Demand to remain strong during festivals: Blue Star MD B Thiagarajan

Air-conditioner maker Blue Star is expecting continuation of strong demand during the upcoming festival season.

“The forecast is that demand will continue to remain strong even during the festive season for cooling products. However, we need to wait and see,” B Thiagarajan, managing director at Blue Star, told Business Standard. 

While demand for room air conditioners have come off from its peak as temperatures have cooled off, commercial air conditioning demand continues to remain strong for the company, he added. 

In the April-June quarter, Blue Star’s revenue from electro-mechanical projects, commercial air conditioning systems, services and international business grew by 9.5 per cent to Rs 1,038.99 core. 

 

In its results release Blue Star said, “Despite limited traction in the commercial building sector, the company experienced robust bookings from segments such as factories and data centres, primarily driven by ongoing efforts of the government to encourage manufacturing investments through PLI initiatives.

“There was also an uptick in inquiries from the healthcare and retail sectors. The commercial air conditioning business witnessed enhanced demand from education, manufacturing and retail segments, driving revenue growth during the quarter. Demand from Tier 3 and 4 cities remained strong, with significant orders for ducted systems and VRF systems from these markets.” 

While its unitary products, which comprises room air conditioners and commercial refrigeration products saw its revenue growth rise 44.3 per cent in the quarter ended June to Rs 1,729.52 crore as extremely high temperatures drove demand for the category. 

Demand for cooling products like air conditioners and refrigerators always drops post the summer season. Currently, the company is currently using 75 per cent of its production capacity. 

The air conditioner major has also outlined a capacity expansion of around Rs 450 crore for the current financial year, Thiagarajan said. 

In September last year, the company raised Rs 1,000 crore via Qualified institutional placement (QIP) and had said that it would use the funds for capacity expansion over the next five years.     

The company intends to maintain its margins at current levels which it achieved in the first quarter, however, there are many other factors at play due to geopolitical issues which impact commodity costs. 

“It (margins) has improved compared with the previous year. Going forward, it will depend on commodity prices across the globe, which is highly volatile. We have to wait and see what is going to happen to commodity prices,” Thiagarajan said. 

He explained that currently, the cost of containers and shipping continue to remain a challenge as they are high.