The Indian room air conditioner (RAC) industry is on the brink of significant transformation, with a year-on-year (YoY) sales volume increase projected at 20-25% for the financial year 2024-25. According to a recent study by ICRA, this growth is set to elevate sales to record levels of 12-12.5 million units. As temperatures rise and urbanization continues, the demand for air conditioning units is expected to surge, leading to a promising outlook for the sector.

ICRA also forecasts a growth rate of 10-12% in the 2025-26 fiscal year, showcasing the industry's resilience and potential. Various factors contribute to this trend, including the increasing prevalence of heatwaves, urbanization, higher disposable incomes, and favourable consumer financing options. The recent summer season witnessed robust YoY volume growth of 40-50% for many original equipment manufacturers (OEMs), reflecting changing climatic conditions and shifting consumer behaviours.

Mr. Srikumar Krishnamurthy, Senior Vice President and Co-Group Head of Corporate Ratings at ICRA, highlighted that the domestic RAC industry has already surpassed its pre-COVID peak sales volumes in the financial year 2023-24. The average number of heatwave days has been steadily increasing over the last three decades, prompting households to invest in multiple RAC units for comfort.

Looking ahead, while the rapid growth experienced recently is remarkable, ICRA anticipates moderate growth rates of 10-12% in the 2025-26 fiscal year. On the supply side, domestic household RAC capacity is expected to increase by over 40% in the next three years. Key OEMs and contract manufacturers are expanding their capacities to meet rising demand effectively. The government's production-linked incentive (PLI) scheme for component manufacturing in the consumer durable sector has also played a crucial role in enhancing localization within the Indian RAC industry.

In the first quarter of the current financial year, ICRA's sample set of three key listed RAC brands reported an impressive YoY revenue increase of approximately 53%. This surge in revenue is attributed to strong demand during the peak season, with the agency predicting a healthy YoY revenue growth of about 25% for the same set this fiscal, compared to around 17% in the previous financial year.

Despite the fierce competition and fluctuations in input costs, the industry's operating profit margin (OPM) is expected to expand gradually, benefiting from operating leverage. This positive trajectory suggests that manufacturers are not only adapting to changing market dynamics but also positioning themselves for sustainable growth.

As the Indian RAC market evolves, the importance of innovation and adaptation cannot be overstated. The increasing focus on energy efficiency, sustainability, and advanced technology will play a pivotal role in shaping the future of the industry.

In conclusion, the Indian air conditioner industry is gearing up for a period of substantial growth and transformation. With rising temperatures, changing consumer preferences, and supportive government policies, the sector is well-positioned to thrive in the coming years. For further insights into the evolving market landscape and investment opportunities, explore the best IPOs to apply now and stay updated on financial developments at Best IPO to Apply Now - IPO List 2024, Latest IPO, Upcoming IPO, Recent IPO News, Live IPO GMP Today - Finance Saathi. Additionally, keep up with Top News Headlines - Share Market News, Latest IPO News, Business News, Economy News- Finance Saathi.

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The Indian RAC industry projects a sales volume increase of 20-25% in FY 2024-25, reaching 12-12.5 million units.

The average number of heatwave days per year has steadily increased, fueling demand for air conditioning units.

The government’s production-linked incentive scheme has boosted localization and capacity expansion in the domestic RAC industry.