Blue Star expects 25% growth in sales of residential AC in June quarter

Homegrown cooling products maker Blue Star on Tuesday said it expects up to 25 per cent growth in sales of residential AC in the June quarter, the period which accounts for the highest number of sales due to the temperature rise and heat wave.

The company has already witnessed up to a 40 per cent year-on-year increase in sales of AC in March from the Southern region, where sales of cooling products start early, Blue Star Managing Director B Thiagarajan said.

"Our goal is to reach the market share of 15 per cent in FY25. So we are working towards that, we have another 11 months to go," Thiagarajan said.

To woo customers in its fold, Blue Star, which launched a new range of over 100 affordable and premium models of AC on Tuesday, plans to invest over Rs 40 crore in advertising during the summer season.

Blue Star is witnessing a significant demand coming from the burgeoning middle-class consumers with higher disposable incomes and the category becoming more of a necessity than a luxury.

Moreover, Blue Star is also experiencing demand from first-time buyers, especially from smaller markets such as Tier II, III and IV markets, as well as the replacement market.

"There are multiple reasons for growth. The weather forecast for the season is good and favourable for the cooling industry and there is an upbeat mood on the overall economy of the country and general elections are also happening.

"The penetration levels had been poor for this particular category so going by what has happened since the warmer season of 2023 till March this year, I think this summer growth can easily be 20 per cent and we are targeting to grow by 25 per cent," he said.

The company, which had entered the residential air conditioners market in 2011, had reported a market share of 13.50 per cent in its latest annual report of FY23.

The Indian residential AC market is estimated to touch 11.5 million units in FY25, which according to Thiagarajan is at "inflection point" and poised to grow exponentially over the next few years.

"For the full year, I think the market will grow by around 15 per cent if the summer season goes well and our target is 20 per cent growth I think we don't know the numbers of last financial year (as financial results are yet to be announced) our goal was to do anywhere between 1 million to 1.1 million units," he said.

Last season, due to unseasonal rains during the June quarter dampened the spirits of the sales, however, it recovered later in the coming months.

According to Thiagarajan, so far the primary sales numbers in the Northern markets, which contribute around half of the sales of the residential AC, are good and dealers are stocking units in anticipation of a good scorching summer this year.

The company is also expanding its manufacturing capacity to meet the growing domestic demand and cater for the export market by investing in its existing units in Himachal Pradesh.

Besides, through its wholly-owned subsidiary Blue Star Climatech, it has set up a new manufacturing facility in Sri City, Andhra Pradesh, which commenced commercial production in January 2023.

"With these plants, Blue Star now has a production capacity of over a million room ACs, which will gradually scale up to 1.8 million ACs in due course," he said.

Currently, the company has an installed capacity of 9 lakh units and is getting 1-1.5 lakh units manufactured by original equipment manufacturers (OEMs). Next year, Blue Star's capacity will increase to 1.25 million units.

Blue Star is also expanding its retail footprint both in offline and online channels. As part of the strategy, it is focusing on e-commerce and modern trade channels, to enhance offtake.

The 80-year-old firm has a partnership with India's batting mainstay Virat Kohli as Blue Star's brand ambassador. This brand endorsement helped Blue Star in building up the company's brand awareness and equity.

For the financial year ended on March 31, 2023, Blue Star reported a total income of Rs 8,008.19 crore, in which its unitary products segment grew, under which residential AC had contributed 38.8 per cent to Rs 3,626.93 crore.