Central air conditioning major Blue Star Ltd. is all set to reorganise its manufacturing footprint in the southern India.
According to a senior official of the compnay, Blue Star Ltd. will finalise the location of its new plant in South as well as redefining its manufacturing operations that includes centralising some products and having one unit exclusively for exports to earn Rs.500 crore by 2018.
"We are in the process of redefining our manufacturing foot print. We closed down our Bharuch plant in Gujarat taking down the total number of plants to six," B.Thiagarajan, executive director and president-air conditioning and refrigeration products business told reporters here on Friday.
He was here to launch the Rs.3,080 crore revenue Blue Star's next generation 100 percent inverter variable refrigerant flow (VRF) air conditioning system.
Part of the move redefining the company's manufacturing foot print involves setting up a new plant in South India at an outlay of Rs.150 crore; centralising manufacturing of some products and designating one unit for exports, he said.
Speaking of the new plant, he said, the company is looking at Andhra Pradesh (Sri City), Tamil Nadu (Oragadam) and Karnataka (Bangalore, Tumkur).
He said Andhra Pradesh scores well on the availability of power front. Further, Sri City is located well as it borders Chennai.
"If the new plant is located in Bangalore. then we will be saving on logistics. Currently our logistics spend is around Rs.150 crore and a plant in Bangalore is expected to bring down the logistics cost by Rs.30 crore," Thiagarajan said.
He said consultancy firm KPMG is studying the redefining of manufacturing foot print and is expected to come out with its report soon.
According to Thiagarajan, the company set up its plants at different locations to take advantage of tax benefits.
But under the new Goods and Services Tax (GST) regime, market witnessing intense competition and with company looking at exports in a major way, reorganisation of the manufacturing operations has become imperative, he said.
Speaking of exports, Thiagarajan said the company earns around Rs.200 crore now and plans to take it up to Rs.500 crore by 2018.
The company is looking at Africa, Middle East and SAARC nations for exports.
He said a final decision of redefining the manufacturing foot print is expected to be taken by the company's board next month.
Speaking about the air conditioning market, he said the global market size is around $90 billion comprising of products like chillers, VRF systems, ducted systems as well as room air conditioners.
The VRF market contributes to nine percent of this global market. The Indian air conditioning market is estimated to be around Rs.15,000 crore, out of which six percent is from VRFs, Thiagarajan said.
A VRF system is a sophisticated and intelligent system that cools large multi-zone spaces with varying heating and cooling needs through smart controls. They are apt for segments such as hotels and restaurants, hospitals, educational institutions, residential as well as office spaces.
The VRF market in India is expected to grow at a compounded annual growth rate of at least 15 percent over the next few years. While the residential air conditioning market is moving towards one-on-one inverter split air conditioners, the commercial segment is showing a strong inclination towards VRF systems, Thiagarajan said.
According to him, the company's new VRF systems would deliver 100 percent cooling even at 43 degree centigrade and provide non-stop cooling even at 54 degree centigrade ambient temperature.
Thiagarajan said the company would be installing the new system in couple of locations in the Middle East to prove that the system would work at high temperature climes.
