AC maker Blue Star is betting on new product lines

Air Conditioner manufacturer Blue Star is betting on new product lines, starting inhouse production of some of the components, increase in exports and investments into digital technologies to help it reach the goal of $1 billion revenue by 2020.

The company, which is expecting to reach a turnover of Rs 5,000 crore during the current fiscal, is expecting contribution of adjacent products such as air purifier and air cooler, in overall revenue to grow from current three per cent to 10 per cent in three years. It is also looking at manufacturing some of the components it buys from other companies, on its own, in order to increase the margin, said B Thiagarajan, joint managing director, Blue Star.

"In the overall company turnover in three year timeframe, the adjacency businesses will contribute 10 per cent from the current three per cent. Adjacency include kitchen refrigeration, healthcare refrigeration etc, introduced last year and beginning to take roots now," he said.

In commercial refrigeration, the company may add the retail refrigerators, and in case of services, it will get into engineering facilities management. At present, it manages only the air-conditioning system services, but now it is looking at getting into service of air-conditioning and plumbing in any building. The company will do any service other than the catering and toilet upkeep. It will start offering the expanded engineering facilities management services this year.

Commenting on the overall strategy to achieve the goal of $1 billion revenue by 2020, he said, "We will focus on the core Air Conditioning and refrigeration business and would like to grow faster than the market. We will look at the adjacency in the products such as air purifier, air cooler and others. The third strategy is to get into new areas, including water purifier".

"We will look at expanding our geographic presence. We are strengthening our global footprint in the Middle East, Africa, ASEAN countries etc," he added.

The company at present has three segments -electro mechanical projects and package air conditioning, which is roughly around 20 per cent of the overall business, electronics business of around 15 per cent of the business while the balance 65 per cent of the business is in the products business. In a three year timeframe, this ratio will remain almost the same.

As part of increasing backward integration initiatives, it would indegenise manufacturing of indoor units of air-conditioner and in a couple of years' time, it will be looking at making some of the electronics in-house, which are currently bought from other players or imported. It will invest into setting up manufacturing units for these products and these initiatives are expected to improve the margin by three per cent.

While it is re-evaluating the projects for a manufacturing unit in Jammu and Kashmir and Andhra Pradesh due to GST issues, it would invest around Rs 75 crore into other projects, including into digital enterprise solutions implementation.

In terms of exports, it has set up an international holding company three months back, operating out of Dubai, and the exports revenue is targeted to grow from Rs 280 crore last year to around Rs 800 crore in three years from now. It is present in around 17 countries, with majority of presence in South Asian Association for Regional Cooperation (SAARC) Countries, Middle East and North Africa. The growth is expected through deeper penetration into these markets, building scale, he added.

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