NEW DELHI: Mumbai-based Blue Star is happy that the weather forecast this year is on the hotter side as sudden long spells of monsoon last year severely dented the prospect of the cooling industry last fiscal. The all-important summer season accounts for 40% of annual AC sales.
In a conversation with TNIE, Blue Star Managing Director (MD) B Thiagarajan said that demand for ACs, as well as refrigerators, has hit an inflexion point in India. Thiagarajan says that they are on the go when it comes to capacity expansion to meet the ever-growing demand and increase Blue Star’s market share to at least 15% in FY25, an increase of more than 100 bps year-on-year. The MD also spoke about refrigeration business, rural demand and more.
Excerpts:
The summer of 2024 is expected to be hot. How has been the initial response?
The weather forecast for the industry has been good and there are lots of things happening such as the economy is doing good, the IPL and the elections. The response in March was excellent. I think industry AC sales will grow by 20% this summer compared to last year’s summer and we are targeting a minimum 25% growth. To achieve this, we have aggressively expanded our model portfolio and spent generously on advertising and marketing.
What are your sales and revenue projections for FY25? What sort of market share growth are you eyeing?
Our AC sales would have breached the 1 million unit mark in FY24. This fiscal (FY25), the industry should grow by at least 15% but we want to grow by 20%. Our goal is to increase our market share by 100 basis points every financial year and it is a tough thing. At present, our market share is little less than 14%. We are prepared to achieve 15% market share this year. In revenue terms, going by the quarterly figures we will be around R10K crore mark in FY24. We want our revenue to grow by at least 15% CAGR for the next few years. To achieve our objectives, we are ramping up our capacity to 12-13 lakh units per annum this fiscal and scale it to 18 lakh units in due course.
You have a very strong market share in the non-metro markets. What factors drive sales here?
About 65% of our sales come from tier 3-4-5 markets. It used to be 55% four years ago and I think it will peak around 70%. The growth of the AC market is driven by aspirational middle-class buyers. About 92% are first-time buyers with more than 50% buying through consumer finance. The current penetration of AC in Indian households is 8%. By 2030, it should grow to 15%.
How is your refrigeration business doing? Are you planning to increase your capacity here?
Currently, the market size of this industry is between R4,500 crore and R5,000 crore and by FY28, it is expected to cross R 10,000 crore. The opportunity for growth here is very high. The penetration of refrigerators in Indian households is less than 5% and as the per capita income of households is growing, demand for refrigerators is going to increase,
Here, our current capacity, which is 3 lakh units per annum, will meet demand till 2026. After that, we will expand our output.