Blue Star J&K plant awaits clarity on GST compensation

Air conditioning and commercial refrigeration major, Blue Star Ltd today said it was awaiting greater clarity on Goods and Services Tax (GST) compensation for their proposed greenfield plant at Jammu before moving ahead any further constructing the factory.
"J&K has GST benefits. Though, we know we will get tax benefits but we are waiting for clarity on who will give us the compensation, state or Centre, before we proceed further," Blue Star joint managing director B Thiagarajan said here today.
The company had provisioned Rs 120 crore for the new plant that will also manufacture room air-conditioners with an annual capacity of four lakh units, taking total capacity to 8 lakh units.

"Already, about Rs 30 crore has been spent for the project. Land at Samba, Jammu had been acquired, ground breaking has also been done," Thiagarajan said.
Blue Star was also contemplating another greenfield plant at Sri City, Andhra Pradesh but that will be after Jammu plant.
He expects with GST there may be a rise in tax of about 2-2.5 per cent and coupled with commodity price trending to be higher and weakening Rupee, there is potential for price hike in air-conditioners by 5-7 per cent after July.

But, as a rider, Thiagarajan said lot many factors will decide the final scenario but as of now there was no major price rise is expected on its ACs products.

The company also intends to increase its investment to Rs 33 crore in FY18' on new product developments and was working on integrating air-purifier into air conditioners and by September 2018 something can be expected.
Meanwhile, Blue Star expects to grow its room airconditioner business at 15 per cent or higher during the current year against 35 per cent in calender year of 2016 despite demonetisation which had no effect on the company.
Company sells some 52 per cent of its ACs in small towns and find less than five per cent sales from e-commerce channel.
As a company, Blue Star was looking forward for a topline touching Rs 4000 crore in FY17 from around Rs 3500 crore in the year before, officials said.