Air conditioning and commercial refrigeration company Blue Star Ltd is planning to set up a Greenfield manufacturing unit in South India, possibly at Tada (about 70 km from Chennai) in the Nellore district, Andhra Pradesh.

The project would entail an investment of about ₹150 crore and will have a backward integration facility. This will enable the company to make some products which it currently sources from other markets.

“We expect to finalise the expansion by September 2015 and complete land acquisition and then construction by early 2016. The Board will then take up the project for approval. Once granted, the new unit, which would have the capacity to manufacture five lakh units would be the company’s first manufacturing unit in south India,” B Thiagrajan, Executive Director and President, AC & Products Business, Blue Star, said.

Addressing a press conference here to announce the launch of its new range of products, Thiagrajan said the company currently has seven manufacturing units, all of them in the Northern and Western India, and the two units for home air-conditioners in Himachal Pradesh. The lower tax structure these units enjoyed so far is likely to end by June.

The company currently has a market share of 9.5 per cent. It expects its share to go up over the next couple of years. The company has a market share of about 10 per cent in the ₹9,000-crore home A/C market and expects a growth of about 15 per cent.

The southern market contributes to about 40 per cent of the Blue Star home A/C business. The company sees this going up to 50 per cent in the medium term. Therefore, a manufacturing unit in the South would be ideal. “Though we have been considering the unit for some time, now we are close to finalising the investments and location,” CP Mukundan Menon, Executive Vice- President, Blue Star, said.

Targeting double digits Blue Star is targeting double digit growth in the next financial year as the country’s home A/C market is set to expand from 3.75 million units a year to about 7.5 million units by 2018 and 10 million units by 2020. The company now has a home A/C range of over 80 models. While Andhra Pradesh is almost a certainty, Telangana is also a possible option for a new plant.

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