Blue Star Ltd (NSE: BLUESTARCO) Q4 2026 Earnings Call dated May. 07, 2026
Corporate Participants:
B. Thiagarajan — Managing Director
Nikhil Sohoni — Group Chief Financial Officer
Analysts:
Natasha Jain — Analyst
Ravi Swaminathan — Analyst
Rahul Agarwal — Analyst
Aniruddha Joshi — Analyst
Sonali Salgaonkar — Analyst
Aditya Bhartia — Analyst
Pulkit Patni — Analyst
Renu Baid — Analyst
Achal Lohade — Analyst
Karan Gupta — Analyst
Keyur Pandya — Analyst
Manish Raj — Analyst
Presentation:
Operator
Ladies and gentlemen, good afternoon and welcome to The Blue Star Limited Q4 and FY26 earnings conference call.
We have with us today from the management, Mr. B. Tiagrajan, Managing Director, Blue Star Limited and Mr. Nikhil Sohoney Group Chief Financial Officer, Blue Stars 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 Star then zero on your touchstone phone. Please note that this conference is being recorded.
I now hand the conference over to Mr. B.T. Agarajan. Thank you. And over to you sir.
B. Thiagarajan — Managing Director
Thank you. Good afternoon ladies and gentlemen. It’s a pleasure interacting with you once again in connection with the financial results for Q4, FY26 and FY26. You all have seen the results approved by the board yesterday and we are here to explained the results in detail. As you would have seen, we have more or less delivered in line with expectations. Though some of you feel that we exceeded the expectations. You know FY26 was a very challenging year with many headwinds one after the other. It started off with a weak summer season.
Then we had interruptions due to GST reduction announcement on 15th of August till September 22. The secondary sale and therefore primary sale was impacted post that we had the energy label change and connected with that. You can see the trade stocking prior to that and the trade trying to liquidate that stock in between. There were trade war related hiccups all throughout the year. It still continues which impacts us in terms of the supply chain itself on numerous raw materials that we get. One is about the availability, the second is about the prices as we were beginning to build up towards the summer season.
You are aware of the war and the war related impact. It’s not much to do with the LPG availability of LPG pricing alone. That’s a minor one. How the supply chains overall will be impacted and the overall market sentiments that will play a role in the coming days. We have been waiting for the summer season to take off in a big way which Indeed happened on April 13th as we speak. We are in a great summer season. One praise that this summer lasts for another eight weeks for managing the huge inventory in the trade and the inventory buildup that we may have which we will deal with as a part of the Questions and answers.
Before that, I will pass it on to Mr. Nikolsoni for the opening remarks over to you. Thank
Nikhil Sohoni — Group Chief Financial Officer
You Mr. Gagarajan. Good afternoon ladies and gentlemen. This is Nikhil Soni and let me take you through the financial highlights for the quarter and year ended 31st March 2026. FY26 has been a challenging year with multiple headwinds affecting revenue and profitability across businesses. However, demand for room air conditioners picked up towards the end of the year helping the Company to post highest ever quarterly revenue in Q4FY26 coming to quarter ended March 31, 2026. The financial highlights are as follows.
On a consolidated basis, revenue from operations for Q4FY26 grew 1.3% to Rupees 4072 crores as compared to Rupees 4019 crores in Q4FY25. EBITDA excluding other income for Q4FY26 improved to Rs. 326.3 crores, EBITDA margin of 8% as compared to 279.4 crores and EBITDA margin of 7% of the revenue in Q4 of last year. PBT before exceptional items was higher at Rupees 282.6 crores in Q4FY26 as compared to Rupees 248.8 crores in Q4FY25 pursuant to the Notification of the Labor Codes as required by ICI Guidance Note, the Company had recognized the incremental impact of gratuity and leave encashment amounting to Rupees 56.4 crores for the period ended 31st December 2025 on an estimated basis and this was shown as an exceptional item.
In the current quarter, the liability was reassessed and finalized at rupees 38.83 crores and accordingly the provision of rupees 17.5 crores has been reversed in Q4 of FY26. Tax expense for Q4FY26 was rupees 72.9 crores as compared to rupees 54.8 crores in Q4 of FY25. Net profit was at Rs. 227.2 crores in Q4FY26 as compared to rupees 194 crores in Q4 of FY 25 for the year ended March 31, 2026. The financial highlights are on a consolidated basis are summarized below. Revenue from operations for FY26 grew 3.6% to Rs.12,402 crores as compared to rupees 11,967.6 crores in FY25.
EBITDA excluding other income for FY26 improved to rupees 930.4 crores. An EBITDA margin of 7.5% of revenue as compared to rupees 875.9 crores and EBITDA margin of 7.3% of revenue in FY25 recording a growth of 6.2% mainly owing to overall focus on cost management. Pvt. Before exceptional items degrew 3.9% to rupees 741.9 crores in FY26 as compared to rupees 772.4 crores in FY25. Pursuant to the Notification of the Labor Codes as required by ICI Guidance Note, the Company had recognized the incremental gratuity and leave encashment amounting to rupees 38.8 crores.
This non recurring item is shown as an exceptional item in Consolidated Statement of Profit and Loss for the year ended March 31, 2026. Tax expense for FY26 was rupees 175.8 crores as compared to R 193 crores in FY25. The effective tax rate was 25% for FY26 as compared to 24.7% for FY25. Net profit for FY26 degree to rupees 527.3 crores 4.3% of revenue as compared to rupees 591.3 crores which was 4.9% of revenue in FY25. The Board of Directors of the Company have recommended a dividend of rupees 8.5 per share.
Last year the dividend was rupees 9 per share carried forward order book of March 31, 2026 grew by 10.5% to rupees 6923 crores as compared to rupees 6263 crores as of March 31, 2025. The capital employed as of March 31, 2026 increased to rupees 3258 crores as compared to rupees 2427 crores as of March 31, 2025 net cash position was at rupees 175.5 crores as of March 3126 as compared to net cash position of rupees 640.3 crores as of March 31, 2022. Coming to business Highlights for electromechanical projects and Commercial Air Conditioning I.e.
Segment 1 the segment 1 revenue grew 1.1% to Rupees 1989.9 crores in Q4FY26 as compared to Rupees 1968.2 crores in Q4FY25 segment. Result was Rupees 128.5 crores which was 6.5% of revenue in Q4 of FY26 as compared to Rupees 149.9 crores which was 7.6% of revenue in Q4ofFY25 segment. Revenue for the year grew 12.8% to Rupees 6762.8 crores as compared to Rupees 5998 crores in FY25 segment. Result was Rupees 501.9 crores which was 7Point4% of revenue in FY26 as compared to Rupees 490.9 crores which was 8.2% of revenue in FY25.
Order inflow for the current quarter was higher by Rupees 35.7% compared to corresponding quarter of FY25 which was Rupee 1954.39 crores in current quarter versus 1439.9 crores in quarter four of last year. Coming to Electromechanical Projects Business Q4FY26 saw strong equity momentum for buildings inquiry momentum for buildings, data centers and factories with bookings growing 35%. Order inflow for the year was lower by 10% compared to rupees compared to FY25 as the order inflow was sluggish in previous quarters.
The carried forward order book of electromechanical projects business was at Rupees 4664.5 crores as of March 31, 2026 as compared to Rupees 4755.2 crores as of March 31, 2025. Coming to commercial Air Conditioning Systems the commercial air conditioning business gained momentum during the quarter supported by healthy demand from the government, industrial and retail segments. While the bookings from office, education and IT sectors remain subdued, the revenue growth in ducted systems and chillers during this quarter has been good and VRF is showing steady progress.
We remain confident in the medium term prospects of the business with steady growth expected across key product categories. International business which also forms part of this segment, the geopolitical uncertainty including tariff related uncertainties persist. The future prospect of the US business is highly dependent on the outcome of the India US Trade deal. However, despite this headwind, our foray into US is progressing well. Our supplies to Europe has also commenced and we remain optimistic on the prospects for this business on account of the change in the project’s mix.
Entire business mix within the segment 1 the margins were lower at 6.5% of the revenue in Q4 of FY26 as against 11.6% in Q4 of FY25 and the margin for FY26 year old was 7.4% as against 8.2% in FY25. Coming to segment 2 I.e. Unitary products, the revenue grew 1.3% to Rupees 1985crores in Q4 of FY26 as compared to 1960.2 crores in Q4 of FY25. Segment result was Rupees 206.9 crores I.e. 10.4% of revenue in Q4 of FY26as compared to Rupees 164.5 crores which was 8.4% of revenue in Q 4 of FY25. Revenue for the year degr by 5.1% to Rupees 5332.4 crores in FY26 as compared to Rupees 5621.1 crores in FY25.
Consequently, segment results declined to Rupees 434.8 crores which was 8.2% of revenue in FY26 as compared to Rupee 471.3 crores which was 8.4 percent of revenue in FY25. Within segment 2, the room air conditioner business witnessed reasonable growth with primary demand picking up in March and channels across all regions stocking up for the summer. The dealer network expansion continues to progress as planned despite the multiple challenges. We gained market share marginally during the current quarter.
Quite a few cost rationalization measures taken in Q1. FY26 owing to poor summer season continued till the end of the financial year and it resulted in improved margins for the quarter. Commercial refrigeration business due to muted demand from frozen food and QSR segment Throughout the year, the market for deep freezers and cold rooms remained stagnant. However, storage water coolers vittish double digit growth driven by strong demand from government and corporate sectors. Due to delayed onset of summer season, advertising and field marketing campaigns had not commenced in March 2026.
This combined with prudent pricing and other cost optimization measures undertaken since April 2025 resulted in improvement of segment margins to 10.4% in Q4FY26 as compared to 8.4% in Q4FY25. Coming to segment 3, the revenue grew 7.3% to Rupees 97.18 crores in Q4FY26 as compared To Rupees 90.56 crores in Q4FY25 segment result was Rupees 14.3 crores that are 14.7% of revenue in Q4 of FY26 as compared to Rupees 8.8 crores which are 9.7% of revenue in Q 4 of FY25 segment revenue for the year degrew by 12% to Rupees 306.8 crores as compared to Rupees 348.6 crores in FY25 segment result was 34.9 crores which was 11.4% of revenue in FY26 as compared to Rupees 29.7 crores which are 8.5% of revenue in FY25.
The uncertainties around the regulatory policy framework pertaining to medtech solutions business are yet to be resolved and consequently the business has slowed down. However, the industrial solutions business continued to grow driven by strong demand in automotive and steel industries and the data security solutions business maintained steady performance. Coming to Business outlook from the second week of April 26, summer had set in and secondary sales of room air conditioners have picked up momentum driven by encouraging demand from manufacturing and data center sectors, electromechanical projects and commercial air conditioning.
Business segment is expected to maintain growth momentum. With rising input costs and volatile exchange rates, there will be challenges in managing the margins. Further, the ongoing Middle east crisis can lead to supply chain disruptions and also dampen growth. We remain cautiously optimistic about the prospects for FY27. With that, I would now like to pass it back to the moderator who will open the floor for questions. We’ll try to answer as many questions as we can and to the extent we are unable to, we’ll get back to you via email. Thank you.
Questions and Answers:
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 the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We’ll take our first question from the line of Natasha Jain from Philip Capital India. Please go ahead.
Natasha Jain
Thank you. Good afternoon everyone. I have three questions. First, in terms of UCP rac, being a hyper competitive market requires constant ad and promotional spend. So could you throw some color in terms of your strategy that are you now protecting margins or will we see elevated ad spend spend later in the year? And if you are protecting margins, will that impact our volumes? Second question, in terms of April, what we observed was first 15 days is pretty much flat because of rains. Second 15 days only secondaries have picked up.
It seems primary. Either the channel is pretty much stocked in south or people do not want to stop because of the erratic weather condition. So with that background, could you tell us how are you reading near term given that season will probably end towards the end of June. And lastly, given cost has increased so much, are you seeing a very sharp down trading happening? Because what we’re seeing is lower tier brands are gaining market share at the cost of all higher ones. So any color on that will help. Thank you.
B. Thiagarajan
Thank you. The first question is connected with the advertising and marketing. So If you know in March 2024 we were anticipating a great summer season. Even the IMD weather forecast said so. And the dealers were stalking anticipating the compressor shortage in a big way. So in Q4 of FY25 there was huge advertising that took place and subsequently it is very difficult to correct say for example an IPN and all, you would have made a huge commitment, you would have bought a media. But when the summer failed, we suffered. Few things could be corrected. That’s about all but significant amount of marketing spends were there in Nikhil’s remarks.
What he meant was actually in Q4 of last year year, that is the FI. I’m not talking about FY26. FY25, there was huge advertising spends in Q4 of FY26. We were clear about it because summer had not set in. Summer set in actually on April 13th only. So therefore in Q4 in preparation, specifically ending end of February, March, these things were. This includes also many in shop promotions like in shop demonstrators, so on and so forth which we are stepping up Post the onset of summer season, see advertising happens in some measure for overall brand visibility.
And the real advertising for room air conditioner, including tactical is indeed a function of how the demand in the marketplace is. Again during the festival season last year we had to there was a GHC announcement and it was not picking up SONAM or subsequent period, we had to call it off. That’s how it works. But there is no income intent to stop our investments which is in the order of around 1 1/2% to 2% of our products business revenue. That’s what is advertising, brand building, marketing expenses that will continue depending on the demand.
If there is an extreme situation like that, we will do and it will not affect because if the summer itself has not set in and you go and keep advertising sale is not going to happen, but because you have not advertised despite that, it is not that your brand image is eroded. So that we are very conscious of that. The second question is connected with the weather. I told you April 13, the summer season and September settings and you have to it has taken off well from April 13th and obviously you have to wait for the dealer field inventory to get liquidated.
They had bought inventory in December because there was a energy level change post that they know the prices will keep going up and and they stocked up and indeed in February and March they would have bought it because they know the price increase have been announced and the new material that will go into the market will be at higher prices. So whether the secondary tertiary movement or whether it is primary pickup, it is now clear the function of how severe the summer will be and how long it will last.
The question here is another six weeks whether summer will be active. And as we speak the primary movement has commenced already in many markets and we will wait and see. So in one single sentence we are happy that the summer season has set in. We are not celebrating like it was 2024 summer. We have still two, three weeks to go to assess how it is going to pan out. And your third question is part and parcel of that. The function of the increase to cost to be passed on is again dependent on the demand in the market. Thank you.
Natasha Jain
Thank you, sir. All the best.
Operator
Thank you. Next question is from the line of Ravi Swaminathan from Aventus Park. Please go ahead.
Ravi Swaminathan
Hi sir. Thanks for taking my question. My first question is. Sorry to interrupt. Ravi,
Operator
Can you use your handset mode please? Your audio is not clear.
Ravi Swaminathan
Is it better now?
Operator
Are you on a Bluetooth device? Please use the handset.
Ravi Swaminathan
Yeah. Is it better now?
Operator
Yes. Please go ahead.
Ravi Swaminathan
Yeah. My first question is with respect to the price increase in air conditioners. How much amount of price increase we would have taken since January 1, including the BE norms and how much more needs to be taken to compensate for the raw material price increase that has been. That has happened.
B. Thiagarajan
We have stated this in many media interviews of mine. It will be there roughly around. It varies from SKUs to SKU. It is around 5% is the price increase on account of energy level change alone average subsequent to that till the April beginning it will be around 8% for the raw material price increase and the exchange rate all put together. So it should have been around 13% price increase. That is warranted. We would have taken until now. You know very well. Again I am repeating the inventory was enough.
The primary sale is beginning to pick up. So far whatever primary had happened we would have realized up to 8% out of 13 price increase 5 more percentage of increase will happen as the April, May, sorry, May, June billings are happening. That is the reality. You know, it may vary from model to model on the average. You can assume it to be so.
Ravi Swaminathan
And is it completely enough to cover the cost inflation which is there and protect the EBIT level margins for the cooling product segment?
B. Thiagarajan
13% will cover the desired margin levels.
Ravi Swaminathan
Okay, got it sir. And you had highlighted that there might be.
B. Thiagarajan
And here again it does not take into account going forward what cost increases will be there. Like what has happened in our post war is The Plastic petroleum based input cost. Like for example city in coalition. All those costs will go up.
Ravi Swaminathan
Got it. And with respect to the project business also in terms of raw material prices going up there some of the costs might be. Some of the projects might be fixed price contract. How to think about any margin impact that can happen in the next 12 months because of the raw material price increase and currency depreciation that has happened.
B. Thiagarajan
I don’t think we have any fixed price contract. Rarely we will be. It’s all covered for the price variation. Having said that, if you have delayed or the delay is attributable to us during the delayed period, price variation will not be applicable. I do not think we have any kind of an impact at the moment in terms of input material cost has gone up. See how it works is that you always assume that price variation will provide for something and there is some contingency that is available and so that is not the major concern.
Ravi Swaminathan
Thanks a lot.
Operator
Thank you. We’ll take our next question from the line of Rahul Agarwal from Ikigai Asset Please go ahead.
Rahul Agarwal
Good afternoon. Thank you for the opportunity sir. Three questions. Firstly on the international business, if you could just provide some color on what’s the one year outlook and a three year outlook in terms of new customer approvals and the growth. You see the revenue potential there. Second question was qualitatively if you could talk about the growth outlook for fiscal 27 on commercial AC, commercial ref and projects and third one on the balance sheet. Just wanted to know what’s changed for the payable number.
I’m assuming that there is a bit more inventory stocking and hence the creditors actually look like maybe you paid in advance and hence they dropped down considerably. Just you could explain that in terms of what’s the change there. That’s all from myself, thank you.
B. Thiagarajan
So the international. It is a wrong time to be talking about long term. You know honestly many trade deals are. They are taking off, they are in the verge of signing and huge uncertainties provide. All that I can say is that we have approval for quite a few products with quite a few of customers and these are connected with air to water or air to air heat pumps. As far as United States is concerned. You may have read already the US market is stagnant or it is growing for our customers. Correct. The H Vac market there is was doing not that great last year.
Now with many other economic factors there, that is likely to slow down. That is the information we have got. Having said that we are new entrant. Even If I sell 100 unit it is. It is a growth for us. It is an additional market. So the trial marketing or the validations and all that continue to go on today, that is not a very, very significant part of the business. But, but we have approvals, acceptance and even customer preferences for quite a few products for quite a few OEMs in these markets.
That’s where it is. Europe. It has been slow, it continues to be slow. But now with the new energy security the countries are are beginning to insist that the people should begin to use heat pumps rather than the boilers. That’s where we are now. We had mentioned repeatedly that it is a very important and critical portfolio for Blue Star. It may not contribute significantly to the revenue but in about three years, depending on how the global economy is going to to pan out, we should be beginning to grow that business significantly.
In all this, Bluestar is not entering with its own brand. Bluestar is not acquiring any brand from those markets. Bluestar is not setting up any joint ventures there. It is Bluestar making products for others as a CDM manufacturer. That is our strategy. And the second part, commercial refrigeration business again to a very large extent like quite a bit of cooling for frozen food, it is impacted by it is dominated by the ice cream segment and the last FY26 was a bad year. F16 27th. We have to wait and watch.
It all depends on how the ice cream retail network is expanding and that significantly impacts this business. Pharma or other sectors are very very minimum. They are not into fresh produce related like pack houses or vegetable fruit, fruit processing. We are not into that. Those are large EPC contracts in the modular cold room business or the modular refrigeration products. It is somewhat muted market. And in any case for you all we are talking about 35,000 crore plus room air conditioner market versus 5,000 crores of commercial refrigeration market which is addressed by Bluestar.
So this is one particular segment which has a huge growth potential but it is yet to grow. What is your third question?
Rahul Agarwal
Comment on the commercial AC and the project segment Outlook for growth Outlook on revenue for fiscal 27?
B. Thiagarajan
In commercial air conditioning again last year it was impacted by the multiple factors including GST in some way. The outlook continues to be around 8 to 10% kind of growth. And the growth is today driven predominantly by manufacturing sector. And in case of projects it is driven by manufacturing as well as the data center. In both these segments we are market leaders. We continue to do well. To give you a rough idea that the data center MEP part of it where we are leaders, we would estimate the market size to be somewhere around 3500 crores and we do a business of around 1000 crores there.
This is likely to more than double within three years. Going by the enquiries in hand and going by the order finalization speed that is there. So therefore that MEP part of that thousand crore has the potential to go to 3,000 crore which is three years. Roughly 15% of Bluestar’s revenue may be coming from data center MEP business alone. So that is the outlook. The sundry sector is that in manufacturing it is connected with semiconductor, EV battery, solar cells. These are the segments which require air conditioning and expert cooling solutions.
And the continue to do well there. And quite a bit of orders are under execution. Quite a bit of orders are on the anvil. And here again this will be next three to five years that is going to be growing tremendously. So both in commercial air conditioning and electromechanical projects while buildings or infra projects like airports, metro, these Are these will continue to happen? Very attractive. Part of that segment is attractive in the sense it is financing. There is no worry. Cash flow. There is no worry.
These are very fast track projects. Nine to ten months you have to complete. And these kind of projects are very attractive to us. This is where we will. Bluestar is not in having the complete range of data center cooling equipment. We are leaders in MEP part of it. We have a few chillers. But if you have to talk about the CDUs which are cooling distribution units cooling that particular space. We are on the lookout for a technology. We are discussing with the machine partners. But nothing material as of now. Thank you.
Rahul Agarwal
Just to clarify, you said…
Operator
Rahul, I request you to join back the queue please as we have participants waiting for their turn.
Rahul Agarwal
Okay. Thank you.
Operator
Thank you. Ladies and gentlemen, in order to ensure that management is able to answer queries from all participants, kindly restrict your questions to two at a time. We’ll take our next question from the line of Aniruddha Joshi from ICICI Securities. Please go ahead.
Aniruddha Joshi
Yeah. Thanks for the opportunity. Sir, if you can share any outlook for the air conditioner industry as well as Blue Star for FY27. Considering there was a. There is a extremely favorable base of FY26. Secondly, whether the excess trade schemes like free installation or higher enemy discounts for the trade. So whether all of them have been discontinued so. And at the same time commodity prices have increased. So considering all these things, what will be the outlook for margins as well? Question number two and last question.
In terms of now Bluestar has solid market share in air conditioners and in a way connect with dealer distributor manufacturing capability. So is there any potential to end? Is there any plan to enter other products in in a way either white goods or durables like washing machines, refrigerators or. Or any any other matter. For that matter. Because if AC penetration reaches a very good level in FY30 so what will be the key driver beyond that? I guess the seeding will have to be done now for the growth to be seen. Maybe after FY2930. Yeah, yeah. These are the questions.
B. Thiagarajan
Your first question is about industrial air conditioning.
Aniruddha Joshi
No, no, sir. Air conditioner industry itself. Overall RSC industry.
B. Thiagarajan
So the first of all room air conditioner industry. Given the penetration it will be the fastest growing market in the world. And I still maintain by 2030 it should more than double the CAGR at 18 to 20% should happen. There may be a year with lower growth. There may be year with very high growth. And one more summer season. May get washed out in the coming years. All that apart, the outlook is very, very encouraging. And this is for the growth of the industry. And what is today around perhaps FY26, let us say it is going to be 17.5 million units.
I will not be surprised. Many things happen and it ends up up with 40 to 50 million units by FY30. It has the potential it can happen. But what I am not very sure is whether it is an industry which given the number of players, the increasing competition and increasing investment in manufacturing capacity, whether it will provide that 8 to 9% of operating margin. So the question will be the margin will be under extreme pressure. It is again a function of how rapidly the demand builds up. And what is going to happen to the commodity prices, specifically copper and other electronic.
This is what is the thing that the industry players will have to look out for. Just because the market is growing, it is not necessary that the margin will expand. It will continue to be under pressure. That is the outlook for the industry. Commercial air conditioning industry is sedigur. It is a function of many infrastructure getting built there. The penetration level is higher. It is urban centric. But you see more and more tile 3, 4, 5 towns having air conditioned restaurant or air conditioned marriage halls or air conditioned hotels, hospitals, so on and so forth.
It will coincide with the construction cycle and the infrastructure development. And. And we are market leaders there. The competitive intensity is not that high like room air conditioner. But you do have the technology related changes, the product innovation cycle or the time it takes to develop those products like vrf. And today it is advanced, advancing very rapidly. Because energy efficiency requirements, reliability requirements, automation requirements are very high in that particular part.
Unlike United States, in India the residential air conditioning market size is very big. It is more than 35,000 crores. And still you are dealing with something like 5,500 crores market in commercial air conditioning. That’s where it is EPC part of the market is huge. It will continue to grow. But there then the question is there you are able to protect your margin. There you are able to protect your cash flows. That is what we are focused on. We are not chasing the market share. We have repeatedly stated this and where the expertise is paid for or you are getting sufficient returns for the expertise that you have built in that particular domain.
Today it is manufacturing and data centers and some other point of time. It may be something else, but it will continue to grow. Because these two sectors India is reinventing itself and it is attracting lot of investment. The margin outlook, given the Commodity prices. It is a wrong time to predict anything because when you are in adverse situation you swing to the other extreme. But it is bad. You don’t have any visibility at all. Whether it is a ting rage or whether it is the commodities. And as we speak they say that there will be huge shortage of electronics because of helium related issues.
So it is unfortunate that we are in that situation that you have to deal with quarter to quarter. And right now we are focused on how to ensure that our prices or our price realization is in line with the cost increase that has already taken place. And once this quarter ends there will be additional input cost increase. If the war is not ending, that’s where we are.
Aniruddha Joshi
Oh sure sir. This is very helpful. In the last session on
Operator
Join back the queue please.
Aniruddha Joshi
No, no. I had. I had already asked the question. The entry in possib other products like refrigerator was using.
B. Thiagarajan
We have as of date foreseeable future we don’t have any such plans at all. We will be focused on air conditioning and refrigeration. There will be geographical expansion which we have begun. And India itself is a very high growth market. We have no plans whatsoever to get into white coal.
Aniruddha Joshi
Okay, sure sir. Very helpful. Thanks.
Operator
Thank you. We’ll take our next question from the line of Sonali Sargaokar from Jeffries India. Please go ahead.
Sonali Salgaonkar
So thank you for the opportunity. So I have the following questions. Firstly, what is the inventory level in RACs right now versus the start of this year say January 26th. Secondly, the quantum of price hikes is definitely required to cover up the margins. But in your view do you think it will lead to a demand destruction industry wide not only limited to Blue Star. Thirdly, Your CapEx and FY27 outlook in terms of revenue or margins Please. Thank you.
B. Thiagarajan
The last part Nikhil will deal with the inventory level will be reasonable as of now the question is that the dealers have to begin stocking. So already March huge willing to play April 13 onwards it is selling in the secondary tertiary very well and my estimate estimate as on date if you. If you ask me it would have come to a reasonable level which means around 45 to 60 days of inventory should be there. But if the summer is active this. This 45 to 60 days of inventory should get exhausted even within 20 days of time.
That is how it should happen. So I do not think today the indication inventory of the manufacture company or Blue Star is an issue at all. Because it is locally manufactured you can regulate it in particular manner. The challenge is that to monitor how Much is moving out and how much will be the primary billing and how I will moderate the production. That’s where it is as of now. That is not the concern. The concern is connected with how the price is will be passed on to the consumers and I cannot talk about other brands.
In our case it is very important for us to pass on the increase. It is not that we operate with huge margins it is very important that the margins are in the order of again for the benefit of everyone I am saying the segment one we want to continue to maintain that 7 to 7.5% outlook. Segment two we want to maintain 8 to 8.5. That’s where it is now. At the same time we have to march towards our market share goal of 50 which is currently at around 14.25. So this is a function of how long the summer will be active how much price realization can be improved.
So this is a very critical period to judge that now the consumer demand will drop. It is again if the summer is active it’s not going to be as I have told you that let us say last year to this year 13% price increase but there is a 10% GST benefit. Actually the consumer is going to pay around 3% and that’s where we are. So I am not very sure there will be the offtake will be reduced because of this price increase. I am not seeing that. If the summer is going to be harsh and the issue will be due to the war let us say tomorrow the petroleum prices are increased or diesel prices are increased and the inflation peaks during this period sentiments may force the consumers not to spend.
That can happen. I am not able to comment on that But I know for sure that the consumer sentiments will dramatically change if say for example petrol prices are going up or diesel prices are going up. But this 3% net of GST increase may not pull down. Probably a 5 star buyer will end up buying a 3 star or somebody in high end 5 star may end up buying a normal 5 star and one may end up buying brand which has priced it cheaper that all that can happen. I don’t think they will postpone the purchase for this particular aspect.
Thank you. Sorry Nikhil about the balance sheet and capex.
Nikhil Sohoni
Yeah sure. So can you hear me?
Sonali Salgaonkar
Yes sir.
Nikhil Sohoni
Yeah yeah. So with regards to Capex see how the annual Capex can be anywhere in the region of around 250 to 350 crores. So that’s the normal spend that we have. And when I say this Capex it includes all type of capex that is the normal routine capex maintenance. Capex your investments in R D product development as well as whatever IT investments that will do, digital investment that we’ll be doing. So all of that will be in that region. As regards what what growth we can expect for the next year. FY27 I think it is too early to comment. You already heard of that. Summer is just set in and we would like to wait and watch because it entirely depends on how the summer actually plays out to predict for the year.
Sonali Salgaonkar
And the margin outlook?
Nikhil Sohoni
The margin outlook. What we have said already again that you know, given the cost pressures that we are having in terms of commodity pressures that are there and the limited kind of wave in which price increases can take place, there is going to be margin pressure this year. The headwinds are going to be there.
Sonali Salgaonkar
Got it, sir. Very helpful. Thank you. And all the best to the team.
Operator
Thank you. Next question is from the line of Aditya Bhartia from Investec. Please go ahead.
Aditya Bhartia
Hi. Hi. Good afternoon sir. So given that you pointed out out of 13% kind of a price increase that was required, around 8% has been taken so far. Does that mean that in Q1 we are likely to have margin pressure and the margins hopefully then recover through the course of the year? If commodity costs cool off and if commodity costs stay where they are then the impact of higher plastic pricing and other crude derivatives is yet to hit us. That starts hitting us from quarter two onwards.
B. Thiagarajan
I have stated very clearly the additional price increase will has come into effect in May itself. We have to pass it on. It is a function of the secondary demand. Then the dealers will have to buy. That’s where we are. And we are also stating that there will be margin pressure throughout the year. And unless and until something dramatically changes in Q2 or Q3 we do not know. And we are still maintaining that 8 to 8.5 is the outlook for the market.
Aditya Bhartia
Sure sir. So we are still aiming for 8 to 8.5% kind of UCP margins in this year. In which case
B. Thiagarajan
As we stand today.
Aditya Bhartia
Understood, Understood. So they are cost pressures but we feel fairly confident that we should be able to pass those on. Is that understanding correct?
B. Thiagarajan
That’s right. In a good summary here it should be 8.5 to 9. For your information we are saying 8 to 8.5 should be the thing. In my very remarks or to the first question I have stated the market will continue to grow. The margins will be continuing to be under pressure. 32030 and I am not seeing that this 8 to 8.5 continuing as the market expands further and further.
Aditya Bhartia
Sure.
B. Thiagarajan
As far as this financial aid is concerned, as we see Today, we believe 8 to 8.5 is possible.
Aditya Bhartia
Understood, understood. And all the costs that have gone up since the war broke out, those costs are yet to get reflected in this 13 kind of price increase that we spoke about. Is that what you would? Yeah, understood. So plastic Pricing further goes up.
B. Thiagarajan
Sure, sure.
Aditya Bhartia
That’s clear, sir. Thank you so much.
Operator
Thank you. We’ll take our next question from the line of Pulkit Patni from Goldman Sachs. Please go ahead.
Pulkit Patni
So, thank you for taking my question. Just one question. You spoke about 3,500 crore cooling opportunity right now for data centers. Out of it you can do thousand crore. As a MEP contractor, can you highlight of those thousand crore. How much equipment can we source internally?
B. Thiagarajan
These are NEP contract equipment. If you are talking about cooling equipment, it will not be there. There is. It will be negligible. Market is completely separate.
Pulkit Patni
So basically as a contractor we can do about thousand. I mean we are doing thousand crore which is a third of the…
B. Thiagarajan
Those material will be something like a bus deck or sheet metal insulation, such things. It is not connected with cooling.
Pulkit Patni
Okay, very clear, sir. Thank you so much.
B. Thiagarajan
Thank you.
Operator
Thank you. Next question is from the line of Renu Beit from IIFL Capital. Please go ahead.
Renu Baid
Yeah, hi. Thank you for the opportunity. Sir. Two questions from my side. First on the RAC bill for the unit recording, can you help us with the volume number for fiscal 26 and at what utilization levels are sitting at the factory. And second is on the MEP portion of the business where you highlighted data centers and manufacturing as key groups markets. These are also sectors where typically customers or one must assume the pricing environment is relatively favorable. So just trying to understand in these segments, especially just underground of market are likely to double up in the next two to three, three years.
Any reason why we are still expecting margins to be at seven seven and a half percent levels only and not expecting the project margins to improve as the quality of projects that we’re executing on the core H VAC side or the MEP side are also improving?
B. Thiagarajan
The last part I’ll answer It is not. Our portfolio is only manufacturing and data center. We do have buildings, we do have infra projects. It’s a blended margin we are talking about. Your other question is that my estimate is that the market would have been anyway, we don’t know the final numbers of the market. It should be somewhere around 15.5 million or something like that. And we have always said that in the volume terms we will be somewhere around some 11% of the market. We will be. Now as far as the segment 2 margins are concerned, I am saying that we are at a juncture where we have to necessarily pass through the cost increase.
If it is not passed on now, it will be even more difficult later because this is the time the increase will look like only 3% over last year. The more you delay, it will look like that we are increasing over. Correct. There is a justifiable reason for that, I suppose. I have answered all your questions.
Renu Baid
Sure. My perspective was that its data center is growing at almost 40 50% CAGR for you. And its share in the project business will increase from current 15% levels to close to 20 25% three years out. So should that not have a positive tail effect on the segment profitability, when we look at the blended numbers for the company
B. Thiagarajan
Within the segment, it is at 33% within the segment. Okay. Data center I mentioned if Blue Stars revenue will be 20,000 crore, it will be 3,000 crore. In that context, 15% of the company’s revenue could be so. Don’t, do not, do not mix up that statement with this. Within the projects business it is. There is. There are data centers, there are factories, there are buildings, there are infra. Now in that particular business we have been operating between 7 to 7.5%. I will not at this juncture say that it is going to become some 8 to 8.5 or 8.69.
It is indeed. It is true that the data center market will grow and that part of the business will be significant within that segment. And we are not making a statement. I am not going to be in buildings or I am not going to be in other verticals. So as of now that is all the guidance that we are giving.
Renu Baid
Got it? Got it. And the average utilization level for our rhe facilities.
B. Thiagarajan
I want to remind that CCT Himachal is built in such a manner that it is operating at full capacity. Okay. The whatever little we can improve, we keep improving. But otherwise it is operating at 100% capacity which is somewhere around 6.5 lakh units. The balance out of our something like 1.6 million comes from CCT factory. Not exactly 1.6. It will be. It will be something like. It is not 1 lakh. It will be somewhere around 9 lakh unit. Because we also buy window air conditioner and few SKUs from outside.
TCT Is built the module of 3 lakh. So 3 lakh became 6 lakh 6 lakhs became 9 lakhs. This 9 can become 12 and therefore this capacity is added in line with the market requirement. Today if we are saying this year the growth will be good, it will be operating close to 100% capacity. Then we will be deciding by October to expand the one more line. And the factory is built in such a manner. The building is available, it is assembly line that we need to invest what we wait for invest. Last year we said that we will postpone and look at it in October. So in October we will go ahead and take that call. So you can. Therefore the answer is it is operating close to 100% capacity in room air conditioners or commercial refrigeration.
Renu Baid
Perfect. Thank you and best wishes. Thank you.
Operator
Thank you. Next question is from the line of Achal Lohare from Nuvama Institutional Equities. Please go ahead.
Achal Lohade
Yeah, good afternoon, sir. Thank you for the opportunity. Just wanted a clarification with respect to the industry size. Did you mention from a fiscal year FY26 perspective the 14 and a half million pieces for the industry, sir?
B. Thiagarajan
No, I didn’t say FY26 will be somewhere around 15 million only. And I think it should be 17.5 for FY27. I also mentioned FY26 final figure. I do not know what it is. It should be. In my view it should be close to 14.75 or 14.5 to 14.75 because it would have degrown only by around 5% in volume over the previous year.
Achal Lohade
And our market share is 11.25%. Like what you said in value to. In volume terms and value terms 14.25. Have I understood right, sir?
B. Thiagarajan
That is right.
Achal Lohade
Got it. The second question I had was with respect to, you know, given where we are currently, you know, what is it you said the season actually started only on 13th of April. Properly what is it typically when it starts according to you? I mean, what kind of delay we have had seen and do you think the way the weather is progressing we could have really an extended summer season particularly for South.
B. Thiagarajan
It has happened in the past like that. The question is whether patterns have completely changed. And so it is just impossible. You have to keep your fingers crossed. And one good news is that the forecast one week prior to that is becoming much more accurate. And the delayed monsoon means it may be in. So January first week it is setting in by January. Sorry, instead of June first week it is setting in by June 15th. It’s not that it is going to get delayed to July or something like that. And again I am stating if it is going to be a disastrous monsoon, it will have other consequences actually.
So it is again not worth it praying for that as well. All that one should look forward to is rest of May and first half of June if the summer is active and perhaps in few pockets of north till June end. That is good enough.
Achal Lohade
Understood, Understood. And just a clarification on the 4Q UCP margins. Fair to say that there is an element of the provision reversals and the lower cost which has improved the margin.
B. Thiagarajan
Provision reversal. I am not able to follow
Achal Lohade
Labor Court provision. The final assessment and the reversal of that 17, 18 crores.
B. Thiagarajan
So that is in the exceptional item. Provision was made in the exceptional item Provision is taken back in exceptional item. So there is no provisions out there.
Achal Lohade
Understood. Thanks for the clarification, sir. Thank you so much.
Nikhil Sohoni
That does not go into business also.
Achal Lohade
Got it. Got it, sir. No, thank you so much.
Operator
Thank you. We’ll take a next question from the line of Karan Gupta from Acmel. Please go ahead. Taran.
Karan Gupta
Yeah, hello. Am I audible?
Operator
Yes, please go ahead.
Karan Gupta
Yeah. Most of the questions on MEP side has been answered. But just want some clarification on that. In overall data center project, as you said, we are providing the chillers and for the CDU side we are doing some partnership. So how much is the in house product and how much it is the outsourcing in the MEP side?
B. Thiagarajan
So chiller, as you say, we are the market leader in MEP of data centers. We do not have any cooling equipment at all. It is electrical or mechanical equipment. Okay. Cooling equipment is bought always separately by a data center provider. Okay. In that cooling equipment business, we do not have the complete range. We have few chillers, we do not have CDUs. We do not have fan wall units for example. These. We are in the process of developing or making partnerships. The MEP part of it is broadly the electrical mechanical actuary. Again, main electrical equipment will be bought by them separately.
Karan Gupta
Okay. Okay. And okay. And what about the order book size in that segment and for the data center?
B. Thiagarajan
I told you that we estimate the market to be anywhere between 3000 to 4000 and our order book will be somewhere around 1500 crores. 51. Yeah. I’m saying at some at any given point of time you are talking about order book, right?
Karan Gupta
Yes, yes.
B. Thiagarajan
Broadly translate into annual revenue of around thousand. But the enquiry inflow is very huge, very big numbers.
Karan Gupta
Okay, sure. Thank you.
Operator
Thank you. Next question is from the line of KUR from ICICI Prudential Life Insurance. Please go ahead.
Keyur Pandya
Thank you. One question that because of the stocking that you mentioned in quarter four, should we expect lag for at least in quarter one between the primary sales and secondary sales? Looking at the inventory situation.
B. Thiagarajan
I don’t think so. The April statement may be true. The primary said is.
Operator
Kayur, can you please mute your line?
Keyur Pandya
Sure.
B. Thiagarajan
Your statement may be true for April. You know, generally April 1st week itself it should start is dimmed and it began only in 5-1-20
Keyur Pandya
Understood. Thanks a lot. All the best.
Operator
Thank you. Next question is from the line of Manish Raj from Canada hsbc. Please go ahead.
Manish Raj
Thank you for the opportunity. Just one question. If the summer progresses as the way it is progressing right now, what is the kind of primary sales that we can expect on the last year’s wage base? If you could give us a growth number.
B. Thiagarajan
I’ve always stated that the given there is price increase of. I’m saying average. You take at least 10% over last year. The good performance would mean anywhere between 25 to 30% over last year.
Manish Raj
And will that result? Will that result? Yes.
B. Thiagarajan
So I’m saying that over last year Q1 for the industry, if it is a 25% growth, that means it is a very good summer. That’s what one will have to imagine. And imagine last year summer was not a great summer. 25% because in that 15% is the real growth. Some 10% is arising out of the price. That’s all it is. And it looks like there is a probability that it will happen again. It’s a function of summer.
Manish Raj
Just adding to that part. If it pans out as the way the expectation is, then at the end of Q1 are we going to be sitting on a lower inventory versus what we were sitting last year? Is that a thought process, right?
B. Thiagarajan
Yes, yes. Inventory adjustment. Even last year was not that difficult. The problem last year was that it was compounded by one factor after the other factor. So you are starting with an assumption there will be shortage of raw material and therefore you have to produce. Then the weather forecast says that weather is going to to become hotter by April 15. April 15 it says May will become hotter and it continued like that. Then the next part of it next part of it is the festival season was completely dampened.
Then you got into energy level change. What will happen to old inventory, new inventory? So that those are all the issues there. But I am saying inventory management of the industry and blueser will be far better this year. Because the moment the summer has not set in. People have moderated the production and they know very well that we have to wait for a lag in the primary sale. It already happened and now they will be moderating what is the production and what is the sale that is happening and I don’t think that will be the concern at all.
I am again repeating the issue is be how to pass on the price increase fully now and how to pass on the price increase post the season. There will be war related increase in cost. So this year will be about margins rather than inventory.
Manish Raj
Thank you sir.
Operator
Thank you ladies and gentlemen. We’ll take that as the last question for today. I now hand the conference over to Mr. Nikhil so for closing comments, over to you sir.
Nikhil Sohoni
Thank you. 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 of your questions are not fully answered and we’ll be happy to provide you additional details by email or in person. Thanks.
Operator
Thank you members of the management team, on behalf of Blue Star Limited. That concludes this conference. Thank you for joining us and you may now disconnect your lines.