Blue Star says second wave a challenge, moderates project execution

Most of Blue Star’s factories are operational

Blue Star, one of India’s largest refrigeration and air conditioning companies, said it is moderating the pace of execution of large contracts to keep it in sync with clients’ ability to pay, and also said the second wave of the COVID-19 pandemic has posed a challenge to the growth trend seen in recent months.

Chief Financial Officer Neeraj Basur said certain sectors of the economy were yet to recover from the impact of the first wave of COVID-19, even without the impact of the second wave.

“..order inflows continued to be slow from the commercial buildings sector which is yet to recover,” Basur told investors. “Muted government expenditure also impacted order inflows in the infrastructure sector. Order inflows from the factories and light industrial sector improved as compared to last year, driven by the Make in India initiatives of the government.”

Blue Star gets about half its revenue from projects — such as those for installing a centralized air conditioning system inside a mall — while the other half of the revenue comes from the sale of cooling products, such as freezers for super markets, vaccine boxes and room ACs.

For the first three months of this year, the company saw stronger growth in its products business. This is largely because consumer sentiments have bounced back faster than the pace of construction of office buildings, malls and so on.

Because of strong anticipated demand, dealers and distributors stocked ACs aggressively ahead of the summer selling season, the company said.

“Stocking of inventory by channels ahead of the peak selling season, improved share of billing from the e-commerce channels and a general business sentiment improvement enabled a growth in revenue for the room air conditioner business in Q4FY21 as compared to Q4FY20. The Room Air Conditioner market grew by 27%. We grew by 33%,” Basur said, adding that he expects to have improved Blue Star’s share in this market to 13.25%.

Sales revenue in the products business jumped 31% year-on-year to Rs 782 cr, while they rose only 18% in the projects business to Rs 780 cr.

Meanwhile, in the projects business, Basur said the company has decided to sync its pace of execution of large projects to clients’ ability to pay.

“We continued to moderate the pace of our execution, basis assessment of customer credit profile and operating cash flow visibility for the ongoing jobs which enabled an improvement in margins for the business,” he said.

However, not all verticals were equally impacted by the pandemic. While those like malls and commercial real estate continued to be bogged down, others — such as factory construction — are showing strong demand, the company said.

“We will continue to focus on the Infrastructure sector such as metro railways, electrical substations and water distribution, which are expected to offer immediate growth opportunities. Factories, data centers and warehousing sectors are also expected to throw up good opportunities in the upcoming quarters.

“The government’s focus on localization under the Atmanirbhar Bharat Program has brought in good
opportunities for the company in the manufacturing sector,” Basur said.


The CFO, however, warned that the second wave of the COVID-19 pandemic is a challenge for the company’s recovery and growth momentum.

“Restrictions similar to lockdowns of varying degrees in many parts of the country since the middle of April 2021 might impact the planned revenue growth for April and May. We are focused on maximizing the revenue in the markets which are open and at the same time moderating the inventory levels and operating costs,” the CFO said.

As of now, he added, Blue Star is operating its factories in Himachal Pradesh, Dadra and Ahmedabad. The Wada plant in Maharashtra is operation only for catering to exports and demand from domestic pharma and healthcare clients.

Among Bluestars numerous offerings are pharma cold rooms, medical freezers, ice lined refrigerators and vaccine transporters, which are in demand because of the ongoing nationwide vaccination campaign.

“Our products have been well accepted by the government, vaccine manufacturers and private distributors. We continue to be the market leader in the healthcare and pharmaceutical sector,” Basur said.

At the same time, Basur the company is also focused on the safety of its employees.

“With the experience gained in the previous year, our focus continues to be on keeping our employees, dealers and business associates safe, fulfilling emergency needs of our customers, building resiliency and operating agility. As in the past, we are confident of sustaining this phase in a prudent and balanced
manner..,” he added.