Blue Star sees no Q2 margin recovery as raw material costs bite

Mumbai-based home appliances firm Blue Star expects margin pressure to continue in the July-September 2026 quarter as higher raw material costs outweigh the benefit of price increases. The situation may begin easing towards the end of the third quarter through product redesign and material substitution, Managing Director B Thiagarajan said.

"The summer season was good, though it was short, and we couldn't deliver in terms of margins. It was a very poor margin of around 3% in our unitary cooling product segment, attributable to the raw material price increase as well as the exchange rate. So, we thought that Q2 it should become better. It is not the case. It continues to be a painful quarter," he said.

The company has raised prices twice, but Thiagarajan said it has still been unable to fully pass on the higher costs to customers.

Blue Star expects minor margin improvement in the room air-conditioning business in the third quarter, with its full year goal of taking margins to around 6.5% by the fourth quarter. New product launches towards the end of the third and fourth quarters will also help.

Despite the margin pressure, Thiagarajan said demand has remained better than expected.

Blue Star shares were trading at ₹1,483 as of 10:45 am on the NSE. The company, which has a current market capitalisation of ₹30,204.81 crore, has seen its shares decline more than 22% over the last year.

 

AC industry to remain competitive

Thiagarajan said competition in the room air-conditioner market has increased as new manufacturing capacity has come up under the production-linked incentive (PLI) scheme.

He expects the industry to grow by more than 25% this financial year, with total sales reaching 17.5-18 million units. By 2030, he expects the market to cross 30 million units, supported largely by first-time buyers.

However, he cautioned that margins across the industry could remain under pressure as manufacturing capacity continues to exceed market demand.

Data center business offers growth

While consumer cooling margins remain under pressure, Thiagarajan said Blue Star's business serving data centers continues to grow.

The company expects order inflows of more than ₹3,000 crore from its mechanical, electrical and plumbing (MEP) business this financial year, rising to ₹6,000 crore by the financial year 2028-29 (FY29).

Revenue from the segment is projected to increase from ₹1,500 crore this year to around ₹4,000 crore by FY29, accounting for nearly 20% of Blue Star's overall revenue, he said.

Blue Star is also preparing to enter the liquid cooling segment for data centers through a technology partnership.

"We are open to a number of things. We have been talking to many players," Thiagarajan said, adding that the company is evaluating collaborations with global firms looking to enter the Indian market.

For the full interview, watch the accompanying video



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