks of unsold inventory piling up.

After delivering a strong double-digit return of around 50% between January and June last year, Voltas shares have faced a major downtrend this year. In the first six months of the current year, the stock has declined by over 26%, dampening investor sentiment.

While Voltas hopes to hold on to its high single-digit margins in the coming quarters, unseasonal weather might bring-in some unwanted surprises for Voltas. As for now, D-Street analysts are pinning their hopes on June sales, but industry-wide risks continue to linger alongside heating competition.

Rising Competitive Heat

"Rising competition and aggressive pricing/higher discounts to recover market share are likely to lead to margin risks for Voltas despite production-linked incentives (₹180 million PLI was booked in Q4 for FY24–25)," Nomura stated in its report.

Even as troubles mount, the RAC firm has stayed away from implementing any major pricing adjustments, as per analysts. Rival firms, on the other hand, have intensified the competition by offering attractive incentives like free installations and bundled offers.

Interestingly, Volt-Beko (a joint venture between India's Voltas and Turkey's Beko) delivered a robust double-digit volume growth of 57% in FY25, majorly driven by semi-automatic washing machines (WM) and direct cool refrigerators. It is also eyeing faster growth as compared to the broader industry in the current quarter.

As for the electro-mechanical projects & services (EMPS) segment, the domestic business is gradually picking up. However, international growth remains slow with no fresh orders during FY25. "Management expects international EMP to stay weak (no new orders in FY25) while domestic shall see a pickup in order inflows and execution in FY26E/27E. We are cutting FY26E/27E earnings per share by 8%/5%," Nuvama Institutional Equities stated in its report.

Analysts Remain Cautious

Nuvama has retained 'Hold' rating on Voltas with a SoTP (Sum-of-the-Parts) based target price of ₹1,190, down from ₹1,250. "Notwithstanding the current weak summer season, we stay positive on the structural story of growing RAC penetration and high growth rate over the medium term," the brokerage firm said.

In the last annual year, the stock has experienced a double-digit drop of more than 16.5% on the NSE. Currently, the share is down by around 34% from its 52-week high price level of ₹1,944.

Nomura has maintained a neutral tone on the stock, citing balanced risk-return profile. "The stock’s current valuation at 35x FY27F offers a balanced risk-reward trade-off, in our view. We maintain our Neutral rating on Voltas, based on our target PE of 33x/15x/15x for UCP/Project/Service, applied to Jun-26F EPS, and value VoltBek (unlisted) at ₹122 per share, to arrive at our target price of ₹1,290," the brokerage firm said.

While increasing the market share remains the top priority for Voltas, the company is also focusing on limiting its losses in Beko.

"The company is focused on gaining market share and reducing losses, aiming to contain Beko Ebitdam at -5% in FY26. We model a compound annual growth rate of 10% for revenue, 15% for Ebitda, and 17% for adjusted PAT over FY25-27E," as per HDFC Securities.

The brokerage firm has maintained a 'BUY' on Voltas with a lower SOTP-based target price of ₹1,420 per share.