Havells India CMD warns of short-term demand impact due to commodity price surge

Havells India Ltd.'s Chairman and Managing Director Anil Rai Gupta has warned that the ongoing sharp rally in commodity prices, including Copper, could hurt near-term demand.

In an interaction with CNBC-TV18 on Tuesday, January 20, after the company's December quarter results, Rai Gupta said that everybody in the market is grappling with how will the increase in costs be passed to potential buyers. He alluded to a 25% surge in Copper prices in just the last one month. He also spoke about how this could go on to impact margins in the short-term.

"Can it hurt demand? Well, in the very short term it will, because there has been extra stocking in the third quarter by the channel, which will normalise in month of January. And hopefully, if it remains stable, then the normal demand should come back. But within this hyperinflationary situation, it can affect demand in the short term," Rai Gupta said.

The Havells India CMD also spoke about the switchgear business, whose margins can be impacted due to the rally in silver prices. However, he added that these cost increases will have to be passed on to the market in the medium-term, in order to protect the company's margins.

"In brand and distribution oriented businesses, the demand is not so price elastic, and hence it is prudent to actually pass on the benefit, or the you know, problem of the cost increases to the consumers. However, usually over a long period of time, it can affect demand," he added.

Havells India's third quarter results were largely in-line with expectations on the revenue and margins front. However, gross margins fell 130 basis points from last year to 33% due to the product mix.

Shares of Havells India have slipped to the lows of the day, currently trading 3.6% lower at ₹1,394.5. The stock is down 13% in the last one year.