On exports - where are you in the journey from an SKU approval perspective?
Thiagarajan said three customers have products approved in the decarbonization area and material lifting has commenced, but the global trade uncertainty since January is constraining scale-up. Inquiries and sample requests are at record levels but conversion to orders is delayed by OEMs trying to secure supply chains while waiting for US-India and US-China deals - he expects another year of wait-and-watch before clarity.
What is the mix of primary sales between April, May and June for the industry?
Thiagarajan said the split is erratic and unpredictable but historically April-May-June together account for around 45% of total annual sales.
Given peers have backward integrated with massive capacities and a tepid start to summer with high channel inventory plus the BEE rating change due in 7-8 months, will the rest of FY26 see pressure on volumes and lack of pricing advantage?
Thiagarajan said the industry is mature now thanks to Make in India and inventory issues will correct quickly - he does not see it as a problem unlike pre-2021 when LCs locked in import shipments. He cited prior precedents (FY24 Q1 was just 2% growth but full year ended at 20%) and said the energy label change should not be an issue since production for those products has not begun and finished goods inventory will be cleared. He remains hopeful for May-June recovery but flagged disappointment if rains persist.
On VRF in Commercial AC - given continuous R&D is required and Blue Star already developed indigenous technology a year back, will there be huge R&D spends and could margins be impacted?
Thiagarajan listed five categories of R&D - portfolio gap closure, cost engineering for margin improvement, regulatory changes (energy label/refrigerant), digital/AI for performance and efficiency, and backward/vertical integration decisions. He said Blue Star plans 1.5-2% of revenue invested in R&D as a steady-state guideline since they cannot rely on a global headquarters for technology. This level of investment is essential to compete with multinationals.
On the EPR side, can you quantify how much provision was taken last year and what is the expected increase on that base?
Thiagarajan explained the recycling rate tripled from Rs. 9/kg to Rs. 23/kg. For Blue Star, the EPR cost was approximately Rs. 10 Cr last year and will rise to about Rs. 30 Cr in the coming year. The rate increase came mid-year last year, and the differential has already been provided for.
Is the Rs. 9 to Rs. 23 per kg rate retrospective or for fresh material?
Thiagarajan confirmed the new rate applies to fresh material only and came into effect mid last year - this is the rate increase being contested by industry.
Can you give qualitative outlook for Commercial AC, Commercial Refrigeration and Projects for next year, plus margin levers for Segment-I and Segment-II - do you see further expansion and is it organic or effort-driven?
Thiagarajan cited an EY/CII report estimating 19% CAGR for Room ACs through 2030 and Commercial AC at 12-12.5% CAGR, with Commercial Refrigeration potentially growing 30% given low penetration and quick commerce demand. On margins, he guided FY26 Segment-I at 7.5% and Segment-II at 8.5% with an attempt toward 9%, while flagging that significant investments in distribution, branding, in-shop demonstrators, and consumer finance costs limit dramatic margin expansion in this growth phase.
Should we assume that whatever growth rates you mentioned, Blue Star will be gaining market share?
Thiagarajan confirmed the goal is to grow faster than the market. Blue Star was unhappy with Q1 FY25 RAC where they stocked out and did not gain share, but Q3-Q4 delivered the 100 bps share gain. The stated target is to reach 15% market share quickly through distribution and branding investments.
On MEP business - which segments would have higher than median margins and which lower?
Thiagarajan explained higher margins come from projects with higher equipment content, shorter 12-18 month completion periods, and built-in price variation clauses. Manufacturing and data center projects typically have above-average margins due to certain completion periods, while infrastructure projects like metro rail or substations face 6-12 month delays that compress margins.
Do weather-related issues impact in the medium term, and do organized players like Blue Star gain share from smaller/unorganized players in such periods? Also share Commercial Refrigeration market size and Blue Star's market share trends.
Thiagarajan said weather doesn't create medium or long-term impact since corrections happen quickly, and in his 45-year career he has not seen two consecutive disappointing summers - he expects May-June to bounce back. He noted smaller players are now mature so they are not disproportionately impacted, and only employee variable pay/sales incentives feel pressure during weak years.
What is Blue Star's market share in Commercial Refrigeration?
Thiagarajan said Blue Star holds close to 31% market share in deep freezers (chest freezers, glass top, hard top, water cooler, negative temp storage) and 32% in modular cold rooms/walk-in coolers. Water cooler leadership is also held. The drag last year was regulatory changes restricting Chinese imports - indigenized products are not yet as price-competitive as Chinese imports were, which is squeezing margins as customers adjust to higher local pricing.
On RAC and Commercial Refrigeration - where are you on backward integration in terms of in-house, third-party and imported sourcing at end of FY25, and how will this change in next 2-3 years given government push to indigenize?
Thiagarajan walked through five critical components: refrigerants (will not manufacture, working with industry on R32 capacity), copper tubes (Hindalco MOU signed plus Adani and MedTube setting up domestic capacity), electronics (will keep PCB assembly outsourced to EMS players, focus on IP/R&D), motors (BLDC ecosystem fully developed via auto industry), and compressors (multiple options including multinational plants in India, GMCC/Highly expansions, CKD assembly, with internal compressor design program in early stages). He said Blue Star is fully secured till end of summer 2026.
By FY27-28, will everything except compressors be India-based to a very large extent?
Thiagarajan confirmed that by FY27, all critical components except compressors will be largely India-based.
On the 15-20% April industry decline you mentioned - is that primary or secondary sales? If secondary, would primary have fallen sharper given high channel inventory?
Thiagarajan said visibility is mainly to primary sales with limited secondary sale data from stores. He confirmed opening inventory was higher than it should have been due to compressor shortage fears triggering dealer stocking. For Blue Star, both primary and secondary sales were up 5%, well below the internal expectation of 30% but not de-grown - last April Blue Star itself was 79% higher than the previous April.
Given the industry is operating with higher-than-usual compressor inventory, what implication does a weak summer have on the compressor scenario?
Thiagarajan said a weak summer is actually beneficial for compressor sourcing since players don't need to overpay for short-supply units. With volatile exchange rates and ocean freight along with potential logistic disruptions, having three to four months of additional compressor inventory is a positive.
Have you taken any price hikes in Q4 and will muted demand impact the industry's ability to take pricing actions despite supply chain disruptions?
Thiagarajan said the principle is to pass through raw material and FX-driven cost increases to consumers gradually - Blue Star implemented a price hike effective January coinciding with new model launches and another hike in early April. He said the industry is not yet desperate enough to discount given the 8-9% margin profile, though some schemes may emerge to defend market share if demand stays weak.
What is the quantum of price increases in April and the cumulative YTD?
Thiagarajan said Blue Star took a 3-4% price increase in January and a further 4-5% effective April 1.
Has the price increase impacted demand so far?
Thiagarajan said Q4 was exceptionally strong with no demand impact from the January hike, though it did not translate to margin expansion since input costs had also gone up. He said it is too early to read the April hike given only one month with 5% growth.
Will the volume lost in April come back in May or June?
Thiagarajan said no one knows since sentiments have changed dramatically due to border tensions, US trade war impacts on IT jobs and South India migration aspirations. He revised his FY26 growth guidance for Blue Star down from 25-30% to 10-15% (with 20% only if extremely lucky), since one month is already gone.
What is the South India mix for the industry and for Blue Star, and did South see a 25-30% drop in April?
Thiagarajan estimated industry South mix at roughly 30%, and Blue Star's South mix is closer to 40% given over 20% market share in several Southern markets. He said Blue Star's 5% growth was supported by Southern markets, while the industry's 15-20% all-India drop was likely heavier in South given early summer onset in Kerala and Tamil Nadu - North India can still recover through July.
On data center liquid cooling - are you present or planning to foray, and what is the opportunity size and margin profile?
Thiagarajan said Blue Star is a leading MEP player for data centers (mechanical, electrical, plumbing) and a manufacturer of data center chillers, expanding the chiller range. Liquid cooling has not penetrated India significantly yet and Blue Star does not currently have it, but is in talks with overseas players for technology access.