Blue Star Ltd (NSE: BLUESTARCO) Q4 2025 Earnings Call dated May. 08, 2025
Corporate Participants:
Unidentified Speaker
B. Thiagarajan — Managing Director
Nikhil Sohoni — Group Chief Financial Officer
Suneel M Advani — Chairman Emeritus
Analysts:
Unidentified Participant
Natasha Jain — Analyst
Naushad Chaudhary — Analyst
Rahul Agarwal — Analyst
Dhruv Jain — Analyst
Anupam Gupta — Analyst
Sonali Sargaonkar — Analyst
Achal Lohade — Analyst
Dhruv Jain — Analyst
Aniruddha Joshi — Analyst
Kailash Gandhi — Analyst
Arshia Khosla — Analyst
Keshav — Analyst
Shivkumar Prajapati — Analyst
Presentation:
operator
The conference is now being recorded.
operator
Ladies and gentlemen, good day and welcome to Blue Star Limited Q4 and FY25 earnings conference call we have with us today from the management, Mr. B T Agarajan, Managing Director Blue Star Limited and Mr. Nikhil Sohani, 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 the star then zero on your touchtone phone. Please note that this conference is being recorded.
I now hand the conference over to Mr. B Tagrachan. Thank you. And over to you sir.
B. Thiagarajan — Managing Director
Good morning ladies and gentlemen. It’s a pleasure and privilege to address you this morning. I have with me Mr. Nikolsoni who is a Group Chief Financial officer and we have seen the results published yesterday after our board meeting both for Q4 and the full financial year. You might have noticed that the total income for there is a consolidated income for booster for the financial year ended 31st March 2025 has crossed 12,000 crores and it is another landmark for the company. The net profit before Exceptional item had grown by 40% to 581 crores. The profit before exceptional item again grew by 38.6% to 7 cents 72.42 crores.
These are a consistent performance for the third year in succession ever since the COVID recovery happened. It’s an all round performance except for the commercial refrigeration business, the performance of which was impacted due to regulatory changes which we had disclosed to you in Q1 itself. These are regulatory changes that continued and the business has recovered and it had been somewhat flat compared with last year in Q4. And as we speak that business is growing significantly from April onwards. In fact the remarks was a flat quarter given that last March. It was very very significant quarter for that business before the regulatory changes came into effect.
I’ll hand it over to Mr. Nitin Soni for his opening remarks. But I am preempting a few things from the reactions questions from many investors, financial press or my own wealth advisor or even neighbors and relatives about our results compared with our competitors, whichever results have been published so far. Now the results obviously you all may be confused with what is going on in the industry. I’ll begin with the first part which is here and now which is how is April going? I had from January the insane. Last year was a very, very, you know, significant summer season with April more than 75% growth happening and Q1 more than 59% growth happening.
The backdrop of it this summer how it will be there has been debate for a long long time. Ever since weather forecasts have been available, we have been maintaining it should be anywhere between 20 to 25%. We should be happy now. April had not been a month which delivered in line with that outlook. First problem was in March itself. Materials were lifted in significant quantities which resulted in my estimate more than 4 million units in the market. In my view it was anywhere between 1.5 million to 2 million more inventory than what should have been there.
And then there were sporadic rains across the country including Mumbai for the past few days and April sale would have been. I understand the industry would have grown anywhere between 15 to 20% in our case as I can disclose this, since the board meeting is over, we would have grown by around 5%. Our own internal target was to grow by 25 to 30% because if the industry is growing between 20 to 25 we wanted to grow by 25 to 30. Second concern will be with regard to commercial depreciation because it is forming part of the segment 2.
The that business as I had mentioned earlier is growing significant has grown significantly. In April it’s more than 25% growth whereas in the last quarter it was flat. The third information you will be in the questions that will come up the energy labeling program whether in 1-1-2026 whether it is going to change or it is going to change in 2027 again or it is also going to be in 2028. The discussions are on it is in the advanced stages. Our anticipation is there will be indeed a change in 2026 and the next change will be 2028 with higher parameters.
So the as originally in this 2026 change should happen. That is what the industry is prepared for now. I also want to reiterate the Blue Star segment two results which I have been explaining for the past two quarters. It does not include commercial air conditioning. It does not include commercial air conditioning service. In other case in our case it includes the room air conditioners. It includes the commercial refrigeration products. I explained to you till session we reclassify what is the path of room air conditioner? What is the part of commercial refrigeration? I am unable to disclose that figure but I can tell you that room air conditioner business has grown significantly.
Commercial representation business has been flat. In the first half of the year it had degrowth. In the last quarter it has been it was flat. Now only way I can indicate is that had it not been commercial refrigeration’s degrowth it would have been business as usual. Our estimate is that our growth in revenue for Q4 would have been 500 basis point higher revenue growth. The margin would have been higher by 50 basis points. It is even to disclose this. We took the board permission that this is how we will disclose now. It does not include the commercial air conditioning or commercial air conditioning service which will be close to more than 150 crores kind of profit at any given point of time in any particular year or the average I’m talking about over the years.
That is not part of the segment two at all in our case it is purely room air conditioners and commercial depreciation products. Then the industry this is the last point I wanted to make had been undergoing many supply chain challenges and it is somewhat stable now with the extensions that are given for the compressor imports. And you might have read about an article about E based extended producer responsibility. The companies are filing suits against the government for increasing the rates. Now Bluser also has filed a petition. The question here is the revised rate when it came into effect whether it was provided for or not provided for.
There are companies which would have provided for. There are companies which would not have provided for. Next part is you would have read an article or many articles about copper duty whether it is under FDA and whether localization has happened. The good news is localization has happened and we have signed an MoU with Hindalco for sourcing locally significant amount of material Next year should be coming from within. Now in the last financial year we would have imported copper. There had been again the question of whether the FTA related disputes have been provided for or not.
These are all business as usual. Some companies would have provided for, some companies would have not provided for. But as far as booster is concerned what needs to be provided for has been provided for. In other words, for example in the E waste matter we might we have provided for that that additional money and if the court case goes in other favor we will be writing it back that that line will go on. Now the result of ours to an extent may not be comparable with others because it is a pure operating income that is there purely for the businesses that I told you in segment two.
I thought I must clarify this because numerous questions will come later our limitations related to bifurcating this well domed and we indeed consider this and at some point of time it may happen but as of now we are not able to the way you should be able to also figure out our room aircraft performance may be from GFK where you would have seen or some of you would have seen, we have gained market share by 100 basis points and for three consecutive quarters we have been leading in terms of the tertiary sales as well in many markets.
So with that I hand it over to Mr. Sunit Swami for his opening.
Suneel M Advani — Chairman Emeritus
Thank you Mr. Sagarajan. Good morning ladies and gentlemen. I’ll be providing you an overview of the results of Blue Star for quarter ended March 25th. FY25 on an overall basis has been an exceptionally good year delivering a 23.6% revenue growth on the back of the the Strong performance of FY24 profit before tax grew by 40.9%. EBITDA margin improved by 40 BS from 6.9% in FY24 to 7.3% in FY25.
Suneel M Advani — Chairman Emeritus
Caddy forward order book rose to the.
Suneel M Advani — Chairman Emeritus
Highest ever level of 6263 crores as compared to 5697 crores in FY24. This reflects on the operational rigor and efficiency and at the same time depicts an extremely good pipeline to support growth. The company remains committed to its stated path of investments in research and development, manufacturing, sales and distribution, digitalization, talent development and capacity enhancement in order to strengthen its position in times to come. Coming to quarter ended March 31, 2025. Financial highlights for the quarter on a consolidated basis are summarized as follows. Revenue from operations for Q4FY25 grew 20.8% to rupees 4018.9 crores as compared to rupees 3327.7 crores in Q4 of FY24 it is the excluding other income for Q4FY25 was rupees 279.4 crores, an EBITDA margin of 7% of the revenue as compared to 241.9 crores.
An EBITDA margin of 7.3% of revenue in Q4 of FY24. PBT before exceptional items grew 16.2% to Rs 248.8 crore which is 6.2% of revenue in Q4 of Fy25 as compared to rupees 214.1 crores. It is 6.4% of revenue in Q4 of fy24 coming to year ended 3-31-25. The financial highlights on the consolidated basis are as given below. Revenue from operations for FY25 grew 23.6% to Rupees 11976.7 crores is compared to Rs.
Suneel M Advani — Chairman Emeritus
9685.4 crores in FY24.
Suneel M Advani — Chairman Emeritus
EBITDA excluding other income for FY25 improved to Rs. 875.9 crores and EBITDA margin of 7.3% of revenue as compared to Rupees 664.9 crores. An EBITDA margin of 6.9% of revenue in FY24 recording a growth of 31.7% mainly due to impact of scale. Pvt. Before exceptional items grew 38.6% to rupees 772.4 crores in FY25 as compared to rupees 557.2 crores in FY24. Tax expense for FY25 was 193.6 crores as compared to 142.8 crores in FY24. Defective tax rate was 24.7% for FY25 as compared to 25.6% for FY24.
Suneel M Advani — Chairman Emeritus
Net profit for FY24 grew to Rs.
Suneel M Advani — Chairman Emeritus
591.2 crores which is 4.9% of revenue as compared to rupees 414.3 crores which.
Suneel M Advani — Chairman Emeritus
Was 4.3% of revenue. In view of the record revenue and.
Suneel M Advani — Chairman Emeritus
Profits earned by the company, a dividend.
Suneel M Advani — Chairman Emeritus
Of Rupees nine per share previous years Rupees seven per share is recommended by the Board of Directors of the company. Carry forward order book as of 3-31-25.
Suneel M Advani — Chairman Emeritus
Grew by 9.9% to 6263.4 crores as compared to rupees 5697.6 crores as of 3-31-24. Capital employed as of 3-31-25 increased to.
Suneel M Advani — Chairman Emeritus
Rupees 2427.3 crores and as compared to.
Suneel M Advani — Chairman Emeritus
Rupees 2156.7 crores as of 3-31/24.
Suneel M Advani — Chairman Emeritus
This was primarily owing to investment in fixed capital.
Suneel M Advani — Chairman Emeritus
The company reported a net cash position of Rupees 640.35 crores as of March 31, 2025 as compared to a net cash position of 455.9 crores as of March 31, 2024. Coming to segments the business highlights for quarter four segment one I.e. electromechanical projects and commercial air conditioning systems, the revenue grew 30.6% to rupees 196.2 crores in Q4FY25 as compared to rupees 1506.8 crores in Q4FY24. The segment result was rupees 149.9 crores which was 7.6% of revenue in Q4 of FY25 as compared to rupees 112.5 crores which is 7.5% of revenue in Q4FY24 segment. Revenue for the year grew 27.2% to Rs.
5998 crores as compared to rupees 4715.5 crores in FY24 segment result was rupees 490.9 crore which is 8.2% of revenue in FY25 compared to rupees 341.1 crore which was 7.2% of revenue in FY24. Order inflow for the quarter increased by 17.5% to Rs. 1439.9 crores compared to rupees 1225.1 crore in Q4 of FY24. Coming to electromechanical projects Business Continuing with the trend of the previous quarter, this quarter also witnessed strong order finalizations primarily from factories and data center market segments. The commercial, real estate and infrastructure market segments saw muted demand. The focus remains on faster execution of projects with healthier profitability and cash flow.
The company is hopeful that growing data center investment and and focus on manufacturing will result in fruitful opportunities. In FY26. The carry forward order book of the business stood at rupees 4755 crores as of 3-31-25 as compared to 4344 crores as of 3-31/24. A growth of 9.5%. Coming to commercial Air conditioning systems the commercial air conditioning business delivered a good performance this quarter by maintaining its market leadership and improving profitability. Growth was led by resilient demand from health care, hospitality and education sectors while the industrial and BFSI sectors remain muted. The government orders showed signs of revival during this quarter.
Coming to international business in FY25 we have developed products for three OEMs in US and Europe and after completion of field trials of the products, commercial shipments have begun. While volatile global trade policies have led to the slowdown, the inquiry levels are higher. In anticipation of an India US trade deal and supply chain de risking by these OEMs, we expect more clarity to emerge in H2FY26 segment 1 margin overall at 7.6% for Q4FY25 versus 7.5% in Q4FY24 and the margin for FY25 is at 8.2% in FY25 as against 7.2% in FY24. As this segment comprises both projects and product business the mix of which influences the margin coming to unitary products, segment 2 revenue grew 14.7% to Rs.1960.2 crores in Q4 of FY25 as compared to 1708.9 crores in Q4 of FY24.
It is to be noted that this growth has to be seen in connection with Q4FY24 growth which was 34.8%. Segment results improved to Rs.164.5 crores 8.4% of revenue in Q4 of FY25 as compared to rupees 141.4 crores. It has 8.3% of revenue in Q4FY24. Similarly, the revenue for the year grew by 22.4% to 561.1 crores in FY25 as compared to rupees four five nine 2.2 crores in FY24. Consequently, segment results improved to Rs.471.2 crores which was 8.4% of revenue in FY25 as compared to rupee three hundred and sixty.3 crores which was 7.8% of revenue in FY24.
FY25 was a landmark year for room AC business with sales volume crossing 1.53 million units. Coming to cooling and purification products business, the room AC business recorded a strong growth during this quarter driven by the upcoming summer season and rising demand in tier 3, 4 and 5 markets. FY25 witnessed a very strong demand growth and the overall performance of this business has been exceptional. Our market share now stands close to 14%. To capitalize on demand momentum, we have introduced a comprehensive new range of room ACs during this quarter including a flagship premium lineup catering to every consumer segment across all price points.
We continue to strengthen our presence across various distribution channels to targeted promotions and in shop demonstrators by expanding distribution especially in Northern India with 2,100 plus service centers, 150 plus vehicles and its gold standard service. We continue to focus on reliable nationwide after sales support coming to commercial refrigeration business which also is a part of segment two. The commercial refrigeration business was impacted due to regulatory changes in H1 of FY25 as well as supply chain constraints. Further, the slowdown in FMCG sector impacted the dairy and the frozen products including ice creams which resulted in lower demand for deep freezers.
In Q4 FY25 the demand has revived and the business has recovered. With the revival of demand from ice creams, frozen food and growth of quick commerce delivery platform, the outlook for this business is encouraging. In Q4FY25 this segment reported a margin of 8.4% which is marginally better than 8.3% in Q4 of FY24. The margin for FY25 has improved to 8.4% from 7.8% in FY24 aided by strong revenue growth in Room AC business leading to a benefit from economies of scale. Coming to segment 3 which is Professional Electronics and Industrial Systems, the revenue degree 19.2% to 90.6 crores in Q4FY25 and as compared to 112.1 crores in Q4FY24 segment result was rupees 8.8 crores which is 9.7% of revenue in Q4FY25 as compared to Rs.
13.6 crores which was 12.1% of revenue in Q4FY24 segment revenue for the year degrew by 7.7% to 348.6 crores as compared to rupees 377.7 crores in FY24 segment result was rupees 29.7 crores which was 8.5% of revenue in FY25 as compared to rupees 51.5 crores which was 13.6% of revenue in FY24. The MedTech business is facing headwinds from regulatory developments and the same has resulted in the loss of revenue and profitability for this business. Industrial solutions business is showing momentum but it is not compensating for lost opportunities. Coming to Business Outlook for the second consecutive year the company delivered exceptional financial results with the total income crossing 10,000 crores and profit before tax crossing 750 crores.
The weather forecast have predicted a strong summer and we are hopeful that the momentum for the room AC business will pick up in May and June. Even though the growth in the month of April was not in line with expectations, the orders faced by commercial refrigeration business are are behind us. The strong Order book of segment one and the growing demand from manufacturing and data center market segments will contribute to growth. The proposed India U S Trade deal should help us to scale our international business. Overall, we are optimistic about the prospects for FY26. Of course we have to keep a close watch on geopolitical developments, potential volatility in commodity prices and supply chain disruptions.
With that, ladies and gentlemen, I am done with the opening remarks. I would now like to pass it back to the moderator who will open the floor to questions. We will try and answer as many.
Suneel M Advani — Chairman Emeritus
Questions as we can to the extent.
Suneel M Advani — Chairman Emeritus
We are unable to. We will get back to you via email. With that we are open for questions.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question press Star and one on their touchstone telephone. If you wish to withdraw yourself from the question queue you may press star and 2. Participants are requested to use handset 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 Natasha Jain from Philip Capital. Please go ahead.
Natasha Jain
Thank you for the opportunity. First of all, the detailed commentary was helpful. My first question is on rat. Now that you’ve mentioned and all your peers have also given out numbers the top end growth was strong could be because of channel filling and the start of this quarter has been slightly tepid and may has any which we have seen continuous rains in north of India. Given that all of our major players have backward integrated are now sitting with massive capacities and the season has kind of at least started with slight disappointment and you said the DE rating is due just probably seven, eight months down the line.
Does that mean that for the remaining part of the year there will be pressure both in terms of volume because inventory will be high in the channel and then therefore there could not be any pricing advantage.
B. Thiagarajan
So if you look at, you know, if you are in this business you should always be watch on that look if it is going to be not that good summer what one needs to do. That’s what one may look at it, isn’t it? That you. You won’t be in the business.
B. Thiagarajan
When.
B. Thiagarajan
We lose the risk this will be already be there. It’s almost like a cricket team. If that season is going to be raining playing in Australia, England they will know very clearly they are trying to do that. If you ask me before 2021 there was a serious problem because you are ordering for the material many SKUs coming from China or Far east. You will not be Able to do anything. Because you have already opened the lc, they started shipping it and the inventory pressure will be huge. Thanks to make in India. All of us have.
Majority of us have already started producing in house. It is a question of raw material and what you have planned and how that is being imported or locally sourced month after month. So I do not see inventory as a problem. It is something very quickly it will be corrected. So you. I. You know, if you. If you recite we are. You know, our memory is short. Including many blue steroids. The whole bad summer was in FY24. It is only one year it changed in FY24. If you look at it the other. As far as blue style is concerned, it started exactly like that in the forecast.
March is becoming very, very, you know, hot. And people started buying. It peaked in quite a few locations in March, April 15th. Suddenly it stopped. And the Q1 growth in FY 2024 for us in room air conditioner volume terms was just 2%. And however the year ended financial year 24 ended with 20% growth. And in fact the Q4 Q3 itself showed 25% growth. The festival season part of it. And whereas if you look at FY19, FY20 was Covid impacted year one year prior to that was a very bad summer year. It was a huge preparation and Q1 was minus 10%.
Q2 however showed 14% growth because in July North India did well and some parts of the Madhya Pradesh etc. And Q3 was a flat quarter. Q4 was again some single digit full year was a flat year. So I’m giving you two comparisons. Now we are again talking about a year on a day which was very very high. I am of the view that energy label change will not be an issue at all. For the simple reason the production of those products would not have commenced and raw materials would have been ordered. One week of the summer season finished good inventory.
Then in case the summer fails. I am still hopeful something will happen in May and June because the very from 12th onwards it is going to be tough summer. Whether this year again 20% growth in the full year. You have to wait and wait and see. But I am not seeing it as a crisis. And because we are seasoned players in this and it will be a disappointment if rain continues throughout the summer. Thank you.
Natasha Jain
Thank you sir, that was helpful. Just one last question. In terms of commercial ac, I understand that VRF technology is the fastest growing and you have indigenously developed your own technology. Now what I’ve understood from the industry Is this technology needs to continuously go through R and D in order to, you know, be with the updated technology. So here, because we have already made this technology probably a year before, are we going to see huge R and D spends on this and therefore can margins be impacted? Thank you.
B. Thiagarajan
See the not only commercial air conditioning, in fact even room air conditioning requires technology for multiple reasons. So number one is connected with you had gap visa, the competition. You will end up making centrifugal. For example, it was not in our portfolio. We have invested in that. We are growing. We will keep developing that. So there is a product portfolio gap. There is a second type of R and D expenses where you want to become competitive. You launch your product. It is functioning very well. But you want to make it very very cost effective, improve the margins.
Which means you will try out alternate vendors for many components. There is a second type of already there is a third thing which is actually energy label change or a refrigerant change in order to improve the sustainability. It will go on. Fourth is the developing technologies in digital or AI. In order to improve the performance, in order to improve the reliability, in order to improve the energy efficiency itself. So you incorporate those technologies. Therefore now in all these, it is not really current year. You keep a five year roadmap and you start developing that, investing in that.
So clear guideline is that whether it is room air conditioner or a deep freezer or it is is a commercial air conditioning system, 1.5 to 2% of our revenue will be invested in R and D. It will keep on happening. And as you can imagine that we are not a global company. Some global headquarters is going to develop a technology and give it to us. Whatever we have achieved, if we are able to compete with multinationals or if our products are comparable to multinationals thanks to our efforts in R and D. The last point is connected with the backward integration or vertical integration whenever that needs to be done.
So in many cases by incompetent ecosystem. It’s not only regulatory. In order to improve the margins. From time to time we will take such a decisions. So our investments in R and D will continue to happen at around 1.5 to 2% of the revenue. Thank you.
Natasha Jain
Thank you sir.
operator
Thank you. Ladies and gentlemen. In order to ensure that a management is able to address questions from all participants, please limit your questions to two per participant as there are several people waiting for their turn. The next question is from the line of Noshad from Aditya Birla Sun Life. Please go ahead.
Naushad Chaudhary
Thanks for the opportunity and Highly appreciate the detailed explanation and almost everything all queries have been resolved. Just one on the EPR side. If it, if at all it is possible if you can, you know, quantify how much we have taken a provision last year either in absolute term or as a percentage of revenue. And what was the expected increase on that base for which we are fighting?
B. Thiagarajan
The exact figure Nikhil will be able to tell. You know what happened was the recycling is. Was at some 9 rupee per kg. It got increased to somewhere around 23 rupee a kg. That is, that is the issue now. What is epr? Ten years ago, whatever number of air conditioners I sold equivalent material there will have to be recycled. And in India generally getting this material back is a problem. You know, one air conditioner becoming old that is shifted to another bedroom and it is border by somebody. And even if you pay 4,500, 5,000, it doesn’t happen.
So you are supposed to be going to the recycler, give the material that you have collected. Apart from that you also buy the certificates for recycling. That rate tripling is the issue. So you assume approximately some 10 crore what it was, it will become 30 crore. That’s a type of formula. As far as blue, say exact figure. Don’t worry, it is, it is in the order of 10 crore which will go up to 30 crore and in the coming year. Last year midway through it came in. So the differential has been provided for.
Naushad Chaudhary
And this 9 to 23 is for retrospective or for the fresh material.
B. Thiagarajan
Fresh material. Whenever it came into the middle of last year it came into effect which is what you are reading in the newspaper as being contested.
Naushad Chaudhary
Okay, so thank you so much. All the rest.
B. Thiagarajan
Thank you.
operator
Thank you. The next question is from the line of Rahul Agrabal from Ikigai Asset. Please go ahead.
Rahul Agarwal
Hi sir. Good afternoon and thank you for the opportunity. Sir, you alluded to some, some outlook on how do you see RAC ahead. Just wanted to understand similarly because last two years most of the revenue for segment one and two has grown like 20% on an average going forward. Obviously the industry looks, the outlook looks great. But I think these numbers are I think very good. So just in terms of sustainability, if you could help us qualitatively understand outlook for commercial ac, commercial ref and projects also going into next year, it will really help. That’s the first question.
And secondly similarly on margins, I think if you just highlight what could be additional levers from where we are at current levels on both segment one and segment two. Do we see margin expansion further and is that more organic or is it going to be more effort driven? Those are my two questions. Thank you.
B. Thiagarajan
So thank you. If you the room air conditioner business is growing, is poised to grow in the coming years and there may be a good year of significant growth beyond 2025%. Another year it may be a flat year. If it is going to be a wash or summer, both can happen. But all taken into account is between now and 2030 the CAGR estimate is 19%. It was a report CAI National Committee on Consumer Durables and Electronics did that and in that research it is widely accepted by many stakeholders and even for many government representations. We continue to use that and in fact the air conditioner will be the fastest growing category within that consumer durable electronics at 19% CAGR market expected to more than double now the commercial air conditioning product is connected with infrastructure whether it is a core infrastructure or a social infrastructure where the product goes shop, showroom, boutiques, hotels, hospital data centers and manufacturing education institutions etc.
Our estimate is that it should grow at a CAGR of somewhere between 12% to 30% 12.5% that is our estimate. Now electromechanical project is a big canvas. It’s a question of where you want to compete, what kind of risk appetite that you have in terms of cost overruns or the time overrun and numerous compared with what we are doing in many number of projects we can get into. Our principle has been that do the project selectively where your cash flows are secured and the profitability is reasonably it doesn’t bring down the average profitability of the company as a whole.
That has been the approach. So I’m not really worried about the market growth as far as the electromechanical project segment is concerned. Commercial recommendation is a fragment. It may be a water cooler, it may be a deep freezer, it may be a cold chain related cold room, it can be a ripening chamber and many many sectors pharma, quick commerce or the QSR segments and warehouses a number of customers keep buying it has a potential to grow at 30% because India is under penetrated and so the growth potential there is very high and it is yet to reach room air conditioner kind of a scenario room air conditioner struggle like that for many years till 2020, 21 then post that it is showing signs of it.
I expect at some point of the time there are signs now there is no doubt that the demand is coming back in many sectors driven by the modernization of the traditional Kirana stores itself. As you are seeing 3, 4, 5 towns heavy kirana store want to sell ice cream or want to sell cold beverages. So the Sikhoda deep freezer market is growing. Processed frozen food consumption is growing. And healthcare sector is getting more nice and therefore you should be. And if you look at it, the KYOTR players keep on announcing more and more number of restaurants getting opened even on the highways.
And quick commerce is a last year phenomena. That huge amount of 10% of the total market now is the requirement from the quick commerce segment for delivery related cold rooms or deep freezers. So this is the overall scenario margin. This is my view. My view is that to dramatically grow the margin in this particular period 2025 to 2030 is to be looked at in the context of many investments have to be made that when you are trying to penetrate the market entire 3, 4, 5 towns you have to make investments in brand and promotion related.
Next you are complying with newer and newer regulations like the extended producer responsibilities. The cost that comes to that next in shop demonstrators when you are expanding your network to 15,000 from 10,000, that additional 5,000 will be coming with some cost like in shop demonstrator consumer finance related cost. It is 40% of the sale coming from consumer finance. That is a cost that comes to you. So therefore if you there is a phase that you go through, keep on making investments. So therefore you make investments for this scale. That is not Imagine the industry was only 8 million in 2024.
Sorry, FY24 and FY25 it crossed 10 million. It has cost 15 million in FY26 booster itself from 8 to 11 to 15.75 lakh kind of volume we have grown. It will require investments in even digitalization, etc. So in this particular period it is going to be a journey, a tough journey. And the competition will be intense to improve the margins dramatically because you are making simultaneously many investments that are needed. The guidance for FY26 adjacent is something. Something dramatically changes. Remind for segment one 7.5% and segment to 8.5% and we will attempt to take it to nine.
And that will be with great difficulty. I think. I mean if the summary is not going to be that great, that 8.79 will be very difficult.
Rahul Agarwal
And second, and we should assume that whatever growth rates you mentioned on all segments, we should be gaining market share. That’s just a follow up that’s very.
B. Thiagarajan
Clear that we want to grow faster than the market. And we were not happy with the room air conditioner in Q1 despite a great summer we stopped out at some point of time last year and we didn’t gain market share share in the summer. But if you look at it in Q3 Q4 we have done better and that 100 basis point market share gain happened in the later part. Now our goal, we have stated that we would like to see that 15% market share quickly and so on. Distribution, branding, everything will be happening that way.
Thank you.
Rahul Agarwal
Thank you so much sir. All the best.
operator
Thank you. The next question is in the line of Dhruv Jain from Ambed Capital. Please go ahead.
Dhruv Jain
Thank you so much for the opportunity.
Dhruv Jain
Sir.
Dhruv Jain
My first question is on the MEP business. So I know that you cater to various segments and do a lot of things there, but just wanted to understand that which segments particularly would be higher than median margins and which would be lower than median margins that you reported? You know, some color there would be very helpful.
B. Thiagarajan
See generally, you know, the projects in which the equipment content is higher will obviously have a higher margin. The projects in meat in Sarah, 12 to 18 months kind of completion will have higher margin. Projects in which you have price variation cost that is built in will have. But broadly what we have seen is that manufacturing data center, these kind of projects have more than average margin for the simple reason they have got a completion period certain and their revenue is suffering. These projects will happen and infrastructure projects like Metro railway or railway electrification substations and all can, you know, six months to one year it can get delayed.
Thank you.
Dhruv Jain
And the second question is on exports. So I know that you’ve embarked upon an export initiative program but just wanted to understand where are you in that journey from an SKU approval perspective and you know, if you could just share some thoughts there. Thank you.
B. Thiagarajan
Yeah. So the situation remains the same, that we have three customers and we have products approved for them. These are in the decarbonization area and they have started lifting the material as one would like to scale, you know, from January, what is happening and the complete uncertain situation provides. Therefore we are, we have to wait and see. And there are, there are huge number of enquiries that are flowing in and there are record number of people are now asking for samples, etc. But it may not straightaway translate into orders because I think all of them are trying to secure their supply chain.
So as we speak the wave was whether US India deal when it will happen, US China deal. They are talking about what will happen and whether US own or hero, whether they will get into inflation or whether they will be into recession. A number of questions Are being asked. So we are to that extent it is a disappointment. There is uncertainty in the whole interaction exports landscape.
Dhruv Jain
Thank you, sir. And all the best.
B. Thiagarajan
And in the meanwhile we are speeding up to give the samples understand the specifications for numerous enquiries that are coming in. Because their problem is if China doesn’t open up and whether India is. They will evaluate it will go on for another one year, I suppose.
operator
Thank you. The next question is from the line of Aniruddha Joshi from ICIC Securities. Please go ahead.
Aniruddha Joshi
Yeah, thanks for the opportunity. Sir. One question. Now, in your career you would have seen such weather related issues like early monsoon or late summer multiple times. So just. Just wanted to understand from the experience that whether these things really impact in the medium term or not. And secondly, are these things in a way helpful? Because I guess the smaller stroke unorganized players would be getting relatively more impacted compared to players such as Bluestar. So do we end up gaining market share in such periods? That is question number one. And in terms of. Secondly, if in.
In case of. In a way, commercial refrigeration. If you indicate about the market size and the market position of Blue Star. Let’s say the market share roughly three years ago, what it was, what is currently and the shares of other players also. Yeah, that’s it. From my side. Thank you.
B. Thiagarajan
Yeah. This the last part of your question is commercial refrigeration, Correct. Okay. Now many times it has happened that it is the first thing is it is seasonal product that sets the tone and the corrections are not happening. As I explained earlier, we have seen in 2024 when the summer failed. Since FY24, when the summer failed in 2023, the recovery happened significantly. And so the situation is different from what it was in the past. But having said that, for that particular year, instead of growing by 25%, the industry can grow by just 10%. That is of course possibility.
The weather is becoming unpredictable. And no one would think that in Mumbai this kind of rain will happen in the month of May. Now equally is the fact that it can suddenly become hot, unbearable temperature can happen. So whether it will impact medium term or long term, I do not think so. It depends on the company. Like for example, will you postpone expansion of your network? Will you postpone recruiting people or initiating new R and D projects? We do not believe in that at all. We continue to in some discretionary expenses. One may it can create pain for the employees associated because the variable pay or the sales incentive will be linked to the sales growth.
So there is a Pain they will undergo. Indeed, there is no doubt about it now. In one particular area you earned significant amount because it was unexpected bumper sale and another year you are losing it. So we have seen this again and again happening of if there is a. I have not come across fortunately two summers consecutively disappointing in my 45 years of career. So therefore I have a feeling I am of the view. Even May June should bounce back is my view legacy. I can be entirely wrong. But the good news now, as I have told you is you can quickly correct the supply chain.
And you asked me a question. Whether the smaller players will be impacted. I don’t think so. We are not mature players. We handled each other. I if you mean the vendors or the OEM suppliers and we should be doing better. We for one, you know, I can put it either way. 10 years ago it used to be a huge tension and mourning and you know, disappointment and all that. It is not. It’s part of the game. It will happen. Thank you.
Aniruddha Joshi
Okay, sure.
Aniruddha Joshi
And on the commercial refrigeration part, commercial.
B. Thiagarajan
Refrigeration, if you take deep freezers which have chip freezers and a bath cooler or the negative temperature storage, all these put together, we will be having close to 31 degrees market share there. And we would like to maintain, if possible improve. But that market is significantly growing. And second part is modular cold rooms which are walking coolers we call it, which goes in very large numbers to restaurants, pharma, industry, logistics, warehouses, etc. And again, we hold 32% market share. Water cooler is a small part. We have been leaders there. There is nothing to worry. And so market leadership is not an issue there.
The issue is connected with the market to open up. It is opening up. Last year was disappointment for a different reason altogether, which you are all aware the many regulatory changes connected with import. Most importantly, we all imported from China many, many, many, many equipment, commercial refrigerator equipment. When you indigenize, it will not be as price competitive as China was able to deliver. The customers are used to Chinese pricing. So therefore, even though you are trying hard, the question that comes up is when the margin will go up. So this is the issue. The customer got used to a Chinese price for many decades.
You suddenly stop importing when you make locally. It is going to take time for you to improve the competitiveness. That’s where it is. Thank you.
Aniruddha Joshi
Thank you. Thank you. Sir.
operator
The next question is from the line of Anupam Gupta from IIFL Capital. Please go ahead.
Anupam Gupta
Yeah, thanks for the opportunity, sir. So the question is on the RAC.
Anupam Gupta
Business, primarily RAC and commercialization.
Anupam Gupta
Talk about basically, where are you in terms of backward integration at this at the end of FY25 in terms of.
Anupam Gupta
In house, third party and imported sort.
Anupam Gupta
Of sourcing and over the next two, three years how do you see it changing incrementally?
Anupam Gupta
Also because there is pressure from the.
Anupam Gupta
Government to indigenize as you saw in case of compressors very recently.
Anupam Gupta
So if you can just give a color here.
B. Thiagarajan
So there are a few items which we should deal with here. The number one is connected with the second item is the motor. Third item is the copper tubes. Fourth item is electronics. Fifth item is refrigerant. All of them are technical items from the supply chain point of view constitutes a significant part of the cost that goes into a traditional refrigerant. We will not be manufacturing at all. We. We are working with the manufacturers in order to ensure that adequate capacity is available. As the refrigerant phase down begins by 2028 we should not be ending up paying huge price due to shortage.
I do not mind saying this the way that it is there the industry should work together to to help create more capacity for 32 refrigerators. I do not think that it’s going to be a challenge per se. Copper fuels, inner crude copper tubes were getting imported and from FA countries like Vietnam predominantly. And there are issues related with the certificate of origin whether it is mined within the copper is mined within us in countries in order to avoid or pay a full duty. There had been clarifications from the Ministry in March. If that is so, it is there is a cost that get added whether there are domestic capacity that is available.
That was initiated two, three years ago. Good news is that domestic capacity commissionings have taken place. As I mentioned in the opening remark with Hindalco we have signed. We were the first one to sign the MoU as well for sourcing. There are two other players as well who will be making cooperatives here including Adani and McDoug. And so therefore it may be expensive than what the industry was getting because of the reasons I told you. But it is. There is no supply chain problem there. The third item is the electronics and significant amount of electronic EMS players are available.
Our policy has been clear that we will invest in R and D for developing our it but get the PC or electronics assembled outside because that is a. That is not enough capacity. That is not a value adding job. The money comes from the IT. And so we are not going to be setting up a PCB assembly unit in house and all we will. There are enough players. That is the model given multinationals follow. That is where we are and we are no longer worried about it. But we are speed up our efforts to develop the it.
The next item is motor. Because of the automobile and other industries BLDC motor ecosystem has developed completely and their quality standards have improved and there is no problem anymore. And so even if restrictions come in place in a much bigger way and even multinationals who were prevented from exporting to India they have set up a manufacturing facility here. So there is no problem with that. Now the question is compressor. That is one big item. There are multinationals who have their technology and they are setting up their own facility. They are in the process of scaling.
There are compressor manufacturers. There are two Chinese compressor manufacturers, GMCC and Hailey. GMCC is part of the Mydia group. They are telling us that they are expanding their manufacturing capacity within India. There are also the players who are trying to get the components and assemble in house. There are rubber of players who are attempting to do that. As far as blues are concerned, we have kept all our options open that we will continue to source from the players from whom we source. We have assured the players who will have excess capacity because when we set up they are setting up a larger capacity than they would consume.
They therefore we are in discussions with them. We are testing these compressors in principle. We have agreed to source if they will be giving third option of getting the components in CKD form. Like another model that is being proposed that set up an assembly line. We have no problem with that at all. It is a low cost investment. Last item, as in 2030, if you have to look back your leaders in air conditioning and your volumes have reached 5 million. That’s kind of in this situation why you shouldn’t be making compressor can come. Therefore, we are looking at how to design a compressor, what it takes.
And we are in the primary school. But the program is very much on and this is where we are. So the bottom line is there are supply chain challenges. There are mitigation measures. Now the mitigation measures have to come with two important conditions. Number one, the quality standards. Actually three quality standards, continuous supply. Third is the cost. And on all angles, we believe at least for FY26 we are fully secured till the end of summer 2026 we are fully secure. Nothing to worry. Thank you.
Anupam Gupta
Okay.
Anupam Gupta
And will it be right to assume.
Anupam Gupta
So let’s say if we look out FY27, 28 except compressor everything would be India based to a very large extent.
B. Thiagarajan
Yeah, I think even by FY27.
Anupam Gupta
Okay, okay. Understand.
Anupam Gupta
That’s all for myself, thank you.
operator
Thank you. The next question is from the line of Lash Gandhi from Investec. Please go ahead, sir. There’s a lot of echo from your end.
Kailash Gandhi
Hello. Is it better?
operator
Yeah. Please carry on.
Kailash Gandhi
So my first question is on something that you mentioned in your opening comments that in April we have seen 15 to 20% decline for the industry sales. Just wanted to understand, was it the primary sales that you were speaking about or secondary sales? Because in case we are speaking about secondary sales, then is it fair to assume that primary sales would have fallen by even a sharper percentage given that inventory in the system was fairly high?
B. Thiagarajan
No. I mean at this point of time we will have visibility only to the primary sale and secondary sales. Visibility is some extent we will have because the information coming from the stores. The thing is our understanding based on whatever data that we have got, indeed the opening inventory was higher than what it should be because there will be a compression shortage. ACS will not be available. The dealers ended up shopping. In our case, I do not know the market data. We have to wait and see for the GfK report whenever it is published for the month of April.
In our case, primary sales as well as secondary sales are up by marginal 5%. We would have expected it to be be 30% and it is 25% lower than what we thought. We have not been grown compared with last April information. Last April we were 79% higher than the previous April.
Kailash Gandhi
Understood? Understood. And given that this year industry has been operating with higher than usual inventory for compressors. Given all the shortages that we were kind of fearing about, what implication can a weak summer have on the compressor scenario? Yeah.
B. Thiagarajan
One month ago I said a question. What happens if submarine compressor shortage will be there? Now I am answering. It is good in my view in the sense that you need not go and pay a higher price. See, today the world is highly volatile, right? We don’t even know what will be the exchange rate and what will be the ocean flight rate. Now you see that the effects of this will start falling. The logistics sector will be impacted and there will be seaports which are closed. And that’s what will happen. And a completed inventory of three or four months more you have.
It is good.
Kailash Gandhi
Understood, sir. That’s helpful. Thank you so much.
operator
Thank you. The next question is from the line of Sonali Sargaonkar from Jefferies India. Please go ahead, sir.
Sonali Sargaonkar
My question is on pricing actions in your media interviews earlier towards the start of this Year. You did mention that you will be evaluating price hikes. So my first question is, have you taken any price hikes in Q4? And with this scenario of sort of muted demand, do you think it will impact the industry’s ability to take pricing actions despite supply chain disruption?
B. Thiagarajan
First is the principle. The principle is that if there is a raw material cost increase or cost increase due to exchange rates, that is is passed on to the consumer after waiting for two or three months and therefore the implemented price increase with effect from 1 January, which coincided with the release of new models again in April first week we have increased the prices, that is the input cost that has gone up. Now when the demand comes down. So what happens is that you end up introducing some schemes, they are not there yet. In other words, there is no desperation if the demand itself is not there and you are taking some 2%, 3% price lower for the sake of getting rather manage the inventory than trying to play with the prices.
But there could be some themes in order to keep your market share. So what it will mean, it will mean how the industry as a whole is going to operate. The desperation has to happen industry wise, then some player will drop the price and that’s what will happen. But we are not yet there as of now. It can change only because the general belief is that the news you would have read May 12 onwards the sky is supposed to clear up, the temperatures are to peak. And anyway the industry is not operating with some 25% margin to be taking this decision.
You know, we are talking about industry, some 8 to 9% margin industry it is. And if there is a cost, and it has to be, you have to manage the inventory well, which means you have to regulate the incoming material and the product correction in line with what you need for the summer.
Sonali Sargaonkar
So what has been the quantum of price increases that you took in April? And also what is the cumulative amount by TD.
B. Thiagarajan
From January in? We don’t calculate like that. If There was a 3 to 4% taken in January, 4 to 5% from.
B. Thiagarajan
April 1 and that has not impacted the demand so far in your view.
B. Thiagarajan
The price increase before we did exceptionally.
B. Thiagarajan
Well, they didn’t impact at all. But it is not that it resulted in margin improvement because the input cost had gone up at that point of time. Now we have increased it by 5% and in any case the first month went with some 5% growth and we have to wait and watch. So 4, 3 to 4, 4 to 5.
Sonali Sargaonkar
Understood. That’s all from my side. So thank you.
operator
Thank you.
operator
The next question is from the line of Achal Ohade from Rama Institutional Equities. Please go ahead.
Achal Lohade
Yeah, good afternoon sir. Thank you for the opportunity. Sorry if I’m happy on the same question says, you know, wanted to just quickly get your sense in terms of the April, May and June, what would be the mix in terms of the primary sales for the industry? Would that be like 40, 40, 20, 20 or you know, any proportion if you could highlight just a mix.
B. Thiagarajan
No, I couldn’t follow the mix of primary.
B. Thiagarajan
Yeah, primary sales perspective. How large will be April, May and June individually? If you would have any proportion.
B. Thiagarajan
I know, yeah. It has been radically changing. All that I can tell you is April, May, June together if you, if you look back many years, it will be some 45% of the sale happening.
Achal Lohade
Okay, understood. And just. Yeah, yeah.
B. Thiagarajan
See what we have seen is four, five days of heat in any particular week immediately it peaks. And so it is not that you know, your question, you know, hidden in your question is what is lost in April, whether it will come back in May or June. If that is the thing no one knows. You know, I would also pay heed to the fact that how the sentiments also change in the market. There are border tensions that are there and I keep telling it is not the US trade war is impacting the stock market alone or the company exports the stock market for the US trade war related issues or the immigration issues.
The entire south India there are new people who are dependent on that. The IT related jobs, new jobs or people who wanted to migrate, people who wanted to study there. So there are sentiments also have dramatically changed and as you see, it keeps changing. So put together all nobody knows and I should not pretend so much growth will happen. All the what I can say is we thought going by what was the forecast, etc. 20 to 25% growth should happen. Blue Surf should grow 25 to 30%. As we sit and see now with a muted April I would down into say 10 to 15% growth and if you are extremely lucky, it will be 20% growth because one month has gone, another seven days have gone.
Achal Lohade
Understood. And just a second question. In terms of the south mix for the industry as a whole and for us, would it be possible to get some sense?
Nikhil Sohoni
My guess is that it will be roughly 30%.
B. Thiagarajan
And for us, would we be similar or little higher?
Achal Lohade
In our case it will be higher. Close to around 40% of our sale will be coming from south because we hold more than 20% market share in quite a few markets there.
Achal Lohade
Right? And that has seen a 25, 30% drop right in April.
B. Thiagarajan
No, the other type isn’t growth is thanks to those locations also.
Achal Lohade
For the industry. Sir, sorry, that is my last question for the industry. Was that a drop as much I.
B. Thiagarajan
Do, I don’t know reason why it dropped. All that I know is that I hear that anywhere between 15 to 20% all India drop. And you know, given that summer sets in yearly in Kerala and Tamil Nadu, it is likely South India contributed more than. Because north can come back in summer until July.
Achal Lohade
Understood. This is very helpful. So thank you so much and wish.
Achal Lohade
You all the best. Thank you.
operator
Thank you. The next question is on the line of Arisha Khosla from Nirmal Bank. Please go ahead. So the current participant has been disconnected.
operator
We can take one more question.
operator
Yes sir. The next question is from the line of Keshav, an individual investor. Please go ahead. As there is no response, we’ll move on to the next question. It’s from the line of Shiv Kumar Prajapati from Ambit. Please go ahead.
Shivkumar Prajapati
Yeah. Hi sir. Thanks for asking my question. So my question is more on the data center front. So we are saying that data center is about to bring in the coming years. So to understand the liquid cooling opportunities available for us, like just want more clarity. Are we present in this segment or we are planning to foray into this segment and what would be the opportunity size and margin profile?
B. Thiagarajan
Number one, they are a leading player with huge market share in the MEP related to data center which are mechanical, electrical, plumbing, putting together the data center related. Okay. Other than the server part of it. So in MEP we are present in a big way and will be a preferred vendor as well. Now if you look at the equipment that goes into. We are a manufacturer of chillers meant for. We make a few types of chillers meant for data center application as well. And. And we are expanding that range. Now liquid cooling has not penetrated in India much and we do not have that.
But we are in talks with many players abroad for getting that technology.
Shivkumar Prajapati
Okay. Okay. Got it sir. Thanks and best of luck.
Shivkumar Prajapati
Thank you.
B. Thiagarajan
Thank you.
operator
Ladies and gentlemen. That was the last question for today’s conference call. I would now like to hand the conference over to Mr. Nikhil for closing comments.
Nikhil Sohoni
Thank you very much ladies and gentlemen. With this we conclude the quarter earning call. Do feel free to revert to us in case your questions are not fully answered. We’ll be happy to provide you additional details by email or in person. Thank you.
operator
Thank you. On behalf of Bluestar limited That concludes this conference. Thank you for joining us. And you may now disconnect your lines. Thank you.