Blue Star Ltd (NSE: BLUESTARCO) Q1 2026 Earnings Call dated Aug. 07, 2025
Corporate Participants:
Unidentified Speaker
B. Thiagarajan — Managing Director
Nikhil Sohoni — Group Chief Financial Officer
Analysts:
Unidentified Participant
Aniruddha Joshi — Analyst
Shivkumar Prajapati — Analyst
Natasha Jain — Analyst
Keyur Pandya — Analyst
Devesh Advani — Analyst
Aditya Bhatia — Analyst
Presentation:
operator
The conference is now being recorded. Ram Sa It. Sa Good day and welcome to the Blue Star Limited Q1FY26 earnings conference call. We have with us today from the management, Mr. B Tag Rajan, Managing Director Bluestar Limited and Mr. Nikhil Chouhani Group Chief Financial Officer, Bluestar Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing Star10Zero on your touch tone telephone. Please note that this conference is being recorded. I now hand the conference over to Mr.
B. Tagrajan. Thank you. And over to you sir.
B. Thiagarajan — Managing Director
Thank you. Good morning ladies and gentlemen. You might have seen the results which were published yesterday. So I take it as what was disappointing quarter that had ended and I do not know, I leave it to your judgment that it was better than what you expected or worse than what you expected. The as you are aware, we had commenced the financial year with the hope that the summer season will be an impressive one. This over 25% of growth during the summer season 25 to 30% market will grow and this also will grow. This is for room air conditioners but unfortunately due to unseasonal rains, as I would have or Nikhil would have explained to you during the course of the summer season several times in the media or in one on meetings or telephonic calls, it was a disappointing summer.
So I had also expressed that it is not disaster, it is a disappointing one. But the long term prospects for room air conditioner business at a CAGR of 19% over the next five year period should happen and we firmly believe in that. And this particular disappointing summer season obviously calls for some corrective actions so that we maintain the profitability, we improve our efficiency and we do not lose momentum in terms of recent development or market expansion or the talent acquisition and other initiatives which are strong pillars for Bluestar. Fortunately, Bluestar as you are aware is not only dependent on B2B businesses.
It’s also dependent on B2B businesses and fortunately that part of the business is doing well. In fact, order book for the B2B businesses is at all time high and we continue to grow at double digits. With that I will hand it over to Nikhil for his remarks. Later on we will answer your questions. Thank you.
Nikhil Sohoni — Group Chief Financial Officer
Thank you. Visha Saharajan Good morning ladies and gentlemen. This is Nikhil Sohani and I will provide you an overview of the results of Bluestar Limited for quarter ended June 25th. So following an exceptional year of growth, FY26 started on a softer note driven primarily by unseasonal rain across the country which resulted in a muted demand primarily for room air conditioning segment. Despite this headwind faced by room AC business, the company has delivered robust revenue growth across other key businesses backed by healthy order book and prospects of demand revolving during festive season. We are optimistic about the growth for full year.
Financial highlights for the quarter ended June 30 on a consolidated basis are summarized as follows. Revenue from operations for quarter one FY26 grew by 4.1% to rupees 2,982 crores as compared to rupees 2,865 crores in Q1 of FY25. EBITDA excluding other income for quarter one of FY26 recorded at rupees 199.99 crores, an EBITDA margin of 6.7% as compared to rupees 237.8 crores which was EBITDA margin of 8.3% of the revenue in Q1 of last year.
Nikhil Sohoni — Group Chief Financial Officer
Pvt. Before exceptional items dropped by 27.8% to Rs. 163.23 crores in Q1 of FY 25 Q1 of FY26 as compared to rupees 226.02 crores in Q1 of FY20 5. Tax expenses for Q1 FY26 was rupees 42.4 crores as compared to rupees 57.26 crores in Q1 FY25. Net profit for quarter one FY26 grew to Rs. 120.82 crores as compared to rupees 168.76 crores in Q1 FY20 5. Carry forward book as of June 30, 2025 grew by 12.5% to Rs. 6,843 crores as compared to rupees 6,085 crores as of June 30, 2024. California order book as of March 31, 2025 stood at rupees 6,263 crores.
The capital employed as of June 2025 stood at rupees 2,821 crore as compared to rupees 1738 crores as of June 30th, 2024. We continue to invest in manufacturing capacity, research and development and digitalization. The company reported a net cash position of Rupees 370 for crores as on June 30, 2025 as compared to the net cash position of Rupees 1042.9 crores as of June 30, 2024. Coming to business highlights for the quarter one segment one I.e. electromechanical Projects and Commercial Air Conditioning Systems. The segment one revenue grew by 35.9% to Rupees 1412.5 crores in Q1FY26 as compared to Rupees 1038.9 crores in Q1 of FY25 segment result was Rupees 111.6 crores which was 7.9% of revenue in the current quarter as compared to Rupees 103 crores in 9.9% of revenue in Q1 of last year.
Order inflow for the quarter was Rupees 1963 crores in Q1FY26 as compared to Rupees 1466 crores in Q1FY25.
Nikhil Sohoni — Group Chief Financial Officer
Coming to. Individual businesses within this segment Electromechanical Project Business we experienced strong order bookings in the project business during the quarter driven primarily by continued demand from factory data. Centers and healthcare market segments indicating sustained interest and healthy pipeline for upcoming quarters. Inflow of inquiries and tenders in railway electrification and Metro railway sectors remained subdued and we continue to maintain selective approach to intra projects. Carry forward order book for electromechanical project business was at Rupees 5080 crores as compared as on June 30, 2026 as.
Nikhil Sohoni — Group Chief Financial Officer
Compared to 4557 crores as on 30 June 2024. Commercial Air Conditioning Systems during the quarter Bustar’s Commercial Air Conditioning business delivered robust growth in line with the overall market trends reflecting sustained demand and strong execution. All key product categories like ducted systems, VRF and chiller registered healthy growth during the quarter. Key demand contributors included the manufacturing and education sectors driven by infrastructure expansion and increased investment in climate control solutions. However, demand from government and public sector remained muted due to low capital expenditure and commercial retail demand was also relatively modest. The international business is also part of this segment where we continue to pursue our international foray as steadily progressing in the US Markets.
The engagement with European customers is also underway with discussions at various stages of finalization uncertainty due to geopolitical Factors including the U.S. trade negotiations mapped as a short term impediment. We are also focused on strengthening our presence in Middle east and African markets. Segment 1 margin at 7.9% for Quarter 1 of FY26 was 9.9% in Q1 of last year. The quarterly margins are influenced by project and product mix and hence may not be comparable with the previous periods. Coming to segment two that is unitary products segment two revenue degrew by 13.3% to rupees 1499.4 crores in quarter one of the aqua 26 as compared to 1729.5 crores in Q1 of last year.
Segment result was rupees 87.5 crores which was 5.8% of revenue in Q1 of FY26 as compared to rupees 158 crores in Q1 of last Year which was 9.1% of revenue. Individual businesses within this segment Cooling and Purification Products Business this quarter presented unexpected headwinds due to the early onset of monsoon across India making this an unusually soft summer season. However, as in the past, we have done marginally better than the industry and we estimate that our market share has slightly improved above 14%. While the near term environment remains challenging, we remain confident in the underlying strength of the category and are strategically positioned and focused on navigating this phase effectively.
Natasha Jain — Analyst
As we look ahead to a stronger. Demand revival during the upcoming festive season, we continue to invest in expanding our distribution footprints across the country. We remain confident in our outlook for the rest of the year and expect to close FY26 with reasonable growth. Commercial refrigeration business witnessed strong growth in Q1 of FY26. As we are now on a firmware footing, the regulatory challenges we faced in storage water cooler category last year has been resolved. Growth in this quarter was primarily driven by strong demand from processed food and pharmaceutical segment reflecting a positive turnaround in key end user Industries. In Q1 of FY26 this segment reported a margin of 5.8% as compared to 9.1% of Q1.
FY25 margins for the current quarter were impacted by a sharp decline in room air conditioning business with the lower volumes. The operating delivery benefits witnessed in Q1 of FY25 could not be replicated in this quarter, thus resulting in the drop in margins coming to Segment three which is professional electronics and industrial systems. The segment revenue degrew by 27.3% to.
Nikhil Sohoni — Group Chief Financial Officer
Rupees 70.4 crores in Q1 of FY26 as compared to rupees 96.9 crores in. Q1 of FY25 segment result was rupees. 7.7 crores which was 10.8% of revenue in the current quarter as compared to rupees 9.6 crores which was 9.9% of. Revenue in Q1 of last year. The segment faced a decline in revenue driven by continued challenges in medtech and data security business. The medtech business has been impacted by regulatory uncertainty with the government temporarily stopping. The import of refurbished medical devices. However, industrial solutions business is experiencing steady.
Nikhil Sohoni — Group Chief Financial Officer
Growth supported by manufacturing and testing. Demand segment margins at 10.8% for Q1. Of FY26 versus 9.9% in the Q1 of last year. The improvement was majorly due to favorable.
Nikhil Sohoni — Group Chief Financial Officer
Change in product and service mix coming to business outlook. While the first quarter of FY26 was impacted due to poor room air conditional sales going to all seasonal range during the summer season, it is expected that the demand will revive during the festive season. Further, our strong portfolio of B2B products and solutions comprising of electromechanical projects, commercial air conditioning and commercial refrigeration should help us partly offset the shortfall during the rest of the financial year. Aligned with our long term vision for growth and innovation, we remain committed to strategic investments in manufacturing, RD and digitalization by ensuring sustainable value creation for our stakeholders.
With that, ladies and gentlemen, I’m done with my opening remarks. I would like to pass it back to the moderator who will open the floor to questions. We’ll try to answer as many questions as we can and to the extent that we are unable to, we’ll get back to you via email. With that, we are open for questions.
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Aniruddha Joshi from ICICI Security. Please proceed.
Aniruddha Joshi — Analyst
Yeah, thanks for the opportunity sir. In case of UCP business, if you can indicate the revenue growth rates in rec air, cooler and even commercial refrigeration separately, it will be great then. Secondly, what is the inventory as of either 30 June or even 31 July? If you can indicate in that.
Aniruddha Joshi — Analyst
And. Thirdly, what are the initiatives that the company has done to clear the excess inventory means either free Installations or additional trade discounts or consumer discounts or what are the additional initiatives the company has done. And lastly now the new norms will come in come into picture from 1st of January. So whether the company will be able to exhaust all the trade inventory by that time or how should we read the situation panning out?
Aniruddha Joshi — Analyst
Yeah, that’s it from my side.
B. Thiagarajan — Managing Director
Thank you. We unfortunately, you know, I think you are new to the call. This has been clarified several times. Unitary cooling products is a segment classification and anything further breakup there will be selective in disclosure. So we will not be able to. All that I can say is that that particular segment comprises room air conditioners and commercial refrigeration products such as water coolers, deep freezer or cold chain equipment. It does not include like our competitor. Some of the competitors have the service business of central or packaged air conditioning. That is not in that particular segment.
It is purely products. Now the unfortunately that this has been going on for some point of a time. We have to. If we have to reclassify, we have to look at the industry, how they report and then we have to. Then it involves regrouping, etc. The fact of the matter is in this particular quarter, what is impacted is room air conditioners. Now room air conditioners market size is around six times of the commercial refrigeration market. Then you can make a guess what it is. In our case also it will be the same what’s our share there? What’s shared here.
B. Thiagarajan — Managing Director
So therefore the question is unfortunately not answerable. Second part inventory is not an issue at all. This also I had clarified in many television interviews or one on one interactions. Nikhil or Swati also would have clarified that the moment the market was not picking up, all it takes is two weeks to correct the manufacturing. Now those days, some three years ago, it used to be China import. So what you are committed, it will be in ICs and you will be saddled with the inventory till the end of the festival season. Now normally in a system 30 to 45 days of inventory will be there always.
Now it is not just in, just out. In addition to that we will excess the inventory. If that is a terminology, it is a one month of sale. That is all the excess inventory Blue Star has got. And inventory is not an issue at all. That one month inventory will be sold out and there is the correction in not billing began in April first week itself. So therefore with the dealers there is nothing need to be done to be giving additional discounts or whatever it is, whatever is market operating prices that the Schemes existing that is going on.
The real issue is when the demand will pick up. So I to you and to the other participants. I would request that inventory is not an issue. It is. It is just 30 days more inventory is there that will move away. The real question is that whether the festival season will be good. Early indications are it begins with. In Tamil nad it is called re like that. And there is independent day sale. And there are some early indications it will be good. But really we have to see in a volatile trade situation across the globe and in India what all will happen.
B. Thiagarajan — Managing Director
We do not know. We wish and pray that the festival season is as good as last year. Your last question was connected with the. What was the last question? No norms in the energy level. We are all well prepared. Usually what happens is in anticipation of the energy label change, many people end up buying in Q3 itself because a new five star will be costlier than the existing five star. So there are a lot of people who end up buying. So it is a question of production planning the new products as well as the old products.
How we will do in Q3. Anyway, from the 1st of January you have to make the new label. And this energy label change happens in consultation with the industry. And we all know what is a new norm and we all know which day it is coming into effect. So therefore research and development supply chain issues are already over. So there is absolutely no concern about that. Thank you.
Aniruddha Joshi — Analyst
Sure, sir. Thank you. Just last one question. You had indicated earlier that Bluestar is also looking for a JV partner for compressor manufacturing. While we have got one year additional window. But any. Any update on this?
B. Thiagarajan — Managing Director
No, I have not stated as we are looking for a JV partner. I will. Again, this question should not come up later in the call. There is a. There is. There is a. The Bluestar is not manufacturing compressors today and it is a question of scale. And we know that within a couple of years we will reach 2.5 million kind of quantity. Therefore, we should look at the compressors. Now there is and the QC extensions may happen, may not happen. And there are manufacturers in India who are planning to expand. So we will keep monitoring both.
What are the import restrictions, what are the manufacturing capacity expansion that is happening here within India. We have kept all the options open procuring from Indian manufacturers as and when they expand. 2 Keeping our ears and eyes open. If we have to manufacture, we will go ahead and manufacture. 3. If few Indian manufacturers have come together to make compressors, we are open to that idea. Right now our supply chain is secured for about 12 months time in the sense that till end of next summer season we are covered. So we will keep reviewing it. And compressor supply chain resilience is no longer bothering us because we have kept multiple options.
Next please.
Aniruddha Joshi — Analyst
Sure sir. Thank you.
operator
Thank you. Ladies and gentlemen. In order to ensure that the management is able to address questions from all the participants in the conference, please limit your questions to two per participant. The next question is from the line of Shivkumar Prajapati from Amber Investment Advisors. Please proceed.
Shivkumar Prajapati — Analyst
Thanks for my question. My first question is the other peers have also reported their numbers and for the UCT segment the numbers are drastically down 34% and 50% for two players. But while we manage just about 13 to 14% of decline, I just want to understand what did we do right? And you have also highlighted that we have gained some market share. So would you be able to quote some figures As I think in Q4 we ended it around 14%. And what would be the current market share? These are your. This is your second question or you have some other question?
Shivkumar Prajapati — Analyst
Sorry, this is my first question. Second question also you complete. You know I’ll answer both together. What is your second question? So basically on the. On the inventory with the dealers and distributors. Suppose the be norms would would we be sharing some burden with these peers or we will be helping them?
B. Thiagarajan — Managing Director
That question I answer. There is. It’s only excess inventory of 30 days is there and that is the label change is long time away. So there is. It’s not an issue at all. So inventory is not an issue. And I request all participants please take note of as far as Blue Producer is concerned it has got 30 more days of inventory. And all that one had to look for is that when the growth will take place. And so that I maintain that still full year this industry has got an opportunity to end the year with 10 to 15% growth.
That’s what will happen whenever there is a summer season which is not good. So one has to watch for if at all there should be anxiety how well the economy will progress, how well the festival season will progress. So inventory is not an issue. Coming back to your first question that is connected with the. Basically what we.
B. Thiagarajan — Managing Director
Will do market share of 14% it would have moved up in my view to 14.2 or something. Something like that going by and why we should have done well. We have been gaining market share. That has been our history. Every year we have even during the COVID period we have gained market share and we started with the momentum. Our goal was to end the year with 14.5% market share. So this is happening with multiple initiatives now. Number one is having products at every price point and expanding our distribution footprint in Tire 3, 4, 5 cities specifically in northern region and places where our market share was lower than All India average improving it.
It’s all because of that. Thank you.
operator
Thank you.
operator
Thank you. The next question is from the line of Natasha Jain from Philip Capital. Please proceed.
Natasha Jain — Analyst
Yeah, thank you for the opportunity. Sir, my first question is on the channel expansion that you have mentioned. Because we’ve got market share gains primarily because of that. I just want to understand if you could call out what is your footprint in south vs non south and what is the scope to expand here further and how much are we non indexed in the rest of India and therefore what can be the growth opportunity just by channel expansion? That’s my first question. My second question is if you could throw some light in terms of how different geographies are doing.
How is south doing? Is it any better than it was before? Because south disappointed the most and Blue Star is indexed to south versus probably not. How is it doing? You are lower index there therefore on that account. And lastly in terms of export, while I understand US the tariff uncertainties but in non US markets what’s the scope there and are these high margin businesses? If yes, what kind of scale up can we expect and by which year? That’s it sir. Thank you.
B. Thiagarajan — Managing Director
So the first is the market share gain is not just due to distribution footprint expansion alone. It is having products at all price points that there are. India is a vast country. Different types of consumers are there. There are entry level products are consumed. Heavy duty air conditioners are consumed. Somewhere someone is asking for wi fi enabled enabled air conditioners. Someone is asking for sophisticated controls there someone is asking for purification and health related features. So you have to have a product portfolio at the right prices. That is. That is the first part of it distribution footprint.
It is not by sheer numbers it will be happening. You can go and say my distribution has become now 20,000 Sarahs or 25,000 samples. That is not the point. Blue Star understands in every town what is the market size in that? Each of the counter? What is the potential of the counter in that? What is my current share and therefore what I have to do. Even in Chennai I may be having more than 20% market share but I should be looking at in a particular counter whether I am getting 20% or not. All India market share may be 14.
There are markets in which we will have 7 or 8%. There are markets in which we will HAVE 10%. So each of these market we internally call it as a surgical strike, go ahead and work there in order to take the market share higher. So a sheer number of expanding the distribution footprint will not be get the market share at all. For a simple reason. Your dealer will agree to be your dealer and display a product. Because you are actually compensating for the space that you occupied. A in shop demonstrator you will be deploying. And that alone is not going to help.
It will help, but that alone will not help. So that is the answer to that. Now coming to the geographical thing we have not followed then. When Kerala failed, we thought in Tamil, Nadhya Pradesh will be that was not picking up. Then I thought it is going to be picking up in west and then north all over the same thing happened. So according to us, the degrowth is common across the country by coincidence. And the last part of your question is connected with the international. First of all, our exports. The international footprint itself is low.
B. Thiagarajan — Managing Director
And we are on a program to improve our international footprint on two conditions. One is it will not bring down our ROCE2, it will not bring down our profitability. Our approach has been we will not enter there in Brewster brand name. We will be making for other players there, established players there. We have acquired around three customers across the United States. And now the tariff uncertainty has been there. Today it has got aggravated. But the question is all along there has been a doubt what will happen to the tariff. And both the sellers like us and the buyers, they have been very careful in arriving at what needs to be done.
Now our dependence on exports is total. All exports put together is 2% of our revenue. If you take United states, it is 1% of our revenue. So it is not going to be impacting our operations in either manner. And what can happen is we had got our products approved and we are in the process of getting our products approved for other players. We are, you know, in the international market. We have to be w sh that product has to be performing well, complying with all their international standards. And it is new to us every market.
And therefore we have been going slow and we were about to ramp up. That may get delayed. That’s about all. So it is not going to impact the financials in any manner. Our decision is please be and watch what happens. Because what happened today may be changed later. We do not know at all. So we are focusing on working with our customers to keep developing the products and figure out what is the Best way they would like to source. That’s where we are. Thank you.
Nikhil Sohoni — Group Chief Financial Officer
Thank you sir.
operator
Thank you. The next question is from the line of Akshay Thakkar from Fidelity. Please proceed.
Unidentified Participant
Hi sir. Congratulations on seeing through a relatively tough quarter. My question is on the electromechanical projects.
Unidentified Participant
Within last three to four quarters we’ve. Seen 30% plus growth over units due to. My question was around the electromechanical project business. You’ve seen four quarters of 30% plus growth in this business. I mean obviously the base is. But could you give us some color on what kind of growth you’re expecting in this business in the coming quarters or maybe for the full year? And then on the unitary product business. I think the comment on TV this morning by Veer was that we’re still gunning for double digit growth. That would imply sort of close to mid teen growth for the rest of the year.
Is that something which is an aspiration at our gate or a guidance? Thank you.
B. Thiagarajan — Managing Director
I will comment to the second part of it. The thing is that if you plot all the years where the summer has summer sales have not been good, eventually the industry ends up growing at least 10%. And so that is the. That is going by the past record. It is not necessary, it will repeat now. But you know it is a question of pent up demand. It’s not that they don’t want the ac. They wanted the ac. Some summer was not harsh. They postpone it and see. Remember this, I mentioned this last investor call as well that May, June or July are very important months for the consumers in terms of schooling, vacation.
They do have additional burden. So if they can shift that expenditure that is fine. And they come back during the festival season. This particular year there is an energy label change. So therefore all the energy label changes. Just before the energy label change huge purchases take place. So therefore there is an expectation going by the past data that growth can be 10%. That’s why I mentioned earlier question also eventually we should look at how the petrol season plays out and aim to close anywhere between 10 to 15% growth. That’s what it is now. Electromechanical project.
That particular segment has got the EPC business of contracting. It serves many segments. It’s infrastructure projects, data center project projects, manufacturing units or factories, buildings, hotels, hospitals, so on and so forth. It also has the package air conditioning equipment like vrf, so on and so forth. In the particular quarter. It all depends on a closure of a job or somebody is ready to lift the equipment if if it is packaged Air conditioning. So the B2B part of the business is doing good. And at the same time it is also cyclical. That’s why I keep mentioning in our case we are not entirely dependent on room air condition.
B. Thiagarajan — Managing Director
There is something else too. So your question is that can we assume this kind of a growth for full financial year? That is not the guidance. The thing is that we would like to to grow somewhere around 15%. That’s about it. And we have always said that the margin should be 7 to 7.5% for the benefit of other participants. I am clarifying that also here. So Lumi 3 cooling products, the growth should be 10 to 15%. That is the aspiration. Going by the past record of the industry and margin, our aspiration is eight to eight and a half.
But in a summer impacted year, it may be tougher. It may be 7 to 8. It all depends on how the festival season is. And the last quarter is going to be. As far as segment one is concerned, 15% growth is possible and 7 to 7.5% margin we will be able to maintain. And the situation is highly volatile. It is not. The US tariff is not connected with the exports alone. There will be other implications arising. For example the exchange rate and other industries which are dependent on therefore the consumer sentiment. So it is going to be an important period and it could be volatile period as well.
And we have to watch out and pray that the festival season goes on and Indian economy maintains its momentum. Thank you.
Natasha Jain — Analyst
All right. Thank you. Thank you, sir.
operator
Thank you. The next question is from the line of Rameer Swaminathan from Avendis Park. Please proceed.
Unidentified Participant
Hi sir. Thanks a lot for taking my question. My first question once again on the segment with respect to what is the. If you can use the oral breakup of the key categories like commercial real estate, residential real estate, retail, data center, infra. And each of you can give some commentary on each of these. Some categories which is doing relatively well. It is doing. Ravi, I will answer this question. The thing is that I do not have the data. And second part is basically we have first of all understand this. Why is that? Why that is important? How fast the projects will get closed.
How healthy is that order book? That’s what you are trying to assess. First of all, I am assuring you that we are not interested in any ankle order. If it is a commercial real estate versus infrastructure projects or data center. What orders we book and carry. According to us. According to us means a healthy order with good cash flows and decent margin. That’s why we are not going ahead and building the order book or fighting for a market share. Okay. Now broadly, the buildings, factories and the infrastructure are equally divided and in a particular quarter, the manufacturing may go up in a particular quarter because the orders are not being finalized based on Blue Star strategy.
B. Thiagarajan — Managing Director
Orders get finalized in the manner in which the consumers want and therefore you can assume always it is 1/3, 1/3, 1/3. And that is what we would like it to be as a part of our risk mitigation itself. Second question of yours. Yeah, my follow up on this is, I mean are we adding new products into this project category, like equipping ourselves for advanced projects in categories like data centers, etc. This is leading to this kind of growth. Visa Viscount listed other competitors who are not going to that part of the. I won’t underestimate any competition at all.
All our competent players, everybody wants to grow, so all should be doing the right things to build their own competitiveness. As far as Bluestar is concerned, you are talking about the segment one, I suppose because equipment addition means it has to come from the commercial air conditioning systems or what used to be called as the package air conditioning. Yes. There are specific chillers meant for data center application. There are chillers meant for prime applications. The product portfolio expansion is driving the growth and we continue to focus on that. Now in even DRF there are next generation DRF or getting developed.
And if you are pointing towards specific data center like liquid cooling, we are working on that as well. But the question is that as and when the market will be there for a particular product, our intention is to be ready with the particular product. And that is why compared with others. See, in case of multinationals, their R and D happens internationally. The Indian companies need not to bear that R and D expenses. In case of Blue Star, you have seen that significant amount of investments are taking place there. Close to around 1.5% of our revenue is in R and D.
That is what is making us close. We will continue to do that. Thank you.
operator
Thank you. The next question is from the line of Acha Lohaden from Institutional Equities. Please proceed.
Shivkumar Prajapati — Analyst
Sir, good afternoon. Thank you for the opportunity. Sorry if I’m asking a repetitive question, sir. So if you could help us with the, you know, volume decline for the industry for the quarter. Just a broad sense. What kind of decline is it? Because the range we keep on hearing is a fairly large number. But just your sense on the same. And in terms of the margin, you know, we’ve seen for the UCP segment, 330 basis point margin contraction, you know, at the gross level have we been able to maintain or if there is a there is a contraction even at the cross margin level.
And if you could also help us in terms of A and P spend in that segment, how much has been the reduction or if it is same.
B. Thiagarajan — Managing Director
Or increased again part Nikhil will answer as soon as the first part is concerned. Our understanding is from various reports because there is a GSA some part of it. There are institutional sales as well. My guess is that the industry the growth would have been around 30% and again, it is not the growth over last year is something which one should look at it at all as other. We always look at it because that is important for you. We look at it from the point of view of 3 years CAGR, the summer of 2023 was a bad summer, summer of 24 was a 57% growth summer and now there is a decline.
So the question is if you take a cagr, it continues to grow. There is a second thing we look at it within Bluestar is January to June how it looks like rather than April to June for the simple reason April purchases not preponed to mass itself. So if you look at it like that, the degrowth will be in single digit. Now why that is important while the market should do whatever it is doing for us, it is connected with the strategic direction, it is connected with the investments that we have to make and competitiveness that we have to build.
In other words, we will not sit with a long face and worry about 1/4 is washed out what to do. I do understand from stock market point of view. So here we are very clear that whether the industry is growing. So therefore if you look at three year cagr, it’s still is, it has grown. And if you look at January to June, the degrowth is single digit. That’s all I worry about. But what I hear is There is a 30% degrowth in the industry and so in a period like this frightening numbers it is better to ignore.
And the second part Nikhil Young answer so as far as margins go, if.
Shivkumar Prajapati — Analyst
You would have heard my commentary also.
Unidentified Speaker
It was mentioned that when the volumes drop definitely based on amount of operating leverage benefits that you normally get, you will not be getting it in the current quarter. That said, last year’s quarter one was an exceptional quarter. So definitely the economies of scale benefit was there and hence you are going to witness the contraction in the margins the moment the volumes have come down. In addition to that, the mix between various components within this segment will Also have a role to play. So it is not of course at a gross margin level will be a function of how the material cost moved which all of us are aware of.
You know, the movements in copper, aluminum and what are the inventories. So that is not going to impact it in a major way. Definitely most of this kind of comes from the playoff volumes.
Unidentified Speaker
So that’s as far as the overall margins go. Coming specifically to your question on what are the AD spends and all that. Again kind of at the moment we.
B. Thiagarajan — Managing Director
See the volumes kind of de growing. There is some amount of control which definitely comes on these spends so they will not be to the extent they were done last year and accordingly some contraction in those spends will also happen. So there are certain unique expenses, expenses which also come every year which are industry level expenses. We are aware of cost like e waste, etc. Also come so they will have the play on the margin. So this margin drop which you are saying is a combination of all of this. So it’s not a gross margin impact.
B. Thiagarajan — Managing Director
It is more an impact which comes. Because of scale economies and certain unique. Expenses which come every year.
Unidentified Participant
Got it. Just a clarification sir, on the first answer. Sir, again I’m sticking to the first quarter. At this point in time, April to June quarter you said industries declined 30% yy and we have said we have our market share is marginally higher. Does that mean that our volume decline is also in the similar fashion or slightly lower than that or it’s substantially lower than that.
B. Thiagarajan — Managing Director
Yeah, I mentioned the market share went up by 0.2% which means our decline is lower than the industry.
Unidentified Participant
Yeah. No sir, the math is. Sorry to interrupt you. I’ll call back in next time. Thank you. Thank you. Thank you. The next question is from the line of kyur Pandya from ICICI Prudential Life Insurance. Please proceed.
operator
Thank you. Sir, first question is on the overall growth for the room AC for the financial year 26. So the hope is on the festive season now currently, I mean in the August same South Korla or ONAM related demand. Are you seeing any early signs of demand revival or for the time being it is just a hope. And you would focus on more of September, October for the growth revival.
Keyur Pandya — Analyst
That is first question I may I. Mentioned it starts much much earlier as Audi says then there is independent change is being done and then the ONAM will come. The early indications are it is, it is good but we do not know because the situation is changing every day. We have to wait and watch. So therefore that full year should be double digit growth is an expectation.
operator
Just. I mean the context was that, sir, because there will be some pre buying because before this December deadline, which is just a timing difference because someone buys in December and may not buy in then. And second point is that Q4 base was also higher because lot of pre stocking has happened in Q4 25 saying that backdrop we will have a high base of quarter four this year. So this 10% looked reasonably high. And that was the reason I asked this question.
Keyur Pandya — Analyst
Last year was not stocking season. Q4 is a stocking season. So therefore when energy level changes, changes there it should be much higher than last year. Q3. That is the first part of it. Now there are two ways of. We can imagine a situation of everything is going to be bad. I do not know how that will help. The question is that the past record shows if there is a summer season which is disappointing full year again, it will not be a 25, 30% growth. It will end up at least with a 10% growth. That is one part of the track record.
The second part is whenever there is an energy level change, that particular quarter peaks actually. And that is the history and the record that is available now. There is on the other hand huge volatility in the market. A lot of things are happening globally and in India. So we can assume that, look, things will be fine. You can assume things will be a disaster. So as far as Bluestar is concerned, we will be prepared for both of it. But our interest is not a quarter. Definitely not our interest. That is why we are there for 82 years and beyond.
Right? We have to go through and a number of times we would have gone through this kind of periods. And fortunately we are a big B2B and B2C company. And going by your argument, if everything is going to be bad, fine, you have to face it. But as of now, we won’t plan for everything is going to be bad. And the as far as festival season is concerned, the question is there are dealers who are inventory, there are dealers who are beginning to buy or there are the tertiary movement. We are seeing much faster in many counters.
So that is an indication.
B. Thiagarajan — Managing Director
One month above normal inventory. That’s right, yeah. In our case, so it is total.
Keyur Pandya — Analyst
One month inventory, one month above normal. One month above normal.
Keyur Pandya — Analyst
Understood? Understood. And sir, last one question that is on your commercial refrigeration side, we are seeing a deceleration in store counts for quick commerce businesses. Are we seeing any impact on say growth in terms of growth deceleration from that segment. Not degrowth, but growth deceleration.
B. Thiagarajan — Managing Director
10% of the business may be coming from quick commerce. So there is a pharmaceutical, there is food and beverages retailing and there is quick service restaurants. There are farm end related logistics providers. There is ice cream like that. There are so many segments there, food commerce is one and there are many segments which continue to do well. In any case, that penetration of that segment, that sector is very low.
Keyur Pandya — Analyst
And I won’t be worried about one. Particular sector segment decelerating.
Keyur Pandya — Analyst
Thanks a lot sir. Thanks for elaborate answers. All the best.
operator
Thank you. The next question is from the line of Divesh Advani from Reliance General Insurance. Please proceed.
Devesh Advani — Analyst
Hello sir, you said that full year you are expecting the venues to grow. At 10 to 15. So how about specifically for unitary products in terms of revenues growth you are expecting for full year and how about profitability growth for the whole year?
B. Thiagarajan — Managing Director
I have not talked about full year revenue at all. So the discussion about 10 to 15% is room air conditioner business has the potential to grow even though it is a disappointment disappointing summer. That is the expectation that’s on the 10 to 15% figure.
Devesh Advani — Analyst
Is that okay? And as far as earnings is concerned, bottom line is concerned. What. What is the expectation for the whole year?
B. Thiagarajan — Managing Director
We don’t give again this breakup within the segment. For segment two, we have been guiding that you should go by around 8% margin. And this year of course there will be a quarter one impact.
Devesh Advani — Analyst
So you can look at it at.
B. Thiagarajan — Managing Director
Around 7 to 8%.
Devesh Advani — Analyst
Okay. All right.
Devesh Advani — Analyst
Thank you.
operator
Thank you. The next question is from the line of Anupam Goswami from SUD Life. Please proceed.
Shivkumar Prajapati — Analyst
Hi sir, just to review clarification. When you say two months of one month of above normal inventory, that is basically an average inventory throughout the year. And hence that indicates in the monsoon.
B. Thiagarajan — Managing Director
Period of Q2 it will take more. Than two months to diffuse it.
B. Thiagarajan — Managing Director
No, I. What I’m saying is that ideally I should have had some inventory. And today our going going by the monsoon sales only. So 30 days or more inventory is there. See always in the pipeline of our factory, our warehouses and the field. If you put together, there will be some inventory of it will be around 45 days and always. And because we also have a factory in Himachal Pradesh, which is a smaller market, it has to move to the other places. And against that we may have 75 days of inventory. So which is a 30 day more? That 30 day figure is based on monsoon sale period.
If it is a peak season, that 30 day will be a 10 day sale, right?
Devesh Advani — Analyst
Understood sir. And when do you see this picking up and after the norms if there is slight growth or market picks up do we again see a quarter flow slow because of a pre buy.
B. Thiagarajan — Managing Director
Again I’m telling you the thing is festival season is the one the pickup happens and the 30 day inventory is not a big thing at all. You look at that when the market will revive in terms of faster movements and it will be from warnam season or independent sales onwards you will start getting the indications Cultural season peaks during Diwali and subsequently against new year It’s a long way off so energy label first the festival season, people who postpone buying in in summer season that is what should should result in the growth. These are all expectations.
I am telling you honestly we will not be sitting and worrying what you know I should not be at least Brucer consideration is not imagining the worst and then preparing for it is not going to help in any manner. We have adequate risk mitigation mechanism so if a sale is not happening you have to manage the inventory, you have to cut down the production, you have to defer the discretionary expenses. You will and you will be very careful in expenses such as advertising, marketing ahead of the virtual region you will watch really what is required in that market and you will end up doing so.
Those cost levers will be applied but the preparation will be for the simple reason in five years this category has to more than double that. Nobody is going to stop and so the long term investments will continue to take place and any other thing is whether we were aware last week that this U.S. decision will impact India in this manner I may not say it is not export, the exchange rate may be impacted. Many other sectors in India will be impacted which will impact do sir because we are also dependent on B2B so that was not known last week, this week it is known but all these are part and parcel of the game and our aim is simple that I should build my competencies for the future.
I should keep delivering good performance better than the industry quarter after quarter and that’s all we can do right? Otherwise I don’t have any way to guarantee to you, you, festival season will be good or there will be a double digit growth. I can go by only past data and number of things that are happening are not due to the industry or due to blue. Sorry, it will keep happening whether it is summer or tariff or a war or number of other things. When we have only just one month inventory there is no reason for us to cut the prices Normal schemes, whatever is the market operating prices that will go on.
Again, margin is not the gross, margin is not the issue. The growth has to happen. Yeah, thank you.
operator
Thank you.
operator
Thank you. The next question is on the line of Aditya Bhatia from Investec. Please proceed.
Aditya Bhatia — Analyst
Hi, good afternoon sir. So while we have seen a decline versus last year, but if I look at versus Q1 two years back, which is Q1FY24, there’s still a growth in the UCP vertical. In that context, margins falling quite sharply versus let’s say the margins that we recorded in Q1FY24 looks a bit surprising. The other way in which I’m also kind of considering is that overall volumes or overall revenues this quarter was still higher than off peak season of Q2 or Q3 last year. But margins have come off quite sharply from there. So is there some element of some other expenses being involved or some gross margin erosion as well?
B. Thiagarajan — Managing Director
Yes, when you look at the margins two years back, one has to factor in that over the two years there has been an increase in volumes. So there will be an increase in some amount of fixed cost also because the semi there are cost comprises of fixed semi, variable and variable. So it’s not that only variable cost will be the part of the cost composition and that is going to definitely impact when you are looking at what period two years back was there the volume increased over last two years and the fixed cost increase over the last two years along with the inflation increase is going to impact the margins to some extent.
So as I also said there are certain new expenses or expenses which are impacting like e waste and all. So they will also impact the margins. So all of these costs are unique for that period and you cannot be relating it to comparing it with what was the cost two years back.
Aditya Bhatia — Analyst
Understood, understood. And versus second and third quarter of last year also there is a decline in margins. I mean second and third quarter of course off peak seasons and therefore volumes tend to be lower. So should we be kind of comparing those.
B. Thiagarajan — Managing Director
Quarter two and quarter three of.
Aditya Bhatia — Analyst
Last year was just one second.
B. Thiagarajan — Managing Director
He’s just looking at the figures. The question is that, you know, in summer season of this year you’re anticipating a 25 to 30% growth. So you invest in many things like advertising and huge number of in shop promotions and in shop domestic demonstrators. That’s what happens. So you are preparing for a huge season and you are employing additional people for installation and service. Now then April when it is disappointing, what you think is that the forecast was maybe the Heat wave. So therefore you carry on to look at May and then you say that from May 15th you hear that from May 15th it will pick up.
So therefore your quick correction also you will not be recruiting somebody in the field and you will ask them to go immediately. There are notice period that is involved etc. So therefore a cost that is committed when the season abruptly fades like a summer rain, it always creates ends up in erosion of margin. Now in Q2, Q3 you will be cautious. Those corrections that I mentioned to you, you wouldn’t end up advertising in the thinking that this special reason is going to be good. You will be watching and watching and stage by stage you will be doing so.
Therefore, if you are. If your question is related to whether there will be a mark margin dip compared with last year in Q2 and Q3, according to us it should not be in Q2, probably one month impact should be there for the simple reason July of last year was again a very peak month. So July of this year still the de growth continues. So Therefore some part that is 1/3 of Q2 may be a problem. Q3 should not be a problem. Ideally the margins should be managed during those quarters.
B. Thiagarajan — Managing Director
Yes, so that that answers a large part of it. And in addition to that, when you look at the quarter two and quarter three again as you yourself said, are the lean quarters where you know that there are certain expenses which are anyway controlled since it’s a lean quarter, whereas this a quarter was not expected to be lean. So you have a different level of in shop demonstrator expenses who are there all of those who are kind of deployed for that season. Now those cannot be pulled off just at the whenever you want. So that is a certain amount of period which is already committed to them.
Those expenses will stay in that quarter. So these are the unique quarter one expenses which are there for that season which you will have to look live with. Those are the kind of expenses which will result in impacting the margins more than which will not be incurred in quarter two or quarter three.
Aditya Bhatia — Analyst
Fair point. That that’s a very very clear answer. Just one. Sorry to interrupt, Mr. May we request you to join the queue again?
Aditya Bhatia — Analyst
Sure. Thanks.
operator
Thank you. Due to time constraints, that was the last question. I would now like to hand the conference over to Mr. Nikhil Sohani for closing comments. Over to you, sir.
Nikhil Sohoni — Group Chief Financial Officer
Thank you very much ladies and gentlemen. With this we conclude this quarter’s earning call. Do feel free to revert to us in case any of your questions were not fully answered. And we’ll be happy to provide you additional details by email or in person. Thank you.
operator
Thank you. On behalf of Blue Star Limited that can you can hear this. Thank you for joining us. And you may now disconnect your lines. It.