Blue Star has planned additional investments to expand its manufacturing capacity at Sri City, a private SEZ in Andhra Pradesh located about 65 km from Chennai, where the company has built a new factory and begun producing room air conditioners.

The ₹6,081-crore company is in the process of buying another 40 acres of land at Sri City as it seeks to expand the capacity for commercial refrigeration products as also for exports, which will receive deeper focus in the coming years.

Capacity building

Since its factories at Dadra and Wada in Maharashtra are running at full capacity, the company is looking to expand production to meet future demand and also to grow exports. Sri City has proximity to four ports in the region. “We have not decided on the total spend for the new unit. But it may entail a minimum investment of ₹250 crore,” B Thiagarajan, MD of Blue Star Ltd, said after unveiling the new range of ACs for the upcoming season at the Sri City factory.

The factory has come up on a 26.5-acre site and the company has planned a total investment of ₹550 crore by FY27. In the first phase, it invested ₹350 crore, creating a capacity of 25,000 units a month, which will be ramped up to about 1 lakh units a month in the next phase. The production started last month.

The unit is expected to provide more edge to the company to consolidate its position in the southern market, which brings about 50 per cent of its sales. “In addition to producing the new affordable range of air conditioners, the Sri City unit is also expected to provide cost-optimisation around incoming raw material as well as outbound logistics. There will also be lower inventory as compared to 10 to 12 days of transit inventory,” said Thiagarajan.

He said Blue Star will end the current fiscal with a revenue of billion dollars. It clocked a revenue of ₹5,335 crore for the 9 months of this fiscal.

Market share

The room AC market in India is expected to grow from 8 million units in FY23 to 10 million units in FY24. With the added capacity through the Sri City unit, Blue Star seeks to produce about a million units in FY24, up from the projected 8 lakh units in FY23. “We have set ourselves a target to achieve 15 per cent market share (by value) by FY25, up from 13.5 per cent now.

The company has unveiled 75 new models across inverter, fixed speed and window AC segments in various price points for this season. It has also redefined its product portfolio under premium, affordable premium and affordable categories and its affordable AC, 3-star rated, comes at a price of ₹29,990. The affordable category accounts for 25 per cent of its incremental sales.