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| Lull in commercial construction may hit Blue Star's financials |
| BS Reporter / Chennai/ Hyderabad Feb 06, 2012, 00:39 IST |
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Blue Star Limited, the country’s largest central air-conditioning company, is expecting the downtrend in the commercial construction activity to impact its financials in the next two quarters, according to B Thiagarajan, president (air-conditioning and refrigeration products group).
“The contracting part of our business (air-conditioning of projects to shopping malls, airports, hospitals and large office complexes), which accounts for 40 per cent of our revenues, is undergoing a difficult time and there is a major slowdown. We do have cost overheads there. It will be so, probably for two more quarters,” he told reporters here on Monday.
Blue Star incurred a net loss of Rs 11.01 crore in the half-year period of the current financial year, as against a net profit of Rs 75.79 crore during the same period a year ago, primarily on account of lull in contracting business. The electro-mechanical projects division and packaged air-conditioning business together accounted for 64 per cent of its revenues in the second quarter of FY12, a decline of 19 per cent.
“In 2011-12, commercial construction activity slowed down. Builders started delaying the projects and we incurred losses because of those long-gestation periods. We expect growth in the market only in 2014,” Thiagarajan said.
Launching their latest room air-conditioners (RACs) in Andhra Pradesh on Sunday, taking its home AC portfolio to 45, Thiagarajan said the company commanded a 30 per cent share of the packaged air-conditioners market and 25 per cent in the refrigeration and cold storage segment.
“We have improved our market share in the RAC segment from 5.5 per cent to 7.5 per cent, and want to move towards the 9 per cent range this year and even to 15 per cent in the coming years, owing to the increasing disposable incomes, residential demand and harshness of the summer,” he added. The company already has a market share of 15 per cent in Andhra Pradesh, which it plans to take it to 17.5 per cent this year and 20 per cent in the year after, he said.
Of the 85 million units of RAC market globally, China accounts for 40 million, the US 11 million, Japan 6 million and India 3.1 million. Thiagarajan said market research figures indicated that the Indian RAC market would touch 7 million units by 2013-14.
To a query, Thiagarajan said the company would spend Rs 20 crore on TV commercials and other promotional activities this year and that it was mulling a price hike of 10-15 per cent on its products in the ensuing summer season.
Blue Star Limited’s scrip rose 1.44 per cent to end the trade at Rs 172.55 on the BSE on Monday over the previous close of Rs 170.1.
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