Blue Star to float separate company to run upcoming Sri City plant in Andhra Pradesh

Air-conditioning and commercial refrigeration major Blue Star has said that it will be setting up a separate company to run its upcoming manufacturing plant at Sri City in Andhra Pradesh in a bid to avail the tax rate benefits applicable to the manufacturing investments. The company was on track to commission the Sri City plant by the end of FY’21 as it has been mandated to roll out the products by March 2022.

Speaking at a virtual press meet after announcing the launch of new products and solutions with virus deactivation technology (VDT), B Thiagarajan, MD, Blue Star said the principles laid out for the Sri City project stand the same today.

“As a company we want to avail of the tax benefits offered by the Andhra government, and therefore it will be separate company. We have not named the company yet and though the volume and capacity constraints were not there due to Covid-19 impacted summer sales, the deadline for availing tax benefits are there and Blue Star is working towards meeting the same,” he said.

He said that the Sri City project is meant for catering to the Southern markets and it will help the company in reducing its inventory holding period, logistics and transportation expenses which are substantial. “The raw material import will be done through Krishnapatnam port, so incoming material cost will also be get reduced, making a perfect business sense,” he said .

Blue Star has planned to invest Rs 120 crore to build the Sri City plant in the first phase to cater to the room air-conditioner market in the South. The plant will at least have two phases of development and the second phase also will see similar investment. The unit will have a capacity to produce half a million units and will cater to the five Southern states, thereby drastically cutting logistics cost when compared to goods being transported from its Himachal plant.

Thiagarajan said the plan to capture a 15% market share in residential ACs by 2024 holds good even though the last summer sales were almost washed out. “We do have challenges in terms of margins due to prevailing situation. We are finding low-end products growing faster than other products. We think the products that we launched for the summer season will address this issue. We always had much higher market share in high end products. We are clear in mind to achieve the targets and despite a very tough time, we have maintained our market share even now,” he said.

Thiagarajan said the company has achieved 80 to 90% production of pre-Covid levels currently. By fourth quarter he hopes to touch 100% of pre-Covid levels or even achieving 5 to 10% growth over the normal level.

On the component imports from other countries including China, he said the company has to depend on other countries for certain components as not many Indian companies are producing them.

Blue Star claimed that its new range of products and solutions with virus deactivation technologies (VDT) has the capability to deactivate viruses including Covid-19 with up to 99.9% efficacy when air passes through these systems. Recently, the company had won an order valued at Rs 149 crore for five underground stations of Mumbai Metro Line III for the purpose of carrying out electrical and mechanical work.