Air Filtration Technology capable of filtering out the virus, will be launched in 6-8 weeks: Vir S Advani, Blue Star Limited

Vir S Advani, Vice Chairman & Managing Director, Blue Star Limited, talks about NCD issue of Rs 300 crore, lockdown and its impact on his business, myth linked to air conditioning and the virus and new product line among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts: 

Q: Blue Star has issued an NCD of Rs 300 in the recent past. Provide details of the NCD and how the raised money will be used?

A: The NCD of Rs 300 crore has been issued mainly for working capital requirements. Our summer season is on and for the purpose - to meet the demand of the season - we managed to build-up the entire inventory in February and March. Then the markets were closed due to which a lot of inventory is in the field, warehouse and factories and I feel that it will take a little more time – of around 6-12 months – to get clear. To fund the working capital, we will have to raise this long-term debt. This is a three-year debt and we think the problems associated to the inventory will get solved in next 6-9 months after which the raised fund will be used as a CapEx so that we can manufacture more room air conditioners and deep freezers in India, itself. We, at present, import around 50% of our products from China and elsewhere. I feel that the import duties will be raised after COVID comes to an end and that’s why we need more CapEx to plan for it.  

Q: The lockdown, which is being lifted in a graded manner, now, has had an impact on the business. Can you tell about the kind of impact it had on your business and plans to mitigate it in future?

A: March and April have washed out completely, giggles. The sales had been meager in these two months, and I expect that the sales will go up slightly in May as several markets like Chennai have opened and I expect that the standalone stores will be opened even in Mumbai. Even the Delhi government has notified that independent stores can be opened. Two of our factories are running at present, but we have a specific focus on sales, not on running the companies. Our inventories are available in every state, but there is a need to open the stores and start sales at the dealer level. If it happens, then it seems that the season sales in May and June will drop by around 30-40% as compared to the last year. 

Q: How your commercial business will be impacted by the closure of commercial spaces like hotels and malls will have? What percentage of your revenue comes from the commercial air conditioning against the personal consumption AC?

A: Commercial air conditioning has a 50% contribution in our revenues and residential stands roughly at 40%. I think, central air conditioning will come back on track after May and June because summer sales belong to residential, which ends with the end of summer. I feel that the central air conditioning business is stable in the long term. It may not register good growth and may report 10-15% drop when compared the last year, but the business is stable in long-term. 

Q: There are talks that the virus survives more under the air conditioning. If it true and what is your view on it and how it will impact the demand?

A: There is a lot of news on the subject, Air Conditioning and the Virus, and it is important to clarify that a technical task force has been constituted in our company as well as refrigeration and air conditioning manufacturer association. So, two task forces are working at present and several tests have been conducted in the last three weeks and can confirm that every talk, related to air conditioning and virus, saying that air conditioning can create a problem is not right. The main reason for this is that air conditioning controls both the temperature as well as the humidity in the room. We all know that the virus to survive needs to either have very low humidity or the temperature needs to be very low. By using air conditioning both residential as well as central air conditioning by controlling the humidity and the temperature, we can control the virus. It doesn’t kill the virus, so don’t get me wrong, but it can control it and keep it stable.

The most important thing about air conditioning and the virus is fresh air. Many of us don’t know that a ventilation system is available in every central air conditioning system. This ventilation helps in bringing fresh air from outside. And, this ventilation system replaces the complete volume of air in the room on a weekly basis. What we are recommending our customers is that we should increase that fresh air even more, so that we should change the total fresh air in the room two times in an hour, 200%. This is doable with the existing equipment, there is no additional investment required by the customer. We just need to come in and change some settings in the system. So in a retail mall, hospital, hotel, airport, you have fresh air coming in into the air conditioning space even now automatically with the central air conditioning system. This is the communication that we want to give to all the public that it is very safe to use air conditioning and we will, of course, be educating them.

Q: You are clarifying the myth about air conditioning and the virus and using the ACs doesn’t create any problem linked to the virus. Is it a scientifically proven fact?

A: The research that we did was conducted in the US, Europe, Japan and India. Actually, air conditioning is an essential service in the US, Europe and Japan and is an essential service and it is necessary to keep it running always because it controls the virus. However, a piece of different news is spread across India and that’s why the research was conducted. The technical papers will be made public and everyone can access it through our refrigeration and air conditioner manufacturer association. The technical resources have been called to explain it. I feel that the problem will reduce a bit in the next one or two weeks after the fact is explained to the public. 

Q: Do you think that there are opportunities to launch some new product or a business line that is liked to existing business under the situation? Also, update us about the existing pipeline of your products?

A: We were innovating number of products, which has slowed down because we need to conserve cash and make sure that we sell what we have. So, unfortunately, some of our R&D activities will slow down in the current year that is a reality. Having said that with this virus growing at a pace it is, air conditioning as you said is an integral part of controlling the environment. We are looking at some new products and solutions technologies from all around the world, which can help reduce the impact of the virus.

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So, this is air filtration technologies, these are not air purifiers, technologies as I mentioned to you that all central air conditioning systems have a built-in ventilation system but that system only brings in the fresh air and takes out stale air it does not do excessive filtration. So, we are looking at some new products from outside the country, which can help in filtering out viruses. We are still working on that and we hope that in the next 6-8 weeks we will have some products available.