Blue Star expects 25-30% growth backed by steady demand for ACs during summer

Blue Star Ltd expects 25-30 per cent growth in sales during 2023-24 on the back of a steady demand for air conditioners during the ensuing hot summer months. Its focus is on affordable and affordable premium segments and expanding reach both through offline and online channels. It had posted a total turnover of ₹5,377 crore during FY-22.

The company, which forayed into the residential air conditioners market in 2011, expects to grab a 15 per cent share of the market by FY25 with a good demand coming in from first time buyers particularly from tier-3, tier-4 and tier-5 towns.

According to B Thiagarajan, Managing Director, Blue Star, the industry is likely to touch the landmark 10 million units sale of air conditioners in FY-24, up from close to 8 million units this fiscal.

“The industry is likely to grow by about 20-25 per cent and we expect to grow by around 25-30 per cent. We were primarily in the premium segment but now we have a number of products across the affordable premium and mass categories. The aspirational middle class is driving the growth,” Thiagarajan told BusinessLine.

Blue Star, through its wholly owned subsidiary Blue Star Climatech Ltd, has set up a manufacturing facility at Sri City. It has commenced commercial production of room ACs at the facility in January this year. It will source some of its new products from here. Located closer to the southern ports, the plant will enable efficient logistics management for the company by ensuring speedy movement and containing the cost.

The company has so far invested approximately ₹350 crore out of the total ₹550 crore planned in a phased manner over a few years, for this project. It will make about 3 lakh units in its first year and will gradually scale up production to 1.2 million units, thereafter.

Blue Star, which has registered EBITDA margins of 7.5 per cent year-to-date up to the third quarter of this fiscal, expects margins to improve to close to 8-8.5 per cent by the end of this fiscal. It expects margins to improve further to close to 9.5-10 per cent in the next one year once production at the new factory gains momentum.

Expanding outreach

The company would continue to make investments in e-commerce channels where it has been a prominent player and plans to sustain its investments in in-store demonstrators in retail stores, as this has helped in enhancing offtake. Besides, it continues to adopt appropriate promotional methods both, online, and offline, to enhance offtake across all tiers.

Blue Star has supplemented its product and pricing strategies with distribution and service mechanisms whereby the product range including its after-sales service is available in all tier 2, 3, 4 and 5 cities and towns so as to reach the mass premium markets effectively.

“With this plant in place, we intend to leverage the synergies between the company and this plant, to enable us to further accelerate growth in the room ACs segment, especially in tier 2, 3, 4 and 5 markets, apart from tier 1. We will continue to invest in expanding distribution footprint, enhancing R&D capabilities and brand building,” he said.