ICRA sees tough time for consumer durable firms

NEW DELHI, AUG. 6. The Investment Information and Credit Rating Agency (ICRA) has said in its report on Indian consumer durables industry that pressure on margins of domestic players would increase due to intense competition from foreign firms.

In the industry watch report of ICRA, the agency said that as foreign firms have access to latest technologies from their parent companies, they would be in a position to offer better products to Indian consumers at affordable prices.

This, according to ICRA, would put the domestic consumer durables manufacturers at a disadvantageous position and unless they invest heavily in product research, domestic players would see a fall in their profitability margins.

The ICRA report further said that even if the Indian manufacturers decide to invest in product research to compete with their foreign counterparts, then this would also lead to a rise in prices of their goods, which would again put them at a disadvantageous position.

Further, the benefits of product research would accrue to them only after a time lag when their competitiveness in the market would be eroded to a large extent. Consumer durable manufacturers may look at overseas markets to counter this threat, ICRA said.

The withdrawal of quantitative restrictions on imports of consumer durables would also lead to the entry of more overseas players in the Indian market.

This, the report said, would cause more competition across sectors which also mean lowering of margins. If the Indian players try to counter this lowering prices without concomitant reduction in costs, then it could not be counted as a sound strategy.

- PTI

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Section  : Business
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