TTK Prestige is getting realistic about its topline growth guidance for the fiscal ending March 2014, citing a tough economic environment prevailing in South India. The leading kitchen appliance company is now looking at a figure of 10-15%, lower than its earlier forecast of 25% at the start of the year.
According to a top company official, the overall sluggishness in the economy, coupled with a delayed monsoon (in South India) and political disturbances down south, has hurt domestic sales. “Keeping this in mind, we have revised our guidelines and feel full-year growth should be anywhere between 10-15%. While South India has been a drag so far, we are optimistic of market sentiment improving in the second half,” said the official in response to dna query during an earnings call on Thursday.
It was a different story last fiscal as festivities started quite early, because of which festive sales loading – known as stocking of goods – took off in September itself. This time round, the same is expected to happen in October, the impact of which will be seen in the December quarter this fiscal.
But analysts are surprised that Onam celebrations, considered as a big event in South India, have failed to revive the fortunes of kitchen appliances companies as demand stayed lacklustre despite higher foreign remittances.
The company officials reasoned that while more money flowed into the hands of people owing to an appreciation in the exchange rate of the US dollar versus the rupee, it was largely utilised to buy gold which was trading at a lower price followed by real estate. As such, kitchen appliances didn’t offer an attractive proposition to customers.
The company recently announced its second quarter results which saw its total income going up to `348.17 crore from `336.16 crore in the same quarter a year ago. Net sales registered a 2.98% rise and stood at a record `345.54 crore, from `335.55 crore in the year-ago period.
Pratik Biyani and Sanjay Singh, analysts with Standard Chartered Bank, said the management’s guidance of 15-20% domestic sales growth in 2013-14 looks difficult to achieve, considering a net sales growth of only 2% in the first half.
In a recent note, Rakshit Ranjan and Shariq Merchant, research analysts with Ambit Capital, said that while non-South sales rose 34% year on year (yoy), revenues from South India declined around 20% on an annual basis. The sales moderation in the South Indian market was prompted solely by a weak macro environment rather than any market share loss,” the analysts said.