Voltas: After 3 years of no returns, is the business finally speaking up?

But FY25 has told a different story so far.

While most of the industry grew at a healthy pace, Voltas surged past them all. AC volumes jumped 42% compared to the first nine months of FY24. The company also managed to inch its market share back up to around 20.5%, showing that its strategy of holding prices steady and focusing on mass-premium buyers might just be working.

Figure 1: Management on Room ACs (RACs). Source: Quarterly Result Dec 24.

Interestingly, the momentum wasn’t limited to just air conditioners.

Voltbek, Voltas’s joint venture in appliances, posted 59% volume growth in the December 2024 quarter at a time when the broader industry was barely moving.

Refrigerators and washing machines saw single-digit or negligible growth across the board, but Voltbek crossed 10% market share in multiple categories during the quarter.

But is this shift durable, or is it just a short-term spike driven by demand and season?

Let’s break it down.

Voltas’s business mix

Voltas may be best known for its air conditioners, but the company’s business spans much more than just cooling homes.

It operates through four key verticals: Unitary Cooling Products (UCP), its flagship business; VoltBek, the appliance joint venture with Arçelik; Electro-Mechanical Projects and Services (EMPS), which handles large HVAC and MEP installations; and Engineering Products and Services (EPS), a niche but high-margin B2B segment.

Each of these verticals is at a different point in its cycle, some consolidating, others turning around, and a few still finding their feet. Understanding them in detail is key to assessing Voltas’s overall trajectory.

1. The flagship engine: UCP segment is back in control

For decades, the Unitary Cooling Products segment has been the backbone of Voltas.

It houses the brand’s room air conditioners (RACs), air coolers, commercial refrigeration systems, and water dispensers. This segment alone contributes close to 70% of the company’s total revenue and accounts for nearly two-thirds of its operating profit. Naturally, any disruption here has ripple effects across the business.

Figure 2: Revenue and Profit Share of Various Segments. Source: Quarterly Result Dec 24.

Over the past few years, Voltas’s dominance in RACs was challenged.

The company found itself slowly losing ground in a market it once ruled. It wasn’t one big event but a combination of things: a crowded field with new players offering cheaper alternatives, changes in import rules that disrupted its supply chain, and rising costs that made price-sensitive consumers pause.

As a result, its share in the room air-conditioner market slipped to 18.7% by the end of FY24, a far cry from where it used to be.

But this year, something shifted.

Voltas took a measured approach.

They froze product prices around mid-FY24, choosing to absorb cost pressures while others hiked MRPs. The strategy was simple: focus on volume leadership rather than margin chasing, especially in the mass-premium 1.5-ton 3-star inverter category that dominates India’s RAC landscape. The company also doubled down on non-metro markets, where affordability trumps brand aspiration, and its value-focused positioning resonates well.

That approach is beginning to pay off.

In the first nine months of FY25, the company grew its AC volumes by 42%, comfortably ahead of the industry’s pace. That surge has already helped Voltas lift its market share to around 20.5% — not just a recovery but a sign that it might be winning back some of the confidence it had lost.

The margin story is starting to turn, too. UCP segment margins are still below pre-COVID highs, but these margins are now stabilising in the high single-digit range. Moreover, sub-segments like air coolers, often ignored in strategic conversations, delivered revenue growth during the same period, making Voltas the second-largest player in the category.

Meanwhile, commercial refrigeration, particularly water coolers and freezers, saw demand improve from institutional buyers, though margins here remain modest. In all, UCP is once again playing offense — and doing it without overextending itself financially.

2. The climber: VoltBek moves closer to operating breakeven

If UCP has always been Voltas’s safety net, VoltBek, its joint venture with Turkish appliance giant Arçelik, has long been its wildcard.

Formed in 2018, the JV entered India’s highly competitive home appliance market with refrigerators, washing machines, and microwaves, but for several years, it struggled to gain meaningful traction. Losses piled up. Distribution was thin. Critics wondered if Voltas had bitten off more than it could chew.

But in the past year, VoltBek has shown signs of transformation.

In Q3 FY25, VoltBek reported 59% volume growth year-over-year, far exceeding the industry average. Even more notable was the share it captured.

In semi-automatic washing machines, the JV now holds a 16.7% market share. In multiple categories, it has crossed the 10% mark, a critical threshold in India’s appliance market that gives brands visibility across large-format retailers and distribution channels.

This scale hasn’t come at the cost of margins.

VoltBek’s gross margins expanded from 12% in FY23 to over 20% in FY24, and its EBITDA loss shrunk from -16.4% to -2.4%, signaling that the business is now approaching operating breakeven.

This turnaround is due to multiple strategic levers: a sharper product portfolio, better SKU availability, local manufacturing to lower costs, and deeper penetration in Tier 2 and Tier 3 cities. Importantly, VoltBek has begun competing not just on price but on mid-premium value propositions — something that resonates well with upwardly mobile consumers looking beyond entry-level brands.

What was once a loss-making experiment is now beginning to look like a real growth engine. VoltBek may still be a few quarters away from profitability, but its direction is clear. For Voltas, this means the long wait to unlock value from its white goods portfolio may finally be nearing its end.

3. The cleanup act: EMPS tries to find stability

While UCP and VoltBek have shown momentum, Electro-Mechanical Projects and Services (EMPS) has been a pain point.

This segment handles HVAC (heating, ventilation and air conditioning) and MEP (mechanical, electrical and plumbing) projects for commercial spaces, infrastructure, and industrial customers, both in India and overseas. It contributes roughly 25-30% of Voltas’s revenue, but its earnings track record has been inconsistent at best.

In FY23 and FY24, the EMPS segment was hit by a series of setbacks.

Execution delays, cost escalations, and legal disputes, particularly in the Middle East, have weighed on performance. A key flashpoint was the Qatar project, where Voltas faced a QAR 200 million (~Rs 400 crore) encashment of bank guarantees, a matter now under litigation. The financial drag from this incident alone forced the segment into a loss position, with EBIT turning negative in FY23.

That said, recent quarters have brought some signs of stabilisation.

The Indian order book is robust, with projects in metro stations, airports, and data centres. Execution speed is improving, and the company has shifted to more selective bidding, with a renewed focus on profitability over order volume. Analysts tracking the company believe EMPS could return to breakeven if international project risks are contained and cost controls continue to tighten. Still, given its volatility and capital intensity, EMPS is unlikely to become a key growth engine. The best-case scenario in the short term is for it to stop being a drag.

4. The constant: EPS steady and cash-generating

Finally, Engineering Products and Services (EPS), Voltas’s smallest segment, remains the steadiest. Focused primarily on trading and servicing textile machinery and mining equipment, EPS contributes only about 5% of overall revenue but punches above its weight in profitability — delivering over 20-25% of EBIT in some years.

This segment doesn’t make headlines, but it provides consistent cash flow with minimal capital requirements. It doesn’t grow rapidly and isn’t impacted by weather, commodity cycles, or consumer sentiment. In a portfolio where two of the four segments are still recovering, having EPS as a quiet, high-margin contributor helps smooth out earnings volatility.

A four-engine model, finally in motion?

With UCP returning to growth, VoltBek nearing breakeven, and EMPS beginning to stabilise, Voltas appears to be moving toward a more balanced business structure.

For much of the past three years, it relied too heavily on one segment. Today, the foundation looks broader, if still uneven. The next leg of the story may not be about a single blockbuster product but about a company rebuilding across multiple fronts.

Valuation: A stock that’s been cooling off, despite the heat

For a company that’s been in Indian homes for decades and one that’s quietly getting its act together again, Voltas’s stock has been oddly quiet.

Over the last three years, while consumer appliance demand recovered, peer stocks rallied, and investor interest shifted to domestic manufacturing, Voltas just stayed where it was. The share price hasn’t done much. If anything, it’s been range-bound, moving up and down in tight bands, frustrating even patient investors.

That lack of movement isn’t entirely surprising. For a while, the business had stopped giving the market reasons to get excited. RAC market share was falling. Margins were under pressure. And the much-talked-about VoltBek joint venture looked like it was turning into a costly distraction. So even though the company was still delivering Rs 8,000-10,000 crore in annual revenue, there wasn’t a clear story to latch on to.

Now, though, the picture is starting to shift, just not yet in the share price.

Let’s talk numbers.

At current levels, Voltas trades at around 61 times estimated FY25 earnings. That’s not cheap. In fact, by traditional standards, it looks expensive. But that number doesn’t quite capture what’s changed under the hood.

This is a company that has grown AC volumes by over 40% this year, clawed back nearly 200 basis points of market share, and is seeing its appliance JV move from -16% EBITDA to within touching distance of break-even. Even the troubled projects business isn’t bleeding like it used to.

Yet the market hasn’t re-rated it. This brings us to the question investors often ask in such cases: What should a company like this be worth?

The answer lies not in comparing it to its peers on raw P/E but in understanding how sustainable the current earnings reset is. If Voltas’s RAC business stabilises margins at 9-10%, and VoltBek moves into the black while holding double-digit market share in categories like washing machines and refrigerators, then you’re looking at a very different earnings profile 12-18 months from now. Maybe not explosive growth, but steady, compounding improvement — backed by brand strength and operational discipline.

Investment thesis: A familiar name, rebuilding its edge

Here’s the interesting part: Most market turnarounds are priced in before the actual numbers start to show up. That probably hasn’t happened with Voltas. It’s rare to find a company of this size and recall showing early signs of recovery across all its verticals while the stock price still behaves like it’s stuck in FY22.

There’s no dramatic story here. No moonshot. Just a company with deep distribution, wide brand acceptance, and now, finally, some momentum in its operating metrics. Voltas isn’t trying to out-innovate the market. It’s trying to do the basics well again: hold price points, grow volumes, improve efficiency, and stay relevant in every Indian city and small town where it already has a foothold.

If anything, the case for owning the stock now is not that it will double overnight. It’s that the earnings are likely to grow into the valuation, rather than the valuation being ahead of itself. And if sentiment shifts, even modestly, to reflect the recovery in RAC and the scale-up of appliances, a stock that has gone nowhere for three years may finally have room to move.

That’s what makes Voltas worth another look and not just as a seasonal bet on a hot summer but as a company trying to fix the right things, in the right order.

Note: This article relies on data from the annual report and industry reports. We have used our assumptions for forecasting.

Parth Parikh has over a decade of experience in finance and research and currently heads the growth and content vertical at Finsire. He has a keen interest in Indian and global stocks and holds an FRM Charter along with an MBA in Finance from Narsee Monjee Institute of Management Studies. Previously, he held research positions at various companies.

Disclosure: The writer and his dependents do not hold the stocks discussed in this article.

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