Headquartered in Mumbai, India, Voltas is an Indian air conditioning and engineering solutions provider and a projects specialist. The company operates through three segments: Unitary Cooling Products (UCP, 69% of LTM 2QFY25 sales), Electro - Mechanical Projects and Services (EMP, 26%), Engineering Products & Services (4%), and others (1%). Founded in 1954 through a partnership between Tata Sons and Volkart Brothers, Voltas has become a key player in the air conditioning and engineering solutions industry. Voltas has a 50:50 joint venture with Arçelik called Voltbek Home Appliances to sell refrigerators, washing machines, microwaves and other white goods under the Voltas Beko brand. The company has three manufacturing facilities located in India (Waghodia, Sanand and Pantnagar).

Favorable macroeconomic indicators enthusing management to grow capacity

The World Bank estimates that India’s economy will grow by 6.5% to 7.0% in 2025, driven by strong activity in the services and industrial sectors. India is expected to become the fourth-largest consumer durables market by FY27. The consumer durables accounts for around 0.6% of the India’s GDP, with the white goods market projected to double to USD21bn by 2025 from USD10.9bn in 2019, and further to USD35.4bn by 2029, growing at a robust CAGR of 14.0%. Domestic manufacturing is a key contributor to this growth, adding nearly USD4.6bn on average to the industry (USD21bn in 2025). Voltas capitalized on this trend and achieved a new milestone by selling more than 2 million room air conditioning (RAC) units in just the first 8 months of 2024. 

Several government initiatives have bolstered the growth of the consumer durables sector. These include Production-Linked Incentives (PLI) for components and white goods, focusing on air conditioners and LED products to promote domestic manufacturing and ‘Make in India’ efforts. Vision 2030 envisions India as a dynamic global center for consumer durables and electronics, leveraging its vast domestic market, skilled workforce, and advanced technology. On the back of these tailwinds, Voltas is investing INR4.5-5bn in a new manufacturing facility in Chennai to strengthen its presence in the Southern and Western India markets. Production at its new factories in Chennai and Waghodia is progressing as planned. The Chennai RAC factory with a capacity of 1mn units has begun operations and aims to produce 1.5-2.0mn units by FY26. According to management, if this growth pace continues, sales will soon exceed 2.5-3.0mn units, compared to 2.0mn units in the first eight months of 2024.

Strong performance continued in 1HFY25, with the UCP maintaining its robust performance

Voltas has delivered consistent performance over the years, registering a revenue CAGR of 10% over FY20-24 to reach INR124.8bn. Although EBITDA margins contracted to 3.9% in FY24 from 9.0-10.0% in FY19-20 due to management’s focus on volume growth. Voltas has been able to maintain positive FCF (INR4.7bn in FY24), and cash and short-term investments have tripled over FY20-24 to INR8.2bn. The strong cash position is expected to aid Voltas to explore additional growth avenues to benefit from the favorable macroeconomic tailwinds.

Recently in 1HFY25, Voltas reported a robust 33% Year-on-Year (YoY) increase in sales to INR77.3bn, driven by 56% volume growth in its RAC business, with net profit jumping 183% YoY to INR4.7bn. The UCP segment reported 45% YoY growth as the company sold over 2.0mn RAC units in the first 8 months of 2024, matching total FY24 sales. EMP segments EBIT turned positive in 1QFY25 and remained positive in 2QFY25 as well. This marks the seventh consecutive quarter where the company beat analysts’ expectations. The business is expected to grow further in the 2HFY25 due to strong domestic orders. Similarly, Voltas Beko saw robust volume growth of 54%, with market share gains in Refrigerator and Washer segments. Analysts anticipates EPS to double to INR 32.0-42.0 per share in the next 2-3 years, compared to an average of INR15.0 in FY20-FY22. EPS was muted in 2023 (INR 4.08) and 2024 (INR 7.62) due to one-off provisions, pricing pressure, and competition.

Recent price correction may ease valuation concerns

Voltas is currently trading at P/E of 61.3x based on FY25 EPS of 27.9, which is lower compared to 5-year historical average of 104x. However, the valuation looks elevated as compared to industry global peers (48.6x) The Stock price climbed over 70% YTD but corrected by around 13% after hitting all time high of INR 1,944.9 in September. Most of the 34 analysts covering the stock have a ‘Hold’ recommendation, with an average target price of INR 1,750, indicating a limited upside potential of 2%. However, over the last few quarters analysts have consistently revised FY25 & FY26 sales and earnings projections upward, indicating their continued confidence in the company.

The company appears to be a good investment due to its solid fundamentals and the positive outlook for its UCP segment. Despite a slower 2QFY25, the UCP segment performed well, driven by strong primary and secondary sales. Beko is also performing well, and the EMP segment is expected to rebound in 2HFY25. Voltas remains a key player in the air conditioning industry and further two new facilities (Chennai and Waghodia) offer strategic location advantages. Major risks are increase in raw material prices and increased competition and market share losses in the RAC business, which could put pressure on company’s financials.