Companies

Blue Star to invest in new manufacturing facilities; targets to grow by 25% in FY22

Nandana James Mumbai | Updated on March 17, 2021

B Thiagarajan, MD, Blue Star   -  Businessline

AC major Blue Star will invest ₹250 crore in a manufacturing plant in Sri City, Andhra Pradesh, which will have a production capacity of 5 lakh room air-conditioning units per annum. It will also invest ₹150 crore in a new manufacturing plant in Wada, Maharashtra, for deep freezers, a top company official said on Wednesday.

In the second phase, which will be in the next 3-4 years, another investment of ₹270 crore will be made in the Sri City plant, for an annual production capacity of 7 lakh room ACs. The construction of the plant will begin in FY22.

Blue Star has two manufacturing plants in Himachal Pradesh and the company plans to enhance its room AC manufacturing capacity there as well. “We will continue to have the two plants in Himachal Pradesh catering to room ACs completely for the North Indian market, Eastern India market and exports, to begin with. And as and when the Sri City plant comes up, it will cater to the South and partially the West,” B Thiagarajan, MD, Blue Star, said at a virtual press conference on Wednesday.

Blue Star also plans to cater directly to the European and North American markets in around 12 months, after it has expanded the capacity at its plants. The expected market size for the room AC market in India by FY22 is 6 million units.

Blue Star also plans to grow by 25 per cent in the next fiscal year, while the industry is expected to grow by 15-20 per cent, he said. Thiagarajan also said that Blue Star plans to increase its market share to 13 per cent in FY22, compared to its market share of 12.5 per cent in FY21.

In a bid to achieve this targeted growth rate, Blue Star will focus on product strategy, expand distribution footprints in conventional and e-commerce channels, as well as bolster its advertising strategy. It will launch a new range of ‘mass premium’ split air conditioners, to expand its market reach and target the mass market. Over 60 per cent of the company’s sales accrue from tier-3, tier-4 and tier-5 towns. The new range comprises 3-star, 4-star, and 5-star inverter split air conditioners that are available at prices starting from ₹25,990 for a 0.80TR 3-star inverter split AC. With this new range, Thiagarajan said that Blue Star’s entry level products are more affordable by 10 per cent.

While Blue Star used to spend around ₹35 crore annually until FY20 on advertising, this declined to ₹22 crore amid the pandemic. “Now, this is being substantially enhanced to ₹64 crore in the coming fiscal year,” said Thiagarajan. The company has rolled out a new TV commercial featuring cricketer Virat Kohli as its brand ambassador for room ACs and air coolers. Blue Star currently has 200 exclusive brand stores in the country and plans to increase this to 250 by the end of FY22.

In the third quarter of the current fiscal year, Blue Star posted a year-on-year growth of 17 per cent in room ACs, and in the current quarter, it is expected to post a growth of over 20 per cent y-o-y. “We will be able to meet the capacity for this summer. For the next summer, we need to augment capacity and in line with Atmanirbhar Bharat initiative, we are indigenising and carrying out a lot of backward integration. We will also be participating in the Production-Linked Incentive (PLI) scheme,” said Thiagarajan.

Published on March 17, 2021

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