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Price increase on the card to offset inflationary pressure

News: According to The Economic Times, consumer durable companies are likely to take a price hike of about 5-6% by December 2021 to offset higher raw material prices.

Views: Consumer durable companies have witnessed a sharp fall in gross margin (in the range of 100 bps to -600 bps YoY) during Q2FY22 due to sharp rise in raw material prices. Hence, companies have decided to pass on inflationary pressure to consumer through judicial price hikes in the coming period. We believe price hikes do not bode well for companies especially when people are rationalising their discretionary spends.

Impact: Neutral