Blue Star has applied for PLI for Component Manufacturing: B Thiagarajan, MD
B Thiagarajan, Managing Director, Blue Star Ltd, talks about his expectations from the festive season, growth, price hikes, e-commerce contribution, expansion plans among others
B Thiagarajan, Managing Director, Blue Star Ltd, talks about his expectations from the festive season, growth, price hikes, e-commerce contribution, expansion plans among others during an exclusive interview with Swati Khandelwal, Zee Business. Edited Excerpts:
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Q: What are your expectations from this festive season and are you being able to maintain the supplies as there are supply chain concerns are present in the market?
A: The festive season has been good and I think it will continue to be good going by the trend in several parts of the country. In fact, from July onwards, the demand for air conditioners have been upbeat. It is obviously compared with the previous year it will be significant that one can understand. But I think, we are already in the pre-pandemic levels. The reason, I think, is the consumers are upgrading their homes and that should be the reason. Plus, I think, still the holidaying is not happening and there should be a substantial amount of money that should be getting invested in consumer durables. I am talking about the air conditioners and water purifiers, therefore, we have been seeing excellent growth so far despite the price increases that took place, since April. So, we have increased the prices in April and once again we increased the price in September. What you mentioned is also true that there are supply chain bottlenecks. Number one is commodity price hikes, I think, it is somewhat coming to stable and I am just praying that it does not go up further. Ocean freight continues to be high, container availability is high because the industry imports lot of raw materials and components for manufacturing. The PLI scheme will help us to mitigate this and become self-sufficient in terms of this ecosystem. For now, we are dependent on imports. There is also a shortage of semiconductors but the good news is that all of us have planned sufficiently well and as far as Blue Star is concerned, I don't think, we have a problem with any supply chain till January, that is where we are. The consumers are also expecting a lot of SOPs, therefore, there is an exchange offer of upto Rs 10,000, a 0% finance scheme, credit card interest, payback, extended warranty, so and so forth, whatever will happen in the festive season is happening.
Q: How much growth are you anticipating this time as compared to last year as demand is quite strong? Also, name the segment where maximum demand is visible? Also, update us about the new launches that will happen in the next few quarters?
A: First I am talking about the residential segment, Tier III, IV and V markets are doing extremely well and I think it is also due to the agricultural income. In the festival season compared with the previous year, I think, we will be doing around 15% more than last year. The margin should be stable because there has been some amount of cost reduction and there is a margin relation that gets compensated. There is where we are. The other segment that is doing well is commercial refrigeration, it is healthcare and pharma, basically driven by the vaccine and other healthcare products which are supposed to be refrigerated. The food delivery segment is doing extremely well. Ice Cream, which was washed out during the summer season has come back very strongly with restaurant and other food delivery beginning to take place. The most important thing is the data sensor and as well as the factory segment. So, that part of the electromechanical project is doing exceptionally very well. So, overall, the market is good, demand is holding up. There are margin pressures and we are trying our level best to mitigate that.
Q: The company has already taken a price hike. Going forward, do you feel that there will be a need to take a price hike, if yes, by when and what could be the quantum for it?
A: Right in January 2021 itself, we reengineered our products because we understood in order to grow, we have to address the belly of the market. Therefore, we reengineered our products and brought down the costs substantially. We had increased the price due to commodity price hike in January between 3-5%, again in April and September. I do not think that till January there should be any price increase, at all. In January also, we will watch how the situation is. I guess that this year's price increase, so far whatever has happened should be good enough.
Q: How much is e-commerce contributing to revenue now and what trends are visible as there has been a lot of digital adoption?
A: It has been in the order of around 17% of the total market from room air conditioners and we are in line with the market. I do not know about the current sale, whenever there is a sale they call it Festive Utsav and call it spikes. But overall, my estimate is that the year should end with 20% of air conditioners getting sold over e-commerce and we should also be at that figure.
Q: What are your expansion plans and where you will invest further in the coming time and what CapEx is lined up for the company?
A: One CapEx which is ongoing and will be completed and the plant should get commissioned by November-December that is the broader deep refrigerator plant, where we are expanding the capacity by around 2.50 lakh deep freezers. The second one is that we are participating in the PLI Scheme that is in three cities. The total investment committed over a 5-years period is around Rs 550 crore. We have applied for PLI for components for which we are eligible to be heat exchanger steel metal components.
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