Blue Star to set up manufacturing unit in south

The company proposes to set up a manufacturing unit either in Andhra Pradesh or Telangana at a cost of Rs 150-crore to cater to the markets of south and east India

Air-conditioning and commercial refrigeration (AC & R) major Blue Star India proposes to set up a manufacturing unit either in Andhra Pradesh or Telangana at a cost of Rs 150-crore to cater to the markets of south and east India.

Blue Star executive director (AC & R products), B Thiagarajan, said the location of the project was expected to be finalised by October, this year. Thereafter, it would take 15 months to commission the project. The initial capacity of the plant would be 500,000 units a year

Stating that south India accounts for 40 per cent of the company’s sales, Thiagarajan said that setting up a production unit in the south would result in saving logistics costs to a large extent. At present, logistics account for 6 per cent of its total cost as its exiting unit is in Himachal Pradesh (HP). Following the establishment of the southern unit, the HP plant will cater to the northern markets.

He told mediapersons here on Tuesday that the new unit would also help the company in making some of the AC components locally. To start with, the company proposes to make plastic components in the proposed plant. At present, Blue Star is importing 70 per cent of these components.

According to Thiagarajan, Blue Star will continue its thrust on the residential segment, which now contributes to 70 per cent of its overall room air-conditioner sales.

The company has targeted to increase the market share in the segment from 8.5 per cent this year to 10 per cent next year. In value terms, the increase will be from Rs 810 crore to Rs 1,000 crore.

“While the market for room air-conditioners is expected to grow by around 15 per cent in FY16, considering our track record of outperforming market, we hope to achieve a growth of 25 per cent and a 10 per cent market share,” he said.

In 2015, the room air-conditioners market in the country was stated to have grown by 20 per cent in terms of value, while Blue Star’s growth rate stood at 30 per cent.

With regard to advertising and brand promotion, Thiagarajan said the company had plans to invest about Rs 35 crore in the forthcoming summer season.