Overview
Analyst Survey 2025 (full report)
If you want evidence of increasing spending power in India, go to an Indian wedding. Whereas 10 or 15 years ago, parents might have brought along a bike or a scooter (essentials for any Indian with a commute), newlyweds can now also expect air conditioners and refrigerators. That shift is sweeping across both rural and urban areas. It’s what I’ve heard repeatedly from the distributors of white goods while travelling the length and breadth of northern India - one of the great joys of my job covering India’s consumers, who spend USD 1 trillion a year on merchandise.
But even before hitting the road, I had a hunch. One leading cooling and refrigeration company has been a top performer in my coverage. Revenue at the AC segment of this company grew at a compound annual growth rate of 14 per cent between the financial years of 2013 and 2023, and the stock has risen over 100 per cent since the start of 2024 and over 200 per cent since the start of 2023. Demand for its air-conditioning has remained strong despite an overall slowdown in consumption in India in recent years. We’re expecting revenue in aircon sales across the industry to rise by 20 per cent in 2025.
Behind this company’s rise is a classic emerging market tale. A growing middle class means more people can afford air-conditioning and other ‘aspirational’ consumer goods (for context, India’s middle class, more than 400 million-strong, could more than double to a billion before 2050). With domestic household penetration just above 10 per cent, India’s AC market has a long growth runway when compared to other emerging Asian economies such as China, which stands at 80 per cent, or Indonesia, at 36 per cent. While India’s GDP per capita (almost USD $2,700 in 2024) is far from $10,000 - the threshold at which AC penetration tends to jump - India has 60 million people with annual income greater than $10,000. These are key target customers for AC companies, and this group could grow to about 100 million by 2027.[1]
Climate change is expected to steepen that demand curve. A summer of record high temperatures in 2024 - north of 50 degrees Celsius in some cases - has underscored aircon as increasingly necessary across this vast nation that sits just above the equator. The International Energy Agency (IEA) estimates India could have 1 billion AC units by 2050 - about half of the current worldwide tally. Where household income falls short, white goods companies offer consumer finance, not unlike loans for cars in developed economies. Both of these factors skewer growth expectations to the upside.
Admittedly, the macro backdrop has been largely disappointing, despite a brief post-pandemic bump. High inflation, high interest rates, and a lack of real wage growth have all eaten into households’ budgets. Severe weather disruptions over the past year added to the pain. The hope is that we’re nearing a turning point as inflation shows signs of easing. External factors should help, too. Hiring could pick up pace, as the IT services sector, one of the largest employers in India, benefits from more spending by big US corporations. Expected monetary and fiscal stimulus will also provide support.
If the story of air-conditioning has taught us anything, however, it’s that strong companies in India can grow regardless of the economic environment. That’s why we remain undeterred by price-to-earnings ratios as high as 50 times in this sector. As white goods spread more widely as a symbol of affluence, more companies are likely to fall into this exciting bucket of stocks.
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[1] Goldman Sachs.
