Why Voltas Share Price is Rising

The Indian market has spun on its heel this past week, leaving even the most seasoned observers scrambling for new headlines.

Benchmark indices, defying all expectations, have climbed to record highs, fuelled by a seven-week rally exceeding 12%. This was backed by optimism on FIIs making comeback and the robust uptrend shown by the domestic markets.

Markets are on track to close out 2023 on a solid note, with benchmark indices hitting back-to-back highs.

Amid this sharp rise in a short period, even beaten-down companies are experiencing a remarkable turnaround.

The buoyant market conditions have breathed new life into the shares of previously beaten-down companies, one among them being Voltas.

Shares of the company have jumped 12% in the past month.

Here's why.

#1 New Manufacturing Plants Plan

Recently, Voltas announced its plan to take up to Rs 5 billion (bn) in term loans to finance the manufacturing of its new plants. The loan will be used for the company's capital expenditure for its new manufacturing plants in Chennai and Waghodia, Gujarat.

The board also approved dropping the proposed non-convertible debentures issue through private placement for raising to Rs 5 bn.

The development came a day after Voltas rejected a news report that claimed that Tata group was considering the sale of Voltas Home Appliance Business.

The company clarified that the aforesaid news was totally incorrect and blatantly false, with no factual basis whatsoever.

This clarification sparked a surge in the company's stock value.

#2 Wedding Season Boom

The wedding season in India for 2023 just concluded with 3.8 m marriages. The wedding business was valued at around Rs 4.7 trillion (tn) this year.

The ripple effect of the wedding season has been particularly pronounced in industries spanning from hotels to retail, witnessing a considerable upswing in their market performance.

Among the notable beneficiaries, Voltas emerged as a key player with a market share of 22.8% in the air conditioning market, capitalising on increased demand during this auspicious period.

Typically, in India, the festive season starts from Onam, covers Durga Puja and with Diwali, contributes around one-third of the overall annual sales value across categories of the industry.

But the sales continue to remain elevated as the wedding season follows immediately after right up to March.

Electronic items such as televisions, air conditioners, refrigerators, etc, are popular purchases by the bride and groom or as a gift given by family and friends on the occasion.

Further, As the wedding season extends into January to March, the anticipation is that this trend will persist, further propelling sales and subsequently boosting the stocks associated with the electronic goods sector.

#3 Turnaround in business

Shares of Voltas were underperforming the market till mid-November this year. The fall was due to FII selling and falling profits.

The company has taken steps to reduce its costs and improve margins. It also announced the launch of a range of products with enhanced features and quality and plans to manufacture more value-added products to improve margins.

The undervaluation, coupled with the company's proactive measures, including cost reduction and product enhancement, may pave the way for a resurgence. Additionally, alignment with broader market cycles further supports the anticipation of an upturn.

This anticipation of resurgence has further fuelled optimism, driving the shares higher.

What Next?

The company dominates the room air conditioner market and has a thriving joint venture with Arcelik, resulting in Voltas Beko Products emerging as one of the Appliances business's fastest-growing brands.

The company further plans to strengthen its market-leading position in the categories that it represents.

Further, Voltas has also announced a capex of Rs 3.5 bn to Rs 5 bn for the next 18 months to increase its manufacturing capacity to 5 m units.

All this indicates that the growth prospects of the company are high.

How Voltas Share Price has Performed Recently

In the past five days, Voltas share price is up 10%. In the month gone by, the stock gained 12%.

In 2023 so far, the stock has gained 18%.

Voltas touched a 52-week high of Rs 957.2 on 20 December 2023 and it has a 52-week low of Rs 737.2 on 27 January 2023.

About Voltas

Voltas is an Indian multinational home appliances and consumer electronics company headquartered in Mumbai, Maharashtra.

It designs, develops, manufactures and sells products, including Air Conditioners, Air Coolers, Refrigerators, Washing machines, Dishwashers, Microwaves, Air purifiers, and Water dispensers.

The company was incorporated on 6 September 1954 in Mumbai as a collaboration between Tata Sons and Volkart Brothers.

To know more about the company, check out Voltas' latest news and analysis.

Also, take a look at Voltas' financial factsheet.

You can also compare Voltas with its peers:

Voltas vs Bluestar

Voltas vs Johnson Controls

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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