By FY25, aim for 15% of the market: Blue Star MD

Blue Star, a company located in Mumbai, is pleased that this year’s weather is expected to be hotter than last year’s, because the cooling industry’s prospects were seriously damaged by unexpectedly protracted monsoon periods. A significant 40% of yearly AC purchases occur during the crucial summer months.

 

Blue Star Managing Director (MD) B Thiagarajan said in an interview with TNIE that India has reached a tipping point in the demand for refrigerators and air conditioners. According to Thiagarajan, they are actively expanding their capacity to satisfy the continuously rising demand and raise Blue Star’s market share to at least 15% in FY25—a gain of more than 100 basis points annually. The MD also discussed rural demand, the refrigeration industry, and other topics.

Take-outs:

It’s predicted that 2024 will be a very hot summer. How did the first reaction go?

The sector has received favorable weather forecasts, and a number of events, including the elections, the IPL, and a thriving economy, are taking place. Excellent response was received in March. We are aiming for a least 25% rise, and I believe industry AC sales will increase by 20% this summer compared to last year’s summer. We have heavily invested in marketing and advertising in addition to actively growing our model collection in order to accomplish this.

What are your expectations for FY25 in terms of revenue and sales? What kind of increase in market share are you aiming for?

In FY24, our sales of air conditioners would have exceeded one million units. The industry should increase by at least 15% in this fiscal year (FY25), but we aim for 20% growth. Every financial year, we aim to grow our market share by 100 basis points, which is a challenging task. We now have a bit less than 14% of the market. This year, we’re ready to take 15% of the market. Based on the quarterly data, our revenue is expected to reach around R10K crore by the end of FY24. For the next several years, we hope to see at least 15% CAGR growth in our sales. We are increasing our capacity to 12–13 lakh units annually this fiscal year, with plans to expand it to 18 lakh units eventually, in order to meet our goals.

In the non-metro areas, you own a fairly sizable market share. What elements influence sales in this case?

Our tier 3-4-5 markets account for around 65% of our total revenues. Four years ago, it was 55%, and I believe it will peak at about 70%. The growing middle-class consumer base is the main driver of the air conditioning sector. Over 50% of first-time buyers use consumer financing, making up around 92% of the total. Currently, 8% of Indian homes have air conditioning. It should increase to 15% by 2030.

How is business going for you in refrigeration? Do you intend to expand your capability in this area?

This industry’s market size is estimated to be between R4,500 crore and R5,000 crore at the moment, and it is predicted to reach R10,000 crore by FY28. There is a lot of room for development in this situation. The percentage of Indian families with refrigerators is less than 5%, and as family per capita income rises, so will the need for refrigerators.

Here, demand will be satisfied until 2026 thanks to our existing capacity of 3 lakh units annually. We will then increase our productivity after that.