“We have ambitious plans to grow our commercial air conditioning exports. In commercial refrigeration, the deep freezer market is growing and we are expanding that manufacturing by around 2.5 lakh units. The factory is getting commissioned in the first week of April,” says B Thiagarajan, MD, Blue Star.
With the heat wave on in most states particularly in Maharashtra, I bet your sales must be seeing a huge bump up?
Yes, it is like Diwali for us. Indeed, the season is looking very, very positive after the washout of two consecutive summer seasons – 2020 as well as 2021. I have a feeling the industry will do well and Blue Star will do well and my guess is that compared with 2019 summer, we should be growing 20-25%. Blue Star attempts to grow faster than the industry as we had done in Q3. I think we will attempt to grow 25-30%. We are well set.
With the heat wave on in most states particularly in Maharashtra, I bet your sales must be seeing a huge bump up?
Yes, it is like Diwali for us. Indeed, the season is looking very, very positive after the washout of two consecutive summer seasons – 2020 as well as 2021. I have a feeling the industry will do well and Blue Star will do well and my guess is that compared with 2019 summer, we should be growing 20-25%. Blue Star attempts to grow faster than the industry as we had done in Q3. I think we will attempt to grow 25-30%. We are well set.
Given that demand is looking robust, are you passing on the commodity costs to the consumers? If yes, is that getting absorbed smoothly?
Our intention was to hold the prices at the same level as December till April, May. We are holding on to our prices because we had raised our prices in April 2021, again in July and again in October. We are well stocked till June. So, the commodity and other key components are secured, there is no problem. But having said that, two, three things are happening; the ongoing conflict which I pray should come to an end soon as it is causing concern about sharp increase in commodity prices post April-May.
Therefore, we need to review the prices. The second part is connected with the fact that if the summer season is better than what we all planned for (we have planned for 20-25% growth) then we may exhaust our stock by May itself and therefore we have decided that we will review the prices by the middle of April once again. It all depends on how this war related action ends. This is a new development which is derailing our original intention to hold the prices.
Are there any expansion plans? How are you looking to fund them?
As we had already announced, we have gone ahead with the expansion of our manufacturing footprint for room air conditioners. We have two factories in Himachal, the third one is coming up in Sri City. The total investment is around Rs 550 crore over three phases. The first phase is at an investment of Rs 220 crore; it should get commissioned in the third quarter between October and December 2022. The work is in full swing.
We have also applied for the PLI scheme. Under the scheme, only plants and machineries qualify for our investment. The PLI is around Rs 153 crore. We should be getting back around Rs 73 crore from that. This is for sheet metal components, powder coating and so on and so forth. It is a green factory and it will produce state-of-the-art room air conditioners for domestic market and exports.
You have also secured semiconductors for the next three years. How will this long-term contract benefit the company?
Our Himachal factory will come to full capacity by this summer. Therefore we need to expand through the Sri City factory. In three years, it will substantially take care of our requirements. Under Atmanirbhar Bharat, we are becoming a fully backward integrated factory. We are not investing in compressors. Complete room air conditioners will be manufactured by us. We do not have any plans to import anything at all.
We also have ambitious plans to grow our commercial air conditioning exports. In commercial refrigeration, the deep freezer market is growing and we are expanding that manufacturing by around 2.5 lakh units. The factory is getting commissioned in the first week of April that is coming up in Wada. We attempted to do it even before March 31st and that is almost ready. Commercial production is about to begin. We are waiting for some final approvals there.
You had managed to have semiconductors for three years and so the supply disruption was less for you. Toshiba recently red flagged that important gases needed in the production of semiconductor come from Ukraine. There could be a year of shortage. How will you manage it?
There is no easy answer for that. I am an optimist, I have a feeling that once the actions are over in the war front, they should be going back to negotiation table and therefore there should be some stability in commodity prices. Once the summer season is over for which the material is all planned, one has to look forward to the festival season. I am only hoping that in that three-four months of gap, some stability would occur.
The other variability is there will be another variant of the Covid-19, I have a feeling the country is well prepared. I do not think there will be huge lockdowns or disruptions there. We are betting on the simple fact that the penetration of room air conditions in this country is just 7%. Every other country has moved past 30% other than African countries. Therefore, for the air conditioning industry, the golden period is going to be this.
The PLI scheme has triggered the huge capacity expansion and this will lead to scale being built and our products being made more affordable the way it is in China. I have no doubt that for the room air conditioning industry, it will be a great 10-year period. The first five years are going to be very exciting. Of course, it will be challenging but it will also be exciting.
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