Blue Star says May started strong, eyes better FY27 despite cost pressure

Vir S Advani, Chairman and Managing Director of Blue Star, said the company expects stronger business performance in the financial year 2026-27 (FY27) even as rising raw material costs continue to pressure margins in its room air-conditioner business.

The unitary cooling products (UCP) business, Advani said, has managed to recover from a weak start to 2025-26 (FY26) caused by an extended winter and delayed summer season.

Blue Star reported flat revenue growth in the January-March 2026 quarter due to a delayed summer. However, he said demand improved sharply from April onwards as temperatures rose across the country.

The EBIT (earnings before interest and tax) margin for the UCP business stood at 8.2% in FY26, while FY27 margins are expected to remain in the 7.5% to 8% range due to higher costs of copper, aluminium and steel.

The company also expects stronger seasonal demand if higher temperatures continue through June, especially after inventory levels across the industry started easing following strong tertiary sales in April and May.

Blue Star shares were trading over 2% down on the NSE at 11.53 am. The stock has gained more than 14% over the last month. Its current market capitalisation is ₹36,331.10 crore.

These are the edited excerpts of the interview.Q: Let's start off with the largest part of your business, which is the UCP business. Now the margins expanded. That's great. Looks like some costs have been pushed down, and you all have done some cost efficiency measures as well, which seems to have played out. So give us a couple of details. The revenue growth is only 1%. Why was that? Have you lost some market share? And on margins, what's the sustainable number for the UCP business? Please go ahead.

A: Yes, you're right. It was a mixed quarter, but I think better than expected, honestly. In the UCP business, you remember how the year started with a minus 20% plus sort of hit to the top line because of the washed-out summer, but we had mentioned at the beginning of the year that the aim would be to bring back revenue to a flat level. So, for the full year to be at the same level as FY25. We fell short of that full year. We're at -5%.

However, if you look at the fourth quarter, you'll see a strong recovery there. Q4 of FY25 was a very big quarter for us. Of course, we expected to grow faster in Q4. We are only able to maintain a flat growth. That was because the onset of the summer was later than expected. In March, there was not much of a summer around India. There were actually rains. That, of course, has changed in April, but for last quarter, revenue flat was better than we expected given the weather.

For the full interview, watch the accompanying video

And as far as the profitability is concerned, the EBIT did expand due to two reasons. One is, of course, we took price increases because of costs going up, but equally, we were able to cut operating expenses.

So of course, we may not be able to sustain a 10.4% EBIT in the new year because costs have gone up further, but we're still optimistic that FY27 will be stronger than FY26.

Q: So, on UCP then, what would you like to guide in terms of growth, and also, if 10.4% is not sustainable, then what's the number you're looking at? And also the other query, with regard to market share, have you lost a little bit of market share?A: So as far as market share is concerned - for the full year we have gained market share by about half a percent. So, we are up to 14.25% now. So, it was a better year than expected on market share. Even for the quarter, we held our market share in spite of us raising prices and others delaying the price increase. So, in Q4, in spite of price increases, we were able to hold on to our market share, which is encouraging.

For the new year, full-year EBIT margin for FY26 was 8.2%. We're expecting it to be at about 7.5-8% in FY27, largely on the count of significant cost increases that you're aware of.

Q: Could you give us a sense of how the 40 days of this quarter April-June compares to 40 days a year ago?

A: So, the 40 days, it's a mixed situation. The first two, three weeks of the financial year started slow, while, of course, the summer set in by about the 15th or so of April. What has happened is tertiary movements have been very strong. So that's extremely encouraging. You do know that coming into April, there was a glut of inventory in the field, in the entire industry. So, we are very happy to see that tertiary sales are moving well, which means that inventory is getting cleared out.

Primary sales were a little soft in April, but May has started off very strong. So, overall, Q1 should be a lot better than Q1 of last year, as long as, of course, the summer continues to hold. May is looking positive. And if we're lucky, if the summer holds out till the middle of June, then it should be a good quarter.

Q: It's expected to be a below-normal monsoon this time around. So maybe perhaps we'll deal with heat, and we need cooling, most definitely. So maybe a bit of a bump for AC makers in that sense.

A: We hope so.

Q: The other thing, of course, is the input price rise. We covered margins and what you expect. But have you taken price increases? Will you have to take price increases?

A: We have already - usually we're the first in the industry to take price increases, and we've done that once again. So just to put it in context, we had a BEE rating table change that you're aware of from January 1, where the efficiency went up. Because of that, cost went up by about 5%.

We did increase prices because of that, and new products went into the market. In addition to that, there was an 8% increase in input cost, largely around copper, aluminium and steel, that we have now passed on to the market partially. So Q4 was without that increase. From April, we have passed that increase. Of course, we're not able to increase prices by 13% — five plus eight — but we've been able to increase prices by about 8% to 9%, and demand is still strong.

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