We are being chased for faster deliveries across various locations: B Thiagarajan, Blue Star

"For air conditioner manufacturers, this is like the Diwali season for us. In fact, even the deep freezer market is doing extremely well. What you just mentioned is true that we are being chased for faster deliveries across various locations, which we are coping up with," says B Thiagarajan, MD, Blue Star.

What is the footfall and sales like in the last few weeks? Is it on expected lines? Is it better? Is it weaker than what we expected?
The demand has picked up extremely well in the past two weeks. In March, there was rain in some pockets. It was not moving but in the past couple of weeks there is excellent demand specifically in the south and west. North began to pick up and I think yesterday, the day before yesterday it rained and I think it will also come back.

For air conditioner manufacturers, this is like the Diwali season for us. In fact, even the deep freezer market is doing extremely well. What you just mentioned is true that we are being chased for faster deliveries across various locations, which we are coping up with.

What we are hearing from our channel checks is that demand has actually jumped 50%. Could you first confirm that? And secondly, how is the comparative scenario because recently we heard that one of your larger peers had taken a big, significant price cut this summer so if you could give us some understanding on that front as well?
In a particular week in a particular market, a 50% jump or a 100% jump has no meaning at all. You have to look at what is likely to happen in the summer season. If I am taking March to June my assessment is overall, it will be somewhere around 25% growth.

The weekly and all it will not matter at all. Now, the market, my estimate in FY23 was 8 million units. My overall assessment for FY24 takes into consideration penetration levels and how the prices are moving, what is the manufacturing capacity, competitive landscape, my estimate is it will move to 10 million numbers. So that landmark 10 million market size is going to happen in this financial year. Now, as far as the prices are concerned, we have not increased the prices. You have seen, in the last five quarters we have outperformed the market every quarter. We are lower in terms of margin percentage compared with the pre Covid period by around 150 basis points.

We thought that when commodity prices have come down, we will be in a position to improve our margins but unfortunately, the exchange rate is not favourable and you can go ahead and look at the price increase only in case the competitive intensity is going to reduce.

The PLI scheme has attracted huge manufacturing capacity expansion in FY24 alone the capacity is going to double. Of course, the market will grow and I do not think that there is room for us to increase the prices.

We are maintaining the prices and we are still holding on and improving our market share. The Sri City factory that has come up under Blue Star Climatech Limited gives us some advantage in terms of logistics both inward and outward and serving the southern region market, which is around 45% of the market.

Therefore, we will be able to manage our margins and get back to our pre-Covid levels within 12 months time. But we are not playing that game of cutting the prices to buy a market share at this moment.

As we were just getting this information from our channel check is that there is a lot of waiting time when it comes to ac delivery so how is Blue Star as a company addressing this issue? Are you looking to increase your production? How is the inventory level at dealers?
In our case, it is adequate. Overall, if you talk about the year, we will be aiming for close to one million. I told you the 10 million will be the landmark for the year. One million will be our share in terms of volume, value share of ours will be higher.
Now six lakh units will be coming from the Himachal plant. Sri City will be delivering around three lakh units and one lakh units are outsourced, basically, window air conditioners.

As we speak now, all the markets have the required products.

The Ice cream industry buys ahead of the summer but now, suddenly, further demand is taking place. Otherwise, I do not see any shortage whatsoever at all. And I do not think at the same time, we have some huge inventory pile up. Thanks to the pain we all have undergone in the past 2-3 years, we have learned to manage the supply chain very well.