Softening base metal prices cushion rupee fall for consumer durables makers

The rupee’s constant fall against the dollar has created challenges for many industries. However, the consumer durables sector has been less affected despite its reliance on imported components, as companies have contracts in the Japanese yen or Chinese yuan.

 

Another factor shielding the sector is the establishment of manufacturing facilities within India, where companies have created their ecosystems domestically. Additionally, a decline in base metal prices has cushioned the impact of the falling rupee.

 

In the last three months, the rupee has depreciated 2.2 per cent against the dollar, which typically hurts consumer durable companies.

 

“The rupee has been depreciating, but we are also seeing commodity prices soften. One has to wait and watch how both trends play out. We will not take any pricing action at the moment but will review the situation next month,” said Kamal Nandi, business head and executive vice-president at Godrej Appliances, part of Godrej & Boyce.

 

The London Metal Exchange base metal index has softened since October, providing some relief.

 

Daikin India has focused on creating its own manufacturing ecosystem within the country to produce air conditioners. While it still imports components, imports account for only 10-15 per cent of its total requirement.

 

“We have created our own ecosystem and recently opened another manufacturing facility, reducing our dependence on imports,” said KJ Jawa, chairman and managing director of Daikin India.

 

Jawa added that the company would evaluate its pricing strategy but only at the end of the month.

 

In December, Daikin India announced a joint venture with Rechi Precision, a major player in the compressor business, to manufacture, design, and sell rotary (inverter and non-inverter) compressors in India and some overseas markets.

 

Another consumer durables manufacturer, speaking on the condition of anonymity, noted that it has contracts in Japanese yen and Chinese yuan. The rupee has not depreciated as sharply against these currencies as it has against the dollar.

 

“The depreciation is not as significant against the currencies in which we have our contracts. We are in talks with our buyers, and the fall may have some impact on our costs,” the person added.