Blue Star bets big on 'harsh' summer to cross 1 million mark in sales

'Rural markets key growth driver, contributing to 65% sales'

Residential air conditioner makers are expecting yet another season of good sales, thanks to rising purchasing power of people in small towns and in rural areas, and the weatherman’s forecast of an intense summer.

Industry major Blue Star Ltd is expecting to sell over 1 million units this year, a jump of about 25 per cent from the previous one. And this may further increase by 30 per cent in 2024-25 to 1.3 million units, the company believes.

“We expect to cross 1 million (mark) this year and to be around 1.3 million next year in room air conditioners, compared to 800,000 last fiscal,” B Thiagarajan, managing director of Blue Star, told Business Standard.

The industry major is also trying hard to expand its market share from around 13.75 per cent now to 15 per cent by 2024-25.

“Consumer finance today is more than 55 per cent. People are beginning to consume more. Even if it is a moderate summer, the demand is going to be good. Forecast, is of a harsh summer,” Thiagarajan said.

The company is experiencing demand from first-time buyers, especially in the Tier 2, 3 and 4 markets, as well as the replacement market.

“Rural markets are our growth drivers and around 65 percent of our sales are coming from such markets. Metros and mini metros contribute the remaining,” he added.

Blue Star, through its wholly-owned subsidiary Blue Star Climatech, has manufacturing units in Sri City, Andhra Pradesh and in Himachal Pradesh.

With these plants, Blue Star now has a production capacity of over 1 million room ACs. And, it is expecting to scale it up to 1.8 million ACs in due course.

To meet the rising market requirement, the company has lined up an investment plan of around Rs 300 crore during the next financial year – which includes Rs 200 crore on manufacturing, Rs 60 crore on advertisements (Rs 40 crore during summer season) and Rs 32 crore on research and development.

Thiagarajan said that the country is projected to be the largest market for room air conditioners by 2047 and double from current level by 2030 itself.

Speaking to the press at a conference held in Chennai, Thiagarajan, said, “The market for room ACs is at its inflection point and is poised to grow exponentially over the next few years.”

Citing industry estimates, he said that the market will more than double by 2030.