Blue Star to invest Rs 150 cr for new plant in south

Air conditioning systems manufacturer Blue Star Ltd said the company was in final stage of discussions for setting up a manufacturing unit in south India.

Setting up a new plant is part of the company's business reorganisation plan to close some of the existing units, locate the new plants close to the market demand in order to rationalise logistics costs, besides tapping export demand.

It would invest around Rs 150 crore in the proposed plant, expected to come up in Tamil Nadu, Andhra Pradesh or Karnataka. The plant location would be finalised by September this year.

As part of its consolidation move, it has decided to close the Gujarat plant, and would take a call on the future of two more plants in the country, it said.

Launching its latest inverter variable refrigerant flow (VRF) air conditioning system here today, B Thiagarajan, executive director and president of air conditioning and refrigeration products business, said the company could save Rs 30 crore in logistics a year if the plant comes up in Bengaluru.

The company is looking at Sri City in Andhra Pradesh, Oragadam in Tamil Nadu, and Tumkur near Bengaluru, for the proposed facility. Thiagarajan said Sri City looked attractive due to power availability and its proximity to Chennai.

Blue Star has appointed KPMG to study redefining its manufacturing footprint, and the report is expected soon. The company has six operational plants across the country. "We are studying what we should do with the Ahmedabad and Thane plants," he said.

The company plans to boost exports three-fold by 2018. With the export contribution at six per cent of the total Rs 3,000 crore revenue in the last fiscal, Thiagarajan said they were aiming at Rs 500 crore export revenue by 2018 by focusing on markets, including Africa, West Asia and Saarc nations.

Speaking on the market size of VRF systems, he said they had a share of six per cent of the total estimated Rs 15,000 crore Indian air conditioning market. However, the VRF market is expected to increase to Rs 2,000 crore by 2018, from around Rs 900 crore now, and it aims to capture around 20 per cent of it with its new technology.

It invested around Rs 30 crore in developing the new product with the help of a Japanese partner.

As per the market trend, the residential air conditioning market is moving towards one-on-one inverter split air conditioners, and the commercial segment is showing a strong inclination towards VRF systems, he said.