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Financial Special

Blue Star Limited

Revenue from operations for Blue Star Limited maintained impressive growth momentum in line with the company’s plans until the end of 3Q of FY20. 4Q also started on track; however, COVID-19 across the globe resulted in significant demand and supply chain disruptions across India. On a consolidated basis, for the current financial year, revenue from operations of the company registered a modest 2.39 percent growth at Rs.5360.19 crore as compared to Rs.5234.84 crore in the previous year. The company registered net profit after tax of Rs.143.25 crore as compared to Rs.190.06 crore.

Blue Star continues to steadily grow on the global front as well. The company actively participated in international exhibitions and segment specific seminars in the Middle East, African, and SAARC regions. To expand operations in the Middle East, Blue Star inaugurated a new office and its first flagship showroom in Dubai. The company’s water coolers are approved by many ministries across the GCC. Eco-friendly inverter split ACs with zero ozone depletion R32 refrigerant, are also well accepted in the Maldives and Sri Lankan markets.

Manufacturing capital. Blue Star’s manufacturing footprint spans five facilities across Wada, Dadra, Himachal Pradesh, and Ahmedabad. Under the aegis of the Manufacturing Excellence Program initiated in 2016 continues to significantly strengthen its manufacturing expertise. The company has now embarked upon a manufacturing transformation project Qualis 2.0 with a focus on supplier excellence, end-to-end logistics, Industry 4.0 practices, and building new age competencies in people. The Dadra Plant enjoys the reputation of being one of the top manufacturing facilities in India for high-quality AC products. The two plants in Himachal Pradesh which continue to cater efficiently to the fast-growing markets of RAC and refrigeration products had an impressive performance. The Wada plant produces a wide range of products such as scroll chillers, screw chillers, cold room panels, condensers and evaporators for the cold room business as well as condensing units for an overseas OEM. The Ahmedabad plant continues to invest in initiatives aimed at enhancing operational efficiency.

Intellectual capital. The company continues to make investments into upgrading its infrastructure and design capabilities as well as imbibing cutting-edge technologies across its range of products. During the year, a complete range of 3- and 5-star RACs with a specific focus on the cost-competitive inverter model series was launched. Water purifiers with the filtration system/process delivering alkaline water with added minerals were well accepted in the market. The new range of air coolers with the Cross-Drift technology were well accepted. The company’s performance laboratories for air conditioning and refrigeration products received accreditation from NABL. The company continued to invest in building new test facilities for electronics as well as toward competency development in inverter drives, smart controllers, and low GWP refrigerants.

Service. Under the framework of its service excellence program, the service reach has improved signif icantly to 3946 taluks/tehsils with a new assured service response time of 3 hours and turnaround time of 18 hours. The company set up a 24×7 call desk with an interactive voice response system. A host of other digital initiatives include a customer service app, a technician application, and remote monitoring of chillers among others. More than 30 service centers were set up across the canny and the company has more than 250 service vans to reach out to customers speedily.

Dealer focus. The Channel Management Center added around 720 channel partners and service associates. The company also expanded its retail distribution reach for RACs and added about 508 retailers and distributors across the country. The company in FY20 launched an e-learning platform. Extensive Star Connect training programs were organized across all branches for dealers and their staff members, and video tutorials and manuals in local languages were created to facilitate the training. ln FY20, Star Connect was upgraded to handle all transactions related to both products and spares.

E-commerce. The company has not only partnered with reputed online distributors but has also become preferred sellers of Flipkart and Amazon. The company has also deployed direct seller and dropship models. While the current contribution of Blue Star’s unitary products from e-commerce to overall sales is less than 5 percent, this is likely to grow to over 20 percent by FY24. Online sales of RACs and water purifiers in FY20 grew by 63 percent and 42 percent, respectively, with a strong beginning in sales of air purifiers and deep freezers. Investments in e-commerce marketing with sponsored listings and brand ads across platforms created immense brand visibility and resulted in high conversions. A new Digital Asset Management system was deployed for all the cooling and purification products.

Opportunities. The economy is passing through a challenging phase due to the disruption caused by the spread of the COVID-19 epidemic. However, the company’s well diversified portfolio of business and its healthy order book, are expected to open up opportunities even in these circumstances. E-commerce and online sales may grow faster due to continuation of social distancing norms. The significant under-penetration levels are likely to continue to fuel demand for RACs in India over the next few years. Water purifiers as a category should witness market size expansion.

We maintained impressive growth for the first 10 months of the financial year, but the COVID-19 crisis and the subsequent lockdowns impacted the financial performance in 4Q, resulting in a shortfall of revenue and profit. What should have been a landmark year in terms of accelerated growth and profitability improvement, ended with disappointing figures.

In the RAC business, the product portfolio was rejigged to address the growing demand for entry-level products in Tier-III and Tier-IV markets. Blue Star has several new offerings in this segment, including premium-yet-affordable energy-efficient air conditioners and 5-star inverter split ACs with in-built air purifiers. Apart from expanding our dealer network, we have also made inroads in the e-commerce space. We engaged Virat Kohli as our brand ambassador and the campaign met with a great success. While we were well set for a bumper summer sale, the onset of the pandemic and the subsequent lockdown impacted our sales in the month of March as well as the peak summer season. We have widened our offerings in water purifiers including a few models with a unique Immuno Boost technology.

With a very large customers base cutting across residential, light commercial, industrial, and corporate segments, our after-sales service organization is a large one with presence in over 1500 towns. It handled around 16 lakh service calls in FY20. The International business grew steadily, backed by brand building initiatives in the Middle East, SAARC, and Africa markets. As soon as the lockdown was announced, we ensured that the digital infrastructure is augmented to enable business continuity in all businesses and functions including R&D to the extent possible. We actively engaged with our customers, dealers, vendors, and employees at all levels.

Having lost the summer season, there is a need to urgently reduce our cost structure. We have moved quickly and apart from cutting our operating costs, we have deferred discretionary investments. We have continued our relentless efforts to strengthen and expand our product offerings even in these volatile times. Building on our success in RACs, we will soon be ready with a new range of central air conditioning solutions with in-built air purification capable of killing the COVID-19 virus. We are also planning to scale up our retrofit solutions for enhancing existing systems with additional fresh air, ultra-violet emitters, and duct cleaning services. More recently, we have established the brand in the e-commerce channel. Looking ahead, this physical+digital sales approach will be replaced with phygital model and we will be leveraging AI, big data analytics, and AR technologies.

While the business challenges arising out of this black swan event will be formidable. I believe that there will be adequate opportunities for us to pursue. It is with this unrelenting spirit that we will continue our journey toward our centennial, the immediate milestone of which is Blue Star@80 in FY24.”
The spokesperson is Vice Chairman and MD, Blue Star Limited

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