The air conditioning industry is feeling the heat from multiple directions. Blue Star Limited has implemented a cumulative 13% price increase across its AC portfolio, and the reasons run deep. Copper, a critical input, faces supply chain constraints with inner grooved tubes primarily imported from Vietnam. Certificate of Origin issues have added costs, though domestic capacity is now coming online with partners like Hindalco and Adani. Transcripts +2
But copper isn't the only culprit. Post-war conditions have driven up costs for petroleum-based plastics like styrene and polystyrene. Energy efficiency norm changes alone account for approximately 5% of the price increase, with the January 1, 2026 label change being a significant driver. Blue Star's management has been clear: raw material cost increases and exchange rate impacts get passed to consumers, typically with a 2-3 month lag. Transcripts +3
Interestingly, despite the 13% headline increase, consumers only pay about 3% more due to a 10% GST benefit. Management is skeptical that price increases alone will significantly reduce offtake, suggesting broader inflation and consumer sentiment matter more. Historical data supports this—the 3-4% and 4-5% increases implemented in FY25 didn't dent demand, with Q4 performance described as "exceptionally well". Transcripts +1
Voltas Limited faces a different reality. With over 65 players in the market, competitive intensity constrains pricing power significantly. Management acknowledged that "input price escalations and inability to pass on the same to the customers owing to stiff competition have impacted the margins". During peak seasons, pricing flexibility becomes particularly constrained because dealers and customers have already placed orders at fixed prices. Transcripts +1
Rather than passing costs to consumers, Voltas has focused on cost mitigation through comprehensive value engineering programs—improved sourcing, deeper localization, design innovations, and manufacturing efficiencies. The company is prioritizing market share over margins, stating they are "heavily driven towards gaining market share" with margin improvement being "a journey which will play out over the next few quarters". InvestorPresentations +1
The GST reduction from 28% to 18% on ACs provides some offset, with channel partners seeing this as a "large opportunity" due to improved affordability. But the fundamental challenge remains: Voltas can't easily pass on costs without risking market position in a fragmented market. Transcripts +2
The dairy sector tells a different story. Fresh milk demonstrates relatively inelastic demand, enabling companies to pass on cost increases while maintaining volume growth. Parag Milk Foods reported milk procurement prices around INR 42 per litre, approximately 15% higher than the previous year. Despite this, the company achieved healthy volume growth of 18.6% year-on-year in Q3 FY23. Transcripts +1
The cost pressures are real. Cattle feed prices are directly impacted by energy prices and fuel cost increases, which cascade through to milk prices. Green fodder prices increased by 28.7% year-on-year in Q3 FY23, contributing to milk price inflation of 45% over the prior 18 months. Packaging film costs have also risen due to war-related geopolitical tensions creating inflationary pressure on polymer prices. Transcripts +2
Hatsun Agro Product faced packaging material price increases of 30-40% due to war impact. Yet milk procurement prices increased by 8-10% in Q3 FY26, and the company maintained operations through vertical integration—owning polythene film production provided comparative advantage. Transcripts +3
The key insight: consumers treat milk as essential. Management across dairy companies believes consumers are willing to spend on quality products, and volume growth has remained resilient despite significant price increases. Transcripts
On May 13, 2026, the government raised the effective import duty on gold from 6% to 15%, making gold costlier by approximately INR 27,000 per 10 grams. This policy shift targets record gold imports of $71.98 billion in FY26 and pressure on foreign exchange reserves amid the West Asia conflict.
For P N Gadgil Jewellers, the impact is nuanced. Despite gold price increases of over 30% in recent periods, the company achieved record sales of INR 123.5 crore on Gudi Padwa in Q4 FY25, marking a 40.4% year-over-year increase. Management emphasized that margins are primarily driven by making charges rather than gold price movements, with 100% effective hedging protecting against volatility. Transcripts +2
Consumer behavior patterns reveal resilience. When gold prices move suddenly, consumers typically pause for 1-15 days to observe where prices settle. Discretionary purchases may be postponed, but wedding demand cannot be shifted significantly because weddings occur on fixed dates. Currently, 55-60% of wedding jewelry purchases happen through old gold exchanges, effectively using old gold as currency. Transcripts +3
Industry expectations suggest India's total gold demand may decline by 10% in the near term. But historical patterns show demand is never truly lost, merely shifted in timing. When prices stabilize, customers return to stores. Transcripts
Higher input costs and policy shifts have forced companies to adapt their working capital strategies. Jewellery retailers have developed sophisticated inventory management approaches. P N Gadgil reduced inventory levels by 25-30% across all stores post-COVID, now operating at INR 40 crores per store compared to competitors who might have INR 55-60 crores. Transcripts +1
Kalyan Jewellers India proactively reduces inventory volumes when gold prices rise—if prices increase by 15%, they typically reduce inventory volume by approximately 10%. They also adjust product mix, promoting 18-karat over 22-karat gold and focusing on studded jewelry where stones account for 40-45% of value. Transcripts +3
Titan Company has leveraged its gold exchange program aggressively. By Q3 FY26, more than 50% of their business had an element of exchange. The company also extended gold loan tenure from 180 to 270 days to manage working capital costs. Transcripts +2
Here's the fascinating dynamic facing AC manufacturers: rising temperatures increase the necessity of cooling appliances, but higher prices driven by input costs and regulatory changes could dampen demand. Blue Star management noted that demand impact assessment heavily emphasizes summer season timing and duration, with caution about celebrating compared to the strong 2024 summer. Transcripts
The net demand curve for cooling appliances depends on how these opposing forces play out. If fuel price hikes and peak inflation force consumers to defer discretionary purchases, AC demand could suffer. But if heat waves become more severe, the necessity argument may override price sensitivity.
For packaged consumer goods companies like Hindustan Unilever, Marico, and Godrej Consumer Products, the threshold for demand destruction is different. These companies have implemented price hikes ranging from 2-7%, reflecting differences in brand equity, product mix elasticity, and competitive positioning. The question becomes: at what point does consumer sentiment deterioration, driven by petroleum price increases, cause meaningful demand destruction?
Exchange rate fluctuations impact companies differently based on their import exposure. Blue Star, with significant imported components including copper tubes, faces direct pressure on raw material costs. Management consistently cited USD-INR depreciation as detrimental to profitability. Transcripts
Companies with more domestic supply chains, like dairy firms, are relatively insulated from currency volatility. Their pricing responses are driven more by domestic inflationary pressures—cattle feed costs, packaging materials, and fuel—rather than exchange rate movements.
The differential ability to pass on costs between essential goods (milk) and discretionary items (ACs, paints) affects margin preservation strategies. Dairy companies have demonstrated strong pricing power with inelastic demand, while AC manufacturers face competitive constraints that limit cost pass-through despite significant input cost inflation.
Management commentary across sectors suggests a common theme: near-term headwinds are manageable, but the environment remains challenging. Blue Star indicated margins would "continue to be under pressure until 2030". Voltas is playing the long game on market share. Jewellery retailers are betting on gold's emotional and cultural role in India to sustain demand despite price increases. Transcripts +2
The companies best positioned are those with strong brand equity, diversified product mixes, sophisticated hedging strategies, and the ability to adapt quickly to changing conditions. As one management team put it, demand is never truly lost—it just shifts in timing. The winners will be those who can navigate these shifts while protecting margins and maintaining customer loyalty.
