Blue Star eyes smaller towns with affordable premium ACs

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Published: February 26, 2020 4:50:53 AM

Thiagarajan said Rs 120 crore would be invested in the plant during the first phase to cater to the room air-conditioner market in the South.

Blue Star is mulling over the idea of floating a separate entity to run the upcoming plant at Sri City in Andhra Pradesh.

To capture a 15% market share in residential ACs by 2024 and to penetrate into smaller towns, air-conditioning major Blue Star has introduced a new range of air-conditioners with affordable price points. This move is aimed at customers from tier III, IV and V cities who have aspirations to buy premium ACs but could not afford these. The company had 12.5% market share in FY19.

Managing director B Thiagarajan told reporters here on Tuesday that the company was rolling out a range of 3-star inverter split air conditioners, starting from Rs 31,990 for a 1-tonne AC and Rs 37,990 for a 1.5-tonne one. “This new range of ACs retains the premium build quality which is the hallmark of Blue Star air-conditioners. They are built to be highly reliable and durable, and are virtually trouble-free. The ACs are also highly energy-efficient, so running costs are low. Besides, the complete range runs on eco-friendly refrigerants,” he said.

Blue Star is mulling over the idea of floating a separate entity to run the upcoming plant at Sri City in Andhra Pradesh to avail the tax rate benefits applicable to the manufacturing investments. The company is on track to commission the Sri City plant by the end of CY21 as it has been mandated to roll out the products by March 2022.
Thiagarajan, however, said the company was yet to take a call on the structure of the Sri City plant, on whether it will be a separate company or be part of the existing one. “The thinking is that we should make use of the tax benefits extended to manufacturing firms, so floating a seperate company is one option.”

According to him, if the company wants to take advantage of the tax benefits, which it desires, it may have to look at how that will be structured. “That’s a bold decision, we will take it up some time in the middle of 2020. All that we know is that we will need the capacity. It is too early for us to comment on it now.”

Thiagarajan said Rs 120 crore would be invested in the plant during the first phase to cater to the room air-conditioner market in the South. The plant will at least have two phases of development and the second phase also will see similar investment. The unit will have a capacity to produce half a million units and will cater to the five Southern states, thereby drastically cutting logistics cost when compared to goods being transported from its Himachal plant.

On the capex for the next fiscal, Thiagarajan said as far as room air conditioners are concerned there are two big expenditure. One is advertising and the other one is R&D. “The company will be investing Rs 65 crore for advertisement and `45 crore for R&D next year,” he said.

On the Coronvirus impact, he said the company would not face any production disruption till mid April and there might be some impact after that on supplies of components from its overseas vendors, as the vendors have supplies from China.

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