Consumer durables demand clutching at straws

by Mahesh Vyas

Consumer sentiments shot up by an impressive 5.5 per cent during the week ended September 17. This is an unusually high increase of the consumer sentiments index during a week.

The pitrupaksh period did not dampen spirits in 2017, like it did not in 2016.

The proportion of households that said that this was a good time (compared to other times) to buy consumer durables increased to 26.2 per cent. This is higher than in any of the preceding four weeks. The past four weeks’ average was 24 per cent. The proportion of households that said that this was a bad time (compared to other times) to buy consumer durables was 21.9 per cent which was a shade lower than the average 22.2 per cent proportion in the past four weeks.

On a net basis, 4.2 per cent households said that this is a good time to buy consumer durables. This is the highest ratio in the past four weeks.

If producers, retailers and marketing professionals of consumer durables have been led to believe that pitrupaksh is not the period to push sales, its time they revisited this theory. On the aggregate, the Indian consumer’s decision to buy consumer durables does not seem to care much about pitrupaksh.

If there is a pitrupaksh effect then it is likely a self-fulfilling prophesy created by the supply chain. It is possible that stockists are more superstitious than consumers. It is also possible that if the supply chain tries hard to capitalise on auspicious days it is correspondingly compelled to accept the incrimination of inauspicious days.

India has progressed and maybe, it is time for consumer durables companies to see some change in their strategies.

Thanks to greater mobility of Indians, festivals are becoming a pan-India phenomenon. Mumbai will celebrate Navratri and Pujo beginning next week with as much fervor as it did Ganesh Chaturthi. Later, it will also celebrate Chhat Puja. Poor Biharis being beaten up in Mumbai was an unfortunate (and deplorable) short-term collateral damage of a relentless change that is underway. Festivals are not rooted much in tradition any more. They are the outcome of a search for celebrations, which can locate a sanction in our traditions and our culture.

Given that migration has engineered a pan-India celebration of all kinds of festivals, and given that consumers don’t pay much attention to pitrupaksh, the consumer goods companies could do better to consider the entire period from Ganesh Chathurthi in August-September through Makar Sankranti or Akshay Tritiya in February-March to be a festive season, without interruption.

It is worth noting that both, rural and urban regions ignored pitrupaksh as consumer sentiments improved in both regions. The urban consumer sentiments index rose 2.8 per cent while the rural index rose by 6.7 per cent.

Yet, both have very different views with respect to buying of consumer durables, now. And the views are in stark contrast to their overall sentiment.

Rural folks displayed a robust, 6.7 per cent increase in household consumer sentiments during the week ended September 17. But, they showed no net improvement in their inclination to buy consumer durables. While the number of rural respondents who believed that this was a good time to buy consumer durables increased from 19.5 per cent to 21.4 per cent, the proportion of rural households that believed that this was a bad time increased from 21.1 per cent to 25.2 per cent. Rural India has been giving consumer durables a thumbs-down similarly since early August.

However, most of the demand for consumer durables is in urban India. And here the story is somewhat promising, but only a bit.

During the week ended September 17, 28.6 per cent of urban households said that this was a good time to buy consumer durables. This is a recovery from a persistent fall since late July; and it is closer to the average.

The proportion of respondents who said that this is a bad time to buy consumer durables dropped quite sharply from 23 per cent to 20.3 per cent. Yet, it was high compared to the average of 18 per cent.

While the proportion of urban households who think it is a good time to buy durables has been steady, the proportion who believe it is a bad time has been increasing.

The BSE-CMIE-UMich consumer sentiments indices seem to suggest that the demand for consumer durables in the coming festivals season is not at its best but, it did improve in the last couple of weeks, even if just a wee bit.

First Published in Business Standard Link

Unemployment Rate
Per cent
4.8 -0.0
Consumer Sentiments Index
Base September-December 2015
93.0 +0.8
Consumer Expectations Index
Base September-December 2015
91.0 +0.6
Current Economic Conditions Index
Base September-December 2015
96.0 +0.9
Quarterly CapeEx Aggregates
(Rs.trillion) Dec 16 Mar 17 Jun 17 Sep 17
New projects 2.32 3.77 2.02 0.88
Completed projects 1.00 1.91 1.13 0.70
Stalled projects 1.13 0.70 2.66 0.64
Revived projects 0.18 0.67 0.29 0.14
Implementation stalled projects 0.82 0.33 0.67 0.50
Updated on: 20 Oct 2017 8:20PM
Quarterly Financials of Listed Companies
(% change) Sep 16 Dec 16 Mar 17 Jun 17
All listed Companies
 Income 2.1 6.2 10.2 10.2
 Expenses 1.9 6.3 11.9 10.5
 Net profit 14.6 40.3 16.8 -18.9
 PAT margin (%) 6.9 6.1 6.1 5.4
 Count of Cos. 4,503 4,503 4,427 4,257
Non-financial Companies
 Income 0.6 5.9 11.8 10.9
 Expenses -0.2 7.2 15.5 11.1
 Net profit 26.7 24.6 -1.1 -24.3
 PAT margin (%) 6.9 6.2 6.3 5.3
 Net fixed assets -9.2 7.5
 Current assets 8.1 2.1
 Current liabilities 11.7 8.5
 Borrowings 3.1 4.9
 Reserves & surplus 8.4 6.5
 Count of Cos. 3,476 3,482 3,432 3,324
Numbers are net of P&E
Updated on: 20 Oct 2017 8:30PM
Annual Financials of All Companies
(% change) FY13 FY14 FY15 FY16
All Companies
 Income 12.6 10.0 5.1 1.1
 Expenses 12.8 9.8 5.2 1.2
 Net profit 1.0 -2.2 1.4 -12.6
 PAT margin (%) 3.5 3.2 3.2 3.0
 Assets 14.3 12.3 9.4 9.4
 Net worth 9.6 9.6 8.7 10.0
 RONW (%) 6.8 6.2 6.1 5.2
 Count of Cos. 26,117 23,850 23,499 19,777
Non-financial Companies
 Income 12.0 9.7 4.3 0.1
 Expenses 12.3 9.3 4.4 -0.6
 Net profit -8.5 -2.7 -5.9 11.6
 PAT margin (%) 2.4 2.2 2.1 2.6
 Net fixed assets 12.9 11.6 13.3 14.4
 Net worth 7.9 8.2 7.2 10.1
 RONW (%) 5.5 5.1 4.9 5.5
 Debt / Equity (times) 1.1 1.1 1.1 1.0
 Interest cover (times) 2.1 2.0 1.9 2.0
 Net working capital cycle (days) 72 69 67 66
 Count of Cos. 20,489 19,109 18,976 16,329
Numbers are net of P&E
Updated on: 20 Oct 2017 4:58PM

Time-series available since 2007-08