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Blue Star Ltd.

BSE: 500067 Sector: Engineering
BSE 16:01 | 20 Jul 657.00 0.45






NSE 15:49 | 20 Jul 660.10 -0.25






OPEN 658.30
52-Week high 845.00
52-Week low 611.00
P/E 48.85
Mkt Cap.(Rs cr) 6,320
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 658.30
CLOSE 656.55
52-Week high 845.00
52-Week low 611.00
P/E 48.85
Mkt Cap.(Rs cr) 6,320
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Blue Star Ltd. (BLUESTARCO) - Director Report

Company director report

The Directors are pleased to present the 69th Annual Report together withthe Audited Financial Statements for the year ended March 31 2017.


Your Company is India's leading air conditioning and commercial refrigeration companywith close to 75 years of experience in providing expert cooling solutions and has anetwork of 35 offices 5 modern manufacturing facilities 2200 dealers and 600 retailers.It fulfills the cooling requirements of a large number of corporate commercial as well asresidential customers. It also offers expertise in allied contracting activities such asmechanical electrical plumbing and fire-fighting services in order to offer turnkeysolutions apart from execution of specialised industrial projects. The Company'sintegrated business model of a manufacturer contractor and after-sales service providerenables it to offer an end-to-end solution to its customers which has proved to be asignificant differentiator in the market place. It has also recently forayed into thebusiness of residential water purifiers as well as air purifiers and air coolers.




Particulars For the year ended March 31 2017 For the year ended March 31 2016 For the year ended March 31 2017 For the year ended March 31 2016
Total Revenue 4183.47 3585.77 4459.30 3859.42
Total Expenses 4035.19 3462.73 4300.67 3715.06
Profit before exceptional items and tax 148.28 123.04 158.63 144.36
Profit after exceptional items and before tax 148.28 153.12 158.63 132.47
Income tax 36.31 26.22 36.67 27.70
Profit for the Year 111.97 126.90 123.05 104.78


Your Company posted another year of splendid performance. On a standalone basis theTotal Revenue of the Company increased by over 17% to '4183.47 crores during the yearunder review as compared to '3585.77 crores in the previous year. Further the Net Profitafter Tax of your Company was '111.97 crores as compared to '126.90 crores for thefinancial year ended March 31 2016.

On a consolidated basis your Company clocked a revenue of '4459.30 crores a growth of16% over the previous year. Further the Net Proft after Tax of your Company was '123.05crores registering a growth of over 17%.

Your Company operates in three key segments (i) Electro-Mechanical Projects andPackaged Air Conditioning Systems (ii) Unitary Products and (iii) ProfessionalElectronics and Industrial Systems. The performance of the Company in the above mentionedsegments during the year under review is as stated below:

(a) Electro-Mechanical Projects and Packaged Air Conditioning Systems

The revenue of the Electro-Mechanical Projects and Packaged Air Conditioning Systemsbusiness increased by 18% to '2122.54 crores from '1797.48 crores. This segment witnessedadverse impact due to slowdown of the real estate sector post demonetisation. However themarket witnessed modest growth propelled by Government-funded infrastructure projects.

Segment Results registered an increase of 26% from '75.79 crores in the previous yearto '95.26 crores in the year under review. The increase is mainly owing to higher billingsof projects with healthy margins and improved control on costs.

(b) Unitary Products

Unitary Products' revenue in the year grew by 27% to '2003.92 crores as againstprevious year's revenue of '1582.82 crores due to an early onset of summer in 2017. Theperformance of the room air conditioner business was impressively driven by the wide rangeof star-rated inverter split air conditioners. With a rise in preference for inverter ACsthe Company continued to perform better in the category of energy-efficient products.Further commercial refrigeration products such as water coolers bottled water dispensersand glass top freezers witnessed significant demand. Enhanced product penetration amongstthe existing channels coupled with a comprehensive range of products and aggressivepromotional activities contributed to the growth and profitability in this segment. Themarket continued to witness an increased demand for display freezers. Sales of bottledwater dispensers grew well as the Company engaged with more retailers while storage watercooler sales also increased with enhanced demand from the educational Government andmanufacturing segments.

The Company extended its product range by introducing water purifiers air purifiersand air coolers.

The results of this segment grew by 26% from '165.13 crores in the previous year to'208.09 crores in the year under review.

(c) Professional Electronics and Industrial Systems

The Company had earlier transferred the business of Professional Electronics andIndustrial Systems to its subsidiary Blue Star Engineering & Electronics Limited.However due to customer and contractual requirements certain contracts of this businessneeded to be executed by the Company. The revenue generated by these contracts during theyear under review was '22.63 crores.


The Board at its meeting held on May 9 2017 recommended a dividend of '7.50 perequity share of '2 each for the financial year ended March 31 2017. This proposal issubject to the approval of members at the ensuing Annual General Meeting.


In accordance with the requirements of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 (hereinafter referred to as the 'Listing Regulations')the Board has adopted the Dividend Distribution Policy for the Company. The Policyinter-alia specifies the parameters and internal/external factors to be considered fordeclaration of dividend. The policy can be viewed online at .


The Company proposes to transfer an amount of '10.80 crores to the General Reserve forthe financial year ended March 31 2017.


Borrowing cost for the year was '30.61 crores which was lower as compared to '36.13crores in the previous year due to reduced borrowing levels led by effective workingcapital management and ability to source the funds at a lower cost. In additiondisciplined and systematic hedging decisions based on accurate information of forexexposure resulted in net gain of '1.91 crores as compared to loss of '0.79 crore in theprevious year.


The Company has not accepted any deposit from the public falling within the ambit ofSection 73 of the Companies Act 2013 (hereinafter referred to as the 'Act') and theCompanies (Acceptance of Deposits) Rules 2014.


During the year the Company allotted 227900 equity shares of '2 each fully paid upto the option grantees pursuant to the exercise of stock options by the eligible employeesunder the Blue Star Limited Employee Stock Option Scheme.

Further during the year under review the Company allotted 5391383 fully paid upequity shares of '2 each to the shareholders of Blue Star Infotech Limited pursuant tothe Composite Scheme of Amalgamation of Blue Star Infotech Limited and Blue Star InfotechBusiness Intelligence & Analytics Private Limited with the Company.

Consequent to the above the issued subscribed and paid up share capital of yourCompany as on March 31 2017 stood at '191140776 comprising 95570388 equity sharesof '2 each.


In accordance with Regulation 34 of the Listing Regulations and Section 129(3) of theAct the Consolidated Financial Statement has been prepared by the Company as per theIndian Accounting Standards (Ind AS) and forms a part of this Annual Report.

The Consolidated Financial Statement shall also be laid at the ensuing Annual GeneralMeeting of the Company.


Subsidiary Companies:

a) Blue Star Engineering & Electronics Limited

Blue Star Engineering & Electronics Limited is a wholly owned subsidiary of BlueStar Limited. It offers advanced technology products surveillance solutions as well aselectronic systems and product testing solutions.

Total revenue of Blue Star Engineering & Electronics Limited for the year endedMarch 312017 was '181.49 crores as against its previous year's revenue of '133.35crores. The subsidiary achieved a net profit of '4.92 crores for the year under review asagainst last year's net profit of '5.25 crores.

b) Blue Star Qatar WLL

Blue Star Qatar WLL is led by Blue Star Limited and Al Malki Trading and ContractingWLL wherein Blue Star Limited holds 49% of the share capital and voting rights and thebalance is held by Al Malki Trading and Contracting WLL.

This company is a subsidiary of Blue Star Limited by virtue of Section 2(87)(i) of theCompanies Act 2013 as Blue Star controls the composition of the company's Board. Thecompany is principally engaged in the business of designing engineering installationmaintenance mechanical electrical and plumbing contracts and all works relating toheating ventilation and air conditioning systems in the Middle East for residentialcommercial and industrial purposes.

Total income of this company for the year ended March 312017 was '110.77 crores ascompared to '71.36 crores in the previous financial year. Net profit after tax for theyear ended March 31 2017 was '3.63 crores as compared to '1.34 crores in the previousyear.

c) Blue Star International FZCO

Subsequent to the financial year the Company has set up a wholly owned subsidiaryBlue Star International FZCO in Dubai Airport Freezone a free trade zone in UAE toconsolidate its international business ownership. The Company made an initial investmentof '5 crores in the share capital of this subsidiary which will carry on the productsbusiness outside India.

Joint Venture Companies:

a) Blue Star M & E Engineering Sdn Bhd

A joint venture between Arab-Malaysian Development Bhd and Blue Star Limited Blue StarM & E Engineering Sdn Bhd carries on the business of mechanical electrical andplumbing contracting which includes operation and maintenance of heating ventilation andair conditioning systems. There have been no significant changes in the nature of itsactivities during the financial year.

This company's total income for the year ended March 31 2017 was '108.44 crores ascompared to '102.97 crores in the previous financial year. Net profit after tax for theyear ended March 31 2017 was '5.14 crores as compared to '4.97 crores in the previousyear.

b) Blue Star Oman Electro-Mechanical Company LLC

A joint venture between W J Towell & Co LLC and Blue Star Limited Blue Star OmanElectro-Mechanical Company LLC is engaged in mechanical electrical and plumbingcontracting services in Oman. Its income for the year ended March 31 2017 was '112.28crores as compared to '17.90 crores in the previous year. Net profit after tax of thisventure for the year ended March 31 2017 was '0.70 crores as compared to '0.47 crores inthe previous year.

In accordance with Section 136 of the Act the audited annual accounts including theconsolidated financial statement of the Company and audited accounts of the subsidiarycompanies are available on the corporate website at . A copy of these documentswill be available to the members on their request in writing. The annual accounts willalso be available for inspection by any member during business hours at the registeredoffice of the Company.

A statement containing the salient features of the financial statements of thesubsidiaries and joint venture companies in Form AOC-1 as required under Rule 5 of theCompanies (Accounts) Rules 2014 forms part of the Consolidated Financial Statement.


(a) International Business

The International Business Group comprises Global Projects and Global Product Sales.International business footprint expansion continues to remain a high focus area for theCompany. During the year Blue Star added its presence in 5 countries: Kenya SudanVietnam Iran and Tanzania.

The Company continued its focus on expansion of its products export business. Itparticipated in multiple major trade shows such as Climate Abu Dhabi Expo UAE and Big 5Exhibition in Dubai UAE with the largest-ever display stall. It participated in HotelAsia Exhibition 2016 which was one of the largest trade exhibitions of its kind inMaldives.

The Company introduced room air conditioners with the eco-friendly refrigerant R410Aand anti-corrosive green fin technology for the Maldives market.

(b) Expansion

The Company has embarked upon an ambitious growth plan and in this context Blue Staracquired land in Jammu and Sri City for setting up manufacturing plants in theselocations in due course. The Company also expanded its product portfolio by entering intoproduct adjacencies and product extensions such as water purifiers air purifiers and aircoolers.


Implementation of Goods and Service Tax

While presenting the Union Budget 2017-18 the Central Government of India reaffirmedthe Goods and Service Tax (GST) roll-out. To ensure seamless migration into the GSTregime a core team has been entrusted with earmarked work streams to drive and accomplishimplementation within defined timelines. The Company is registered on the GST portal.


In 2016-2017 the Company was conferred multiple awards and recognitions bothinternational and national few of which are listed as follows:

• Blue Star was recognised as the 'MEP Company of the Year' at the Annual MetroRail India Summit 2017.

• Blue Star Oman Electro-Mechanical Company LLC has won the 'Most Promising MEPContractor' at the Dossier Construction's Infrastructure Awards & Summit 2016.

• Blue Star received the Brand Excellence Award in FMCG sector (Consumer Durables)in 2016.

• Blue Star chillers were certified by the Air Conditioning Heating andRefrigeration Institute (AHRI) for achieving a 100% success rate in the performancetesting of the air cooled as well as water cooled chillers in 2016.

• The Company won the Water Digest Awards 2017 for the 'Best Domestic RO+UVPurifier' in the country.


During the year under review Ashok M Advani retired as the Chairman of the Companywith effect from November 30 2016. The Board took on record the exemplary contributiontowards the growth of the Company made by the Chairman during his 47 years of service andassociation with Blue Star. Ashok M Advani was appointed as the Chairman Emeritus of theCompany with effect from December 1 2016. Suneel M Advani was appointed as the Chairmanof the Board effective December 12016. Further M K Sharma Independent Directorresigned with effect from June 12 2017. The Board appreciated his valuable guidance andcontribution during his tenure.

Vir S Advani retires by rotation at the ensuing Annual General Meeting and beingeligible offers himself for re-appointment.

Further based on the recommendation of the Nomination and Remuneration Committee theBoard had appointed Rajiv R Lulla (DIN: 06384402) and Dinesh N Vaswani (DIN: 00306990) asthe additional Non-Executive Directors of the Company with effect from December 12016.In compliance with the Act and Listing Regulations Sam Balsara (DIN: 00076942) has beenappointed as an additional Independent Director with effect from June 20 2017 for aperiod of 5 years.

As per the provisions of the Act they hold office up to the date of the ensuing AnnualGeneral Meeting of the Company.

Your Company has received notices under Section 160 of the Act together with requisitedeposit from the members proposing appointment of Rajiv R Lulla Dinesh N Vaswani and SamBalsara as Director(s) on the Board of your Company. Accordingly the necessaryresolution(s) seeking approval of the members for appointment of Rajiv R Lulla Dinesh NVaswani and Sam Balsara have been incorporated in the Notice of the ensuing Annual GeneralMeeting.

Brief profiles of the Directors proposed to be appointed/re-appointed are annexed tothe Notice convening Annual General Meeting.

The Board recommends their appointment at the ensuing Annual General Meeting.

Declaration by Independent Directors

The Company has received necessary declaration from each Independent Director of theCompany under Section 149(7) of the Act confirming that they meet with the criteria ofindependence as laid down in Section 149(6) of the Act read with Regulation 25 of theListing Regulations.


In accordance with the provisions of Section 203 of the Act the following personnelhave been designated as the Key Managerial Personnel of the Company:

Name Designation
Vir S Advani Managing Director
B Thiagarajan Joint Managing Director
Neeraj Basur Chief Financial Officer
Vijay Devadiga Company Secretary


Pursuant to the provisions contained in Section 134 of the Act the Directors to thebest of their knowledge and belief confirm that:

• in the preparation of the annual accounts for the financial year ended March312017 the applicable accounting standards have been followed along with properexplanation relating to material departures;

• the Directors have selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company as at March 31 2017 andof the profit of the Company for that period;

• the Directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets of the Company and for preventing and detecting fraud and otherirregularities;

• the Directors have prepared the annual accounts for the year ended March 312017 on a going concern basis;

• the Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and are operatingeffectively; and

• the Directors have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems are adequate and operatingeffectively.


During the year under review 5 (five) meetings of the Board of Directors were held onMay 30 2016; August 1 2016; November 10 2016; January 25 2017; and March 6 2017. Theintervening gap between these meetings was within the period prescribed under the Act andListing Regulations. The details of the meetings and attendance of the Directors areprovided in the Corporate Governance Report.


Your Company has in place all the Committee(s) as mandated under the provisions of theAct and Listing Regulations. Currently there are seven Committees of the Board namely:

• Audit Committee

• Nomination and Remuneration Committee

• Investor Grievance and Stakeholders' Relationship Committee

• Risk Management Committee

• Corporate Social Responsibility Committee

• Share Transfer Committee

• Executive Management Committee


The Audit Committee of the Company comprises Shailesh Haribhakti Pradeep Mallick and BThiagarajan. Shailesh Haribhakti is the Chairman of the Committee. B Thiagarajan wasappointed as a member of the Audit Committee with effect from November 10 2016. M KSharma ceased to be member of the Committee with effect from June 12 2017.

The composition of the Committee is in compliance with the requirements of Section 177of the Act and Regulation 18 of the Listing Regulations. The charter of the Committee isin conformity with the Act and the Listing Regulations as more particularly set out in theCorporate Governance Report which forms a part of this Report.

During the year under review there was no instance wherein the Board had not acceptedany recommendation of the Audit Committee.


The CSR Committee comprises Suneel M Advani B Thiagarajan and Shobana Kamineni. SuneelM Advani is the Chairman of this Committee.

During the year under review the Company was required to spend an amount of '167.64lakhs towards activities as stipulated under Schedule VII of the Act. The Company hasspent an amount of '172.55 lakhs towards various CSR initiatives. The brief outline of theCSR Policy and the initiatives undertaken by the Company on CSR activities during the yearare set out in Annexure 2 of this Report in the format as prescribed in the Companies(Corporate Social Responsibility Policy) Rules 2014. The Policy is also available on thewebsite of the Company.


Pursuant to the provisions of the Act and Regulation 17 of the Listing Regulations theBoard of Directors has carried out an annual evaluation of the performance of the Board asa whole the Directors individually and the working of the committees of the Board. In aseparate meeting of the Independent Directors held on April 11 2017 the performance ofthe Non-Independent Directors the Board as well as that of the Chairman were evaluatedtaking into account the views of the Executive and Non-Executive Directors.

The details of the familiarisation programme for the Independent Directors of theCompany are available on the website of the Company at


The Company is committed to maintaining the highest standards of Corporate Governanceand continues to be compliant with the requirements of the Corporate Governance asenshrined in the Listing Regulations. The Report on Corporate Governance as stipulatedunder Regulation 27 of the Listing Regulations forms part of the Annual Report. Thecertificate from the Statutory Auditors of the Company confirming compliance with theconditions of Corporate Governance as stipulated under Regulation 27 of the ListingRegulations has been annexed with the said report.


Pursuant to the provisions of sub-sections 9 and 10 of Section 177 of the Act and asper the Listing Regulations the Company has established a vigil mechanism to enable theDirectors and employees of the Company to report concerns of any unethical behaviourunacceptable and improper practices or suspected fraud. The Company has a Whistle BlowerPolicy in place which has also been uploaded on its website. An Ethics Committee has beenconstituted comprising the Chief Financial Officer HR Head and Company Secretary (EthicsOfficer) to administer this Policy.

The Whistle Blower Policy is uploaded on the Company's website under the weblink at:

The Company has also adopted a Code of Conduct which is available on the website of theCompany under the weblink of

The Audit Committee reviews on a quarterly basis complaints if any and implementscorrective actions whenever necessary.


The Company has established an internal control system commensurate with the sizescale and complexity of its operations. In order to enhance the standards of controls andgovernance the Company has adopted COSO 2013 framework to ensure that robust internalfinancial controls exist in relation to operations financial reporting and compliance.

Significant features of the Company's internal control system are:

• A well-established independent Internal Audit team operates in line withbest-in-class governance practices. It reviews and reports to the Audit Committee aboutcompliance with internal controls the efficiency and effectiveness of operations as wellas key process risks.

• The Audit Committee periodically reviews internal audit plans significant auditfindings and adequacy of internal controls.

• Systematic self-certification of adherence to key internal controls as part ofcontrol self-assurance by process owners monitors and reviewers.

• Adherence with a comprehensive information security policy and continuousupgrades of the Company's IT systems for strengthening automated controls.

During the year the internal controls were tested and found effective as a part ofthe Management's control testing initiative. Accordingly the Board with the concurrenceof the Audit Committee and the Auditors is of the opinion that the Company's InternalFinancial Controls were adequate and operating effectively for the financial year endedMarch 31 2017.


Details of loans guarantees and investments covered under the provisions of Section186 of the Act as may be applicable are given in the standalone financial statement asper Note 6.


All related party transactions that were entered into during the financial year were onan arm's length basis and in the ordinary course of business. All related partytransactions are approved by the Audit Committee.

There are no material transactions with any related party as defined under Section 188of the Act read with the Companies (Meetings of Board and its Powers) Rules 2014. Thedetails of transactions with the related parties are provided in the standalone financialstatement as per Note 37.

A policy governing the related party transactions has been adopted and the same hasbeen uploaded on the Company's website under the weblink of


The Risk Management Committee has been formed to assist the Board in fulfilling itsresponsibilities relating to evaluation and mitigating various risks exposures thatpotentially impact the Company. An Enterprise Risk Management (ERM) framework prescribedunder the Committee of Sponsoring Organisations (COSO) was adopted for implementation bythe Committee.

The Risk Management Committee comprises Suneel M Advani Vir S Advani B Thiagarajanand Neeraj Basur. Vir S Advani is the Chairman of this Committee.

During the year the Committee reviewed the Company's risk management processes on aquarterly basis to mitigate various risk categories including technological obsolescencerepudiation of claims by the customers cost overrun in projects accidents safety/healthhazards dependence on channel partners domestic and international competitionregulatory shifts customer/supplier/geographical concentration and others.

The Committee has adopted a formal Risk Management Policy. The Committee identifiesevaluates and assesses the risks understands the exposure of risks and accordinglyprepares the risk mitigation plan. It has identified the Risk Management Units which areconstantly monitored and the severity of risk is tracked based on risk ratingmethodology. The Company maintains risk registers to ensure that the effectiveness of themitigation action plan gets assessed independently. This register was reviewed by the RiskManagement Committee the Audit Committee and the Board.


The Nomination and Remuneration Committee comprises Gurdeep Singh Suneel M AdvaniPradeep Mallick and Dinesh N Vaswani. Gurdeep Singh is the Chairman of this Committee.Dinesh N Vaswani joined as a member of this Committee with effect from January 25 2017.

The Committee is constituted in line with the requirements mandated by the Act and ofthe Listing Regulations. The terms of reference of the Committee are in conformity withthe said requirements as more particularly set out in the Corporate Governance Reportwhich forms a part of this Report.


Details of the ratio of the remuneration of each Director to the median employee'sremuneration and other details in terms of Section 197(12) of the Act read with Rule5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014is enumerated further.

i. The ratio of the remuneration of each Director to the median remuneration of the employees of the Company for the financial year Vir S Advani* 78x
B Thiagarajan 50x
ii. The percentage increase in remuneration of each Director Chief Financial Officer Chief Executive Officer Company Secretary or Manager if any in the financial year Vir S Advani* 149.15%
B Thiagarajan 52.21%
Neeraj Basur 12.50%
Vijay Devadiga 10.00%
iii. The percentage increase in the median remuneration of employees in the financial year 0.18%
iv. The number of permanent employees on the rolls of Company 2498
v. The explanation on the relationship between average increase in remuneration and Company performance Increments are based on the individual employee performance market benchmarking of salary and net profit of the Company.

vi. Comparison of the remuneration of the Key Managerial Personnel Total remunerationpaid to the Key Managerial against the performance of the Company Personnel constituted9.94% of the net profit of the Company for FY 2016-17.

vii. Variations in the market capitalisation of the Company price earnings ratio as at the closing date of the current financial year and previous financial year and percentage increase over decrease in the market quotations of the shares of the Company in comparison to the rate at which the Company came out with the last public offer 2016-17 2015-16
Market 6617.29 3510.79
Capitalisation (' in crores) PE ratio 59.03 30.30
In the recent past the Company has not made any public offer.
Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration Average increase to employees other than Managerial Personnel and justification thereof 12.49% To remain competitive in the market to attract and retain talent.
Average increase to Managerial Personnel Please refer to (ii) of this table.
Exceptional circumstances forincreasetomanagerial remuneration* The average increase given in FY 2016-17 was based on the outcome of compensationand benefits benchmarking survey to align remuneration of Wholetime Directors to market median.
ix. Comparison of the remuneration of each Key Managerial Personnel against the performance of the Company Vir S Advani* 4.76%
B Thiagarajan 3.02%
Neeraj Basur 1.68%
Vijay Devadiga 0.48%
x. The key parameters for any variable component of remuneration availed by the Directors The Nomination and Remuneration Committee evaluates the performance of the Directors against the key result areas determined by it and recommends payment of commission to the Directors.
xi. The ratio of the remuneration of the highest paid Director to that of the employees who are not Directors but receive remuneration in excess of the highest paid Director during the year NA
xii. Affirmation that the remuneration is as per the Remuneration Policy of the Company Affirmed

* Remuneration of Vir S Advani includes additional performance linked incentives (PLI)of 199.09 lakhs for the financial year 2016-17 pursuant to the approval of theshareholders at the previous Annual General Meeting held on August 12016. As the PLI hasbeen paid to Vir S Advani effective financial year 2016-17 his remuneration for financialyear 2016-17 is not comparable with that of the previous financial year.

The Non-Executive Directors of the Company are paid sitting fees and commission as perthe statutory provisions and within the limits approved by the members. The ratio ofremuneration and percentage increase for Non-Executive Directors' Remuneration istherefore not considered for the purposes above. The details of remuneration ofNon-Executive Directors are provided in the Corporate Governance Report.


The Human Resources philosophy of your Company is to attract and retain the best talentin the industry. Your Company considers its employees as partners in success. Your Companyconstantly endeavours in adopting the best policies to keep its employees motivatedengaged and aligned to the interests of the Company. Your Company undertakes variousemployee engagement programmes and also fosters a culture of continuous learning anddevelopment and creating future leaders. Your Company constantly explores variouspossibilities to make Blue Star a better place to work.


The Nomination and Remuneration Committee of the Board of Directors of the Companyinter alia administers and monitors the Employees' Stock Option Scheme of the Company inaccordance with the SEBI (Share Based Employee Benefits) Regulations 2014. Details of theshares issued under Employee Stock Option Scheme (ESOS) as also the disclosures incompliance with Section 62 of the Act and Rule 12 of Companies (Share Capital andDebentures) Rules 2014 and SEBI (Share Based Employee Benefits) Regulations 2014 isavailable on our website at .


Particulars of employees as required under Rule 5(2) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 are required to be annexed to theBoard's Report. In accordance with the provisions of Section 136 of the Act the AnnualReport excluding the aforesaid information is being sent to all the members of the Companyand others entitled thereto. Any member interested in obtaining such particulars may writeto the Company Secretary at the Registered Office of the Company.


The Company incurred a total expenditure of '53.67 crores on research and developmentfor the year as against '49.81 crores in the previous year.

During the year the Company recorded foreign exchange earnings from export of itsproducts commission and other income aggregating to '256.63 crores as against '349.09crores in the previous year. The previous year's earnings included '104.39 crorespertaining to earnings made by erstwhile Blue Star Infotech Limited that merged with theCompany with effect from the Appointed Date of April 1 2015.

There was a corresponding increase in foreign exchange outflow which stood at '1037.85crores as compared to '925.46 crores in the previous year.

The information on Energy Conservation Technology Absorption and Foreign ExchangeEarnings and Outgo as required under Section 134(3)(m) of the Act read with Rule 8 ofthe Companies (Accounts) Rules 2014 is annexed herewith as Annexure 1.


The Management Discussion and Analysis for the year under review as stipulated underthe Regulation 34 of Listing Regulations is annexed to this report.


In compliance with Regulation 34 of the Listing Regulations the BusinessResponsibility Report describing sustainability initiatives undertaken by the Companyduring the year under review is provided in a separate section forming part of this AnnualReport.


M/s S R B C & CO LLP Chartered Accountants (Regn No. 324982E/E300003) wereappointed as the Statutory Auditors of the Company at the Annual General Meeting held onJuly 28 2014 to hold office for a term of five years i.e. till the conclusion of theAnnual General Meeting to be held for the financial year 2018-19 subject to ratificationof their appointment at every Annual General Meeting during the said term. The Board ofDirectors of the Company at its meeting held on May 9 2017 has recommended ratificationof appointment of M/s S R B C & CO LLP as the Statutory Auditors of the Company forfinancial year 2017-18 by the members at the ensuing Annual General Meeting.

The Company has received a letter from M/s S R B C & CO LLP Chartered Accountantsto the effect that ratification of their appointment if made would be in accordance withthe relevant provisions of Section 139 and 141 of the Act read with Rule 4(1) of theCompanies (Audit and Auditors) Rules 2014.


The Board has duly reviewed the Statutory Auditors' Report on the Financial Statements.There are no qualification reservation adverse remark given by the Auditors in theirReport.


In terms of the provisions of Section 148 of the Act read with the Companies (CostRecords and Audit) Amendment Rules 2014 the Board of Directors had on therecommendation of the Audit Committee appointed M/s Narasimha Murthy & Co HyderabadCost Accountants as the Cost Auditors to conduct cost audit for the financial year endedMarch 31 2017.

As required under the Act remuneration payable to the cost auditor is required to beplaced before the members in a general meeting for their ratification. Accordingly aresolution seeking members' ratification for the remuneration payable to Cost Auditorsforms part of the Notice convening the Annual General Meeting.


In terms of the provisions of Section 204 of the Act read with Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014 the Board had appointed M/s N LBhatia & Associates practicing Company Secretaries as the Secretarial Auditor of theCompany for conducting the secretarial audit of your Company for the financial year endedMarch 31 2017.

The Secretarial Audit Report given by M/s N L Bhatia & Associates PracticingCompany Secretaries has been provided as per Annexure 3 to this Report. The SecretarialAudit Report does not contain any qualification reservation or adverse remark.


Pursuant to Section 92(3) and Section 134(3)(a) of the Act read with Rule 12(1) of theCompanies (Management and Administration) Rules 2014 an extract of annual return in FormMGT-9 has been provided as per Annexure 4 to this Report.


The Company has zero tolerance for sexual harassment at workplace and has adopted aPolicy on prevention prohibition and redressal of the same in line with the provisionsof the Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal)Act 2013 and the Rules thereunder for prevention and redressal of complaints of sexualharassment at workplace. All employees (permanent contractual temporary and trainees)are covered under this Policy.

The Company has set up Internal Complaints Committees to redress complaints receivedregarding sexual harassment. The Company organises workshops and awareness programmes atregular intervals for sensitising the employees with the provisions of the Act. During theyear under review 2 complaints with allegations of sexual harassment were filed with theCompany and the same were investigated and resolved as per the provisions of theaforesaid Act.


• There were no material changes and commitments affecting the financial positionof the Company which have occurred between the end of the financial year under review andthe date of this report.

• There were no significant and material orders passed by the regulators or courtsor tribunals impacting the going concern status of your Company and its operations in thefuture.

• Your Company has not issued any shares with differential voting.

• Your Company has not issued any sweat equity shares.

• There was no revision in the financial statements.


The Directors place on record their sincere appreciation for the assistance guidanceand co-operation provided by the Government of India and other regulatory authorities. TheDirectors thank the financial institutions and banks associated with the Company for theirsupport as well. The employees of Blue Star Limited are instrumental in the Companyscaling new heights year after year and their commitment and contribution is deeplyacknowledged. Shareholders' involvements are greatly valued. The Directors look forward toyour continuing support.

For and on behalf of the Board of Directors
Suneel M Advani
Mumbai: June 20 2017 Chairman


Information pursuant to Rule 8 of Companies (Accounts) Rules 2014:

CONSERVATION OF ENERGY Energy conservation measures taken:

The Company believes that energy provides the means for economic growth as well associal and economic development. Hence it is important to conserve and use energyjudiciously. Even though energy does not constitute a major cost element in the Company'smanufacturing facilities several initiatives were undertaken to optimise energyconsumption during the year under review. The Company has a certified energy conservationaudit team which also helps in identifying and addressing their appropriate conservationplans.

Himachal Plants (HP1 and HP2)

• Two Six Sigma Green Belt projects on energy conversation (one in each of thePlants) were completed during the year. This resulted in low maximum demand indicator andhelped to reduce energy consumption by 13% in the production of Storage Water CoolersMini Split Air Conditioners and Commercial Split Air Conditioners and 18% in MicroChannel Heat Exchangers (MCHX) production in the HP2 Plant. This project enabled savingsof approximately '13.24 lakhs and 10% energy in the HP1 Plant.

• The speed of circulation and exhaust fans of Controlled Atmospheric Brazingfurnace was reduced by 20% by installing variable frequency drives on induction motors.This resulted in savings of 54000 kWh per year.

• In the HP2 Plant conventional lighting was replaced with LEDs at shop flooroffices canteen and street lights which saved approximately 11680 kWh power consumptionper year. In HP1 Plant halogen street lights were replaced with LED lights which alsoimproves lux levels saving energy cost of '3.14 lakhs per year.

• Automation initiatives were undertaken to save water generated by way of rawreverse osmosis de-mineralised sewage treatment plant; tap testing; and sprinkler watersupply system for R-32 storage area which helped save approximately 6848 kWh powerconsumption as well as 43.40 million litres of water consumption per year.

• Automation initiatives undertaken with respect of Helium leak detection machinelab ambient control system helped generate savings of approximately 14500 kWh per year.

• Utility power factor was improved by installing capacitors with Automatic PowerFactor Controller Relay at main low transmission panel and power distribution board panelsat the shop floors. This helped to generate savings of approximately '3.12 lakhs per year.

• The set point for unloading all air compressors was decreased by 0.5 kg/cm2resulting in energy savings by around 4%. Air leakages in the low pressure distributionsystem were arrested. These initiatives have resulted in energy savings and reduction ofcarbon footprint saving around '1.50 lakhs per year.

• Upgradation of the screw element of the existing LP compressor was undertakenwhich reduced power consumption by 14 kW/hour. This also improved LP pneumatic airgeneration which saved energy cost by around '3.93 lakhs per year.

Ahmedabad Plant

• Automatic Power Factor Controller panel was installed which maintains the powerfactor close to unity helping save energy cost by '1 lakh per year.

• Plant lighting apparatus was replaced from CFL to LED. This helped in reducingenergy consumption of plant via lighting load by 58%.

• Turbo air ventilators were installed on roof top which improved lux level inthe Plant thereby reducing energy consumption for lighting during day time.

• Instead of 22 kW LP air compressors compressors of 7.5 kW and 22 kW withimproved load pattern and optimum utilisation were deployed during the year. This enabledin saving the electricity consumption of utilities.

Wada Plant

• Power factor was maintained near unity and savings in the form of a rebate of'9.5 lakhs per year was achieved.

• Replacement of conventional high pressure sodium vapour street lights by solarlights resulted in saving '1 lakh per year.

• Solar panels and 2.5 kVA smart inverters were installed and office lightingload was connected to solar panels resulting in savings of '0.40 lakh per year.

• Due to cyclic operation of the foaming machine chemical pump motors contributesto major energy losses during unloading operation. Considering the move towards Industry4.0 and IoT initiatives smart tabs have been installed to operate the foaming machinefrom the ground level. This helped achieve energy savings of '4 lakhs per year.

• In the coil shop all the machines now run on programming logic control andencoder system. A 10 kVA uninterruptible power supply (UPS) was installed for verticalexpander and hair pin bender. This has resulted into energy saving of '1 lakh per year.

• Balance of electrical load was maintained on the transformers avoiding runningof DG sets during additional load. This enabled savings in the diesel cost as well in DGelectricity duty charges by '34 lakhs per year.

Dadra Plant

• Installed i-controlled technology paint booth which helped in achievingreduction in powder and power consumption thereby saving '4.85 lakhs for the periodbetween November 2016 to March 2017.

• Power factor was controlled to a level near unity resulting in savings of '3.71lakhs during the year.

• Inverter variable refrigerant flow ACs were installed in the office resultingin reduction of 1000 units per month.


a) Efforts made towards Technology Absorption:

During the year continuous efforts were made to strengthen the R&D facility in theareas of adoption of alternatives to lower global warming potential (GWP) refrigerantswherever feasible certification of labs formation of core cells for embedded technologyand understanding of emerging regulatory standards which are mandatory for domestic andglobal sales.

The Company continued to invest in research infrastructure and added an electronics labfor development and reliability testing of electronic components and controllers.Competencies were developed in embedded software which is a part of an overall competencydevelopment programme for controllers. The Company also added one lab for refrigerationwhich is NABL accredited. In addition various initiatives were undertaken during the yearto improve productivity of R&D projects.

b) Outcome and benefits:

During the year a complete new range of Room ACs was introduced with low GWPrefrigerants. The Company also introduced a complete new range of Ducted Inverter Systemsand a configured series of Water Cooled Chillers which will meet the upcoming EnergyConservation Building Code (ECBC) norms.

The Company's special focus during the year was to develop products that can meetapplicable norms of global sales. In line with this objective existing VRF and VRF Sprintsystems were modified to comply with ESMA Standards which will help the Company inexporting its products to the relevant overseas markets.

In addition wall-mounted units were also introduced during the year to meet enhancedquality regulations in the Middle-East in terms of performance and safety. Acost-effective series of Water Coolers and high-efficiency Ducted Systems with ultra-lownoise was also introduced to boost export prospects.

c) Information regarding imported technology (imported during last 3 years):

No technology has been imported by the Company in the last 3 years.

d) Expenditure incurred in R&D:

(Rs. in crores)

(a) Capital 12.37 10.60
(b) Recurring 41.30 39.22
Total 53.67 49.81
Total R&D expenditure as a percentage of total turnover 1.28% 1.39%


a) Activities relating to exports initiatives taken to increase exports developmentof new export markets for products and services and export plans:

Discussed in detail in the Management Discussion and Analysis section of the AnnualReport.

b) Total foreign exchange earnings and outgo:

(Rs. in crores)

Total foreign exchange outgo 1037.85 925.46
Total foreign exchange earned 256.63 349.09*

* includes 104.39 crores pertaining to earnings made by erstwhile Blue Star InfotechLimited that merged with the Company with effect from the Appointed Date of April 12015.