Ladies and gentlemen, good afternoon, and welcome to Blue Star Limited Q1 FY 2025 earnings conference call. We have with us today from the management, Mr. B. Thiagarajan, Managing Director, Blue Star Limited, and Mr. Nikhil Sohoni, Group Chief Financial Officer, Blue Star 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 touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. B. Thiagarajan. Thank you, and over to you, sir.
Thank you. Good afternoon, ladies and gentlemen. It's a pleasure to address you today as a part of the earnings call. I have with me, Mr. Nikhil Sohoni. Of course, he is joining from Singapore today. You might have seen the press release, as well as other announcements shared with the stock exchanges, including the AGM speech of my colleague, Mr. Vir S. Advani. So you might have seen that the results are once again an excellent one, this time supported by a very very hard summer season. B2B as well as B2C businesses have done well. We have done well in terms of the balance sheet items as well. The order book has been good, and the margins have improved.
Of course, today, Mr. Nikhil Sohoni will take you through the highlights for the quarter ended June 30, 2024. We will also share with you the outlook for the coming quarter. From my side, we have interacted individually, collectively, over the past six months. You have seen my television interviews and other interactions wherever it is available in the public domain. The outlook is positive. As I had shared last time, it is a golden period for the Indian air conditioning and refrigeration industry.
We are the fastest growing market in the world, and we are, we are, as far as room air conditioner is concerned, I think, and I continue to maintain, that, by 2045, we can overtake China in terms of market size. The supply chain constraints continue in the same way. It's due to different reasons, which you are all aware of, and, domestic supply chain has been improving steadily. There are three items which many of you keep asking. One is connected with copper. It's likely to improve, in about six months' time. Till then, we are imports dependent.
Compressors, we continue to source from outside and from domestic manufacturers as well as international companies, and this is likely to be getting resolved only after around 18 months of time. This is the—it's true for every player in the industry. The third item is connected with the electronics, and again, domestic supply chain is improving. There is a transition that is happening. In other words, hybrid sourcing goes on. The costs are coming down as of now, and due to various measures. One is connected with the scale. Second is connected with value engineering. The third is connected with the indigenization that is happening and the global commodity prices.
But having said all this, right now, the geopolitical situation across the world and, specifically the developments in the Middle East region, calls for extreme caution. It's a matter of concern. Things can dramatically change, but we continue to remain optimistic, and I suppose India will navigate through this crisis, which is likely to be lasting for about six months of time. That's our understanding at the moment. We continue to pursue our basic fundamentals. Number one is connected with growing faster than the market, building strong fundamentals by investing adequately in research and development, looking out for improvements in margins through multiple ways, including supply chain effectiveness and discipline in terms of capital allocation, whether it is CapEx or working capital management.
In terms of booking large orders for B2B businesses, like projects, our focus will continue to be look for the free cash flows and profitability rather than market share. There is one important element alone I'll highlight, preempting you know the it may come up in the Q&A so that we can be out of this. Two important points. One is connected with the segment one margin. It is very high, basically, because of the mix of our own manufactured products in packaged air conditioning. So as you're aware, it is electromechanical projects and packaged air conditioning, and we where we have VRF systems, chillers, and packaged air conditioners, there are significantly high value orders for the equipment executed in the quarter.
That's why the margin for that, for this quarter for that segment is very high. The second one I would like to preempt is that we maintained that the growth will be somewhere around 25%-30% in the beginning of the quarter. It was increased to 30%-35%, but in real life, we witnessed some 40% growth in March last week itself. We exceeded the expectations for the Q4 FY 2024 results. In Q1, April, the market grew by some 70%. Again, in May, 70%. June only it came down to somewhere around 10%-15%. So there was a chaos in managing the demand versus supply. At the end, you know the figures.
We, we have delivered much more than what we planned for. There have been questions as to what could be the revenue we would have lost because we have not planned for. I don't think one will ever plan for a 50%-60% growth at all. That would have been a futile exercise while keeping the supply chain flexible. So a 25%-30% growth to 50%-60% growth could be managed with great difficulty. Still, if we would have had material, we would have sold. Our estimate is we would have done somewhere around INR 250 crore worth of revenue, and perhaps INR 20 crore-INR 25 crore worth of PBT, we would have done more. But that, that's only for an academic interest, what would have been. It was an unprecedented summer.
I don't think that every now and then you can expect that kind of situation, especially this summer is the one which is following a very disappointing summer season of 2023. So with that, I will hand over to Mr. Nikhil Sohoni for his opening remarks. Thank you.
Thank you, Mr. Thiagarajan. Good afternoon, ladies and gentlemen. This is Nikhil Sohoni, and I will provide you an overview of the results of Blue Star Limited for quarter ended June 2024. We stepped into FY 2025 on a strong note with an outstanding business performance in first quarter and a healthy carry-forward order book to be executed in coming quarters. Robust demand for our diversified product portfolio across segments and focused cost management helped us achieve impressive revenue and profit growth during this quarter. Financial highlights for the quarter ended June 30, 2024, on a consolidated basis, are summarized as follows: Revenue from operations for Q1 FY 2025 grew by 28.7% to INR 2,865.37 crore, as compared to INR 2,226 crore in Q1 of last year.
EBITDA, excluding other income for Q1 FY 2025, improved to INR 237.83 crore, an EBITDA margin of 8.3% of revenue, as compared to INR 145 crore and EBITDA margin of 6.5% of revenue in Q1 FY 2024. PBT before exceptional items grew 98.9% to INR 226.02 crore in Q1 FY 2025, as compared to INR 113.61 crore in Q1 FY 2024. Tax expense for Q1 FY 2025 was INR 57.26 crore as compared to INR 30.24 crore in Q1 FY 2024. Net profit for Q1 FY 2025 grew to INR 168.76 crore as compared to INR 83.37 crore in Q1 FY 2024.
Carry Forward Order Book as of June 30, 2024, grew by 13.5% to INR 6,084.69 crore, as compared to INR 5,359 crore as of June 30, 2023. Carry Forward Order Book as of March 31, 2024, stood at INR 5,697.63 crore. Capital Employed as of June 30, 2024, increased to INR 1,737.88 crore as compared to INR 1,700 crore as of June 30, 2023. We continue to invest in manufacturing capacity, research and development, and digitalization initiatives. Strong operating performance aided the net cash position of INR 1,042.87 crore as on June 30, 2024, as compared to a net borrowing of INR 283.46 crore.
The net equity ratio of 0.20 on a net basis as of June 30, 2023. Business highlights for Q1 FY 2025. Coming to segment one, which is Electromechanical Projects and Commercial Air Conditioning Systems. Segment one revenue grew 9.5% to INR 1,038.99 crore in Q1 of FY 2025 as compared to INR 949.12 crore in Q1 of FY 2024. Segment result was INR 103 crore, which was 9.9% of revenue in the current quarter, FY 2025, as compared to INR 66.62 crore, which was 7% of revenue in Q1 of FY 2024. Order inflow for the quarter was INR 1,466.03 crore in Q1 FY 2025, as compared to INR 66.62 crore in Q1 of FY 2024.
Electromechanical Projects business, despite limited traction in commercial building sector, we experienced robust bookings from the factories and data center sectors, majorly driven by ongoing government efforts to encourage manufacturing investments through PLI initiatives. We also witnessed an uptick in inquiries from healthcare and retail sectors. Additionally, inflow of inquiries and tenders in railway electrification sector remained buoyant throughout the quarter, while there was a slowdown in finalization of orders in the power and metro railway sectors. Carry Forward Order Book of Electromechanical Projects business was at INR 4,557.29 crore as on June 30, 2024, as compared to INR 4,038.14 crore as of June 30, 2023, a growth of 12.9%. Coming to Commercial Air Conditioning Systems, demand for government sector was subdued.
However, the increasing demand from education, manufacturing, and retail sector more than compensated, driving revenue growth during the quarter. Price resilience and prudent cost management helped us improve the margin. Demand for tier three and four cities remained strong, and significant orders primarily driven by ducted systems and VRF chillers. We successfully retained our top position in conventional and inverter ducted air conditioning systems, and ranked amongst the top three players in scroll chillers, VRFs and screw chillers. This quarter, we expanded the product range with the commercial launch of state-of-the-art chillers for data center application and brine chillers. With these new product lines, we are confident of penetrating new market segments. Due to the higher mix from commercial air conditioners, especially with good margin products, segment one margin significantly improved in Q1 of FY 2025 versus Q1 of FY 2024.
Coming to international business, demand in Middle East and Africa remained subdued during the quarter. Overall, for our international business, we are focusing on products. Accordingly, we continue to invest in R&D to expand the product portfolio. Our subsidiaries in U.S. and Europe are engaging with customers, and we expect the business to pick up traction soon. Segment two, which is Unitary Products, the revenue grew by 44.3% to INR 1,729.52 crore in Q1 of FY 2025 as compared to INR 1,198.45 crore in Q1 of FY 2024. Segment result was INR 158.03 crore, which was 9.1% of revenue in Q1 of FY 2025, as compared to INR 89.34 crore, which was 7.5% of revenue in Q1 of FY 2024.
Coming to cooling and purification products business, this quarter has experienced exceptionally strong growth for room ACs, with seasonal demand receiving an additional boost from unusually high temperatures. The demand exceeded our inventory plan, and the company successfully met most of the demand through higher production. In our estimate, in the month of May, we would have lost an opportunity to meet the market demand despite 50% higher production. We estimate that our market share continues to remain at 13.75%. Margins for the quarter improved due to volume growth, while which enhanced operating leverage. Q1 FY 2025 was exceptional, and we remain optimistic about our growth outlook for the entire year. Coming to commercial refrigeration business, the market for commercial refrigeration, namely, deep freezers, water coolers and modular cold rooms, continued to grow at a CAGR of 15%.
BIS-related regulatory changes for water coolers, announced in the last week of March 2024, impacted the sale of water coolers in Q1 FY 2025. Though the production and sales have normalized in Q2 FY 2025, substantial reduction in sale of water coolers resulted in lower than expected revenue growth and profitability in Q1 FY 2025. Company maintains its leadership in key categories like deep freezers, storage water coolers and modular cold rooms. The outlook for the commercial refrigeration market is strong, and we expect to accelerate our growth in coming quarters. Segment three, which is Professional Electronics and Industrial Systems, here, the revenue grew 23.5% to INR 96.86 crore in Q1 FY 2025, as compared to INR 78.43 crore in Q1 FY 2024.
Segment result was INR 9.6 crore, which is 9.9% of revenue in Q1 FY 2025, as compared to INR 10.49 crore, that is 13.4% of revenue, in Q1 FY 2024. While most of the product categories are performing well, supply chain disruptions and cost overruns in med tech business impacted the segment margins. Coming to business outlook, the year has begun on a positive note with robust demand for our product portfolio, and the outlook for the remainder of the year continues to be favorable.
We anticipate sustained growth driven by ongoing market trends and launch of new products. We are pleased to announce that our order books remains robust, indicative of sustained confidence and trust placed in us by our esteemed customers and partners. As a part of our commitment to long-term growth and innovation, we'll continue to invest in manufacturing, research and development, and digitalization. These investments will position us to capitalize on future opportunities and enhance our competitive advantage. We continue to remain focused on maintaining a prudent approach to balance sheet management.
To conclude, we are optimistic about the business prospects for the rest of the year. With that, ladies and gentlemen, I'm done with the opening remarks. I would now like to pass it back to the moderator, who will open the floor to questions. We'll try to answer as many questions as we can. To the extent we are unable to, we'll get back to you via email. With that, we are open for questions.
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 their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. 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 on the line of Bhoomika Nair from DAM Capital Advisors Ltd. Please go ahead.
Yeah. Good afternoon, sir, and congratulations on a good set of numbers. So my first question is on the EMP segment, where you said that the mix was kind of skewed towards commercial segment, which kind of product segment, which kind of helped the margin profile. Can you just give a color on how the mix kind of changed? From what I understand, earlier, it used to be 70% project, 30% product. What was the kind of skew during the quarter? And you were looking at margins earlier at, say, 7%-7.5%. Does this quarter kind of change the outlook? And a sub question to the project segment or the similar EMP segment is also on data centers.
How large are we? What kind of revenues on an annualized basis are we generating from this segment? And if some color can be thrown in terms of what is the addressable TAM out here for us in terms of per megawatt CapEx, what could be our addressable project size that we could potentially get?
Thank you. First of all, I am not sure where you got 70/30 as a figure. Officially, our position is very clear, that we are not going to be selectively disclosing any of the products within a particular segment at all. The same question can come within unitary products, what is refrigeration? What is room air conditioners? I have been a very strong advocate. I have taken it up with SEBI forums, and I have aired this in many CII forums. Whether it is integrated report or annual report, quarterly disclosures, there is no level playing field at all. Because I compete in a multinational environment, my information is readily available to the international competitors, readily. I do not have any information on my competitors at all.
So I have been strongly advocating that at least SEBI filing should be asking for the disclosures. Otherwise, listed companies are at a disadvantage. So that has been my position. Second, we respect that there has to be a level playing field in terms of disclosures to all stakeholders. So this position is very clear, whether it is QIP investors or retail investors, the information that is put out is same for all. So I coming back to the 70/30 or anything in that segment, you know very well, the projects is something which happens based on a particular order being executed, particular site being available, how the progress is taking place. A big order that is booked, nothing may move for six months at a time, in seventh to eighth month, suddenly the billing will come in.
There could be jobs which are going on smoothly and suddenly some three months, the billings may not happen. So never, even within Blue Star, will one be able to say ahead that what is the equipment part of it, what is the projects part of it. Equipment, again, is based on, let us say, a VRF or a package air conditioner. It is dependent on the site availability, and the customer just lifts the equipment because it is not stored in the site, nor it is a product where it is billed to the dealers and it is getting consumed. And most of these equipments are also cleared after the drawings are approved. Under the circumstances, one quarter it may be 20/80, another quarter it can be 80/20, another quarter it can be 90/10.
All that we are saying is, when you see a huge margin, the skew could be where the products are higher for the simple reason that certain products fetches higher margin. Same way, within projects itself, there are certain projects which would have been booked or resulted in a higher margin. Certain projects, we are just making some 6%, 5%, kind of. That, that's the real story. It is extremely difficult, even within Blue Star, to be passing a judgment on quarter to quarter. Our interest is to smoothen out and have consistent execution, but it is entirely not in our hands at all. So therefore, I am unable to disclose anything more than this, except that the margin. Why I'm saying this? I am saying for your benefit, somebody should not end up projecting that this business has the potential to deliver 10%+ EBIT margins.
Then I am doing injustice to your estimates. The outlook remains very clear, the outlook is somewhere around 7.5%. It could be 7.5%-8% as far as segment one is concerned. And we don't want the investors to, you know, as well I can keep quiet, but we don't want to, in the best interest of transparency to this extent, that it is due to certain high profit, highly profitable orders equipment executed. This is the first part of it. Same way, here I'm completing the segment two outlook.
Segment two, we have been saying it is somewhere around 8%, and now since the summer season has been good, like, barring that, the rest of the period goes through, there are no major disruptions due to geopolitical situation, we are saying it could be 8.5%-9% instead of 8%-8.5%. So 7.5%-8% for segment one, 8.5%-9% for segment two is the outlook we are communicating. Now, coming to data center part of it, the segment is growing. There is absolutely no doubt about it. Right now, everyone is investing. It is driven, according to us, by, according to the information we have, it is due to artificial intelligence-related expansions that are happening.
There is a huge demand for data centers and all are expanding their capacity. Now, equally is the fact that there are growing concerns about the carbon footprint related to data centers. Therefore, what are the alternate solutions? We are conscious of this as well. Now, close to, in a year, we think that INR 1,000 crore-INR 1,500 crore worth of orders can be booked. It is in the order of around 1,000 now, it can go up to INR 1,500 crore. This business, I keep believing it is something like Telepac. Some point of a time, we used to be a player in that. Mobile cellular towers, wherever it was coming up, for the batteries as well as the switches, there were specialty equipment, and it was a growing segment at some point of time.
Close to around six-seven years, we have a niche business. It was growing and the profitability was high. The tower companies, we all have reported about their growth. At some point of time, the technology changed and there was no need for air conditioning. We believe in next two to three years' time, there will be a huge requirement for equipment like chillers as well as electromechanical projects, where we do including the civil work, which are highly profitable, will grow. I would reckon that INR 1,000 crore-INR 1,500 crore of revenue is possible in the coming years for at least three years. I do not think a dramatic change in the technology could be there.
You might have seen even yesterday, there was an article with regard to AWS, Accenture reporting that one could explore cloud solutions in order to bring down the carbon footprint. We are watching that. Right now, we are augmenting capacity in order to execute. In the electromechanical project segment, as Nikhil mentioned, that the growth is driven today by manufacturing, it is driven by data center, it is driven by education institutions, these are the segments. Building segment is showing some kind of revival. During the last six months, infrastructure orders, there was some kind of slowdown. I suppose it is due to the elections and the new government getting formed. Things would have been delayed, but now those orders are also getting finalized. We believe that we will further build on the results we delivered last year for the segment one. This is where we are.
Yeah. Thank you, sir. Just on INR 1,000 crore, what is the FY 2024 revenues from data centers?
I, it will become selective, right? The, this is where the problem is, that, I am, I should not be doing injustice to a regulation. If I do it, I will notify to the stock exchange and do. I am not doing it because I am peeved by the fact that it is not a level playing field. Room air conditioners, for example, the information of Voltas, Blue Star, Havells will be available, Amber will be available in different degrees, but then I don't have the other competitor. So this solution will have to be found where we disclose every information. You look at our annual report, to the extent possible, we have disclosed everything.
We have got nothing to hide, but the fact is that whether the information disclosure meets two requirements. One is, I am having a level playing field with my competitors. Two, I am disclosing the same information to all stakeholders.
Noted, sir. Noted. Very well noted.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to answer questions from all participants in the conference room, please limit your questions to two per participant. And if you have a follow-up question, please fall back in the question queue. The next question is from the line of Natasha Jain from Nirmal Bang. Please go ahead.
Yeah, thank you for the opportunity. So just one, follow-up in terms of the segment, one commentary that you just made. So, in the last phone call, you said that manufacturing and data center, you know, given orders cannot compensate for the large infra projects that we could not get. So, now that elections are over, are we seeing any pickup in the infra-related orders, or is there still, you know, delay happening in terms of finalization?
And t he tenders are being floated. Order finalizations will be coming up in the next two, three months.
Got it, sir.
So, one can expect that, you know, it doesn't mean that Blue Star should back the order, but the market has opened up, and we should be successful, I suppose, in the same ratio as what we have been in the past in terms of share from a particular segment.
Got it, sir. So are we in line in terms of maintaining our 25% top line guidance in terms of segment one?
What is the guidance you are saying?
Sir, we... I think last quarter you'd given a guidance that approximately 25% is the top line growth that, that segment one is expected to see in FY 2025. So are we on track, you know, in, in terms of delivering that guidance?
You know, we have been saying some 20%-25%, that's how it has been, going by the industry. See, the ratio of a particular segment will also depend on the other segment, right? The room air conditioners and commercial refrigeration products and all have grown significantly due to summer.
Got it, sir. So my second question is in terms of the update. Can you tell us, we had shipped out trial orders for commercial AC in the European and Northern market, so what's the update there? What's the feedback? Have you got any initial feedback on that? That would be all. Thank you, sir.
No, we have been successfully testing, validating the products, and I think we have made good progress in terms of meeting the technical specifications. So that has been our direction to the team, that our product should be world-class quality. We should be able to compete with the best of the best in the world. And the second, you know, that's what we did in VRF or room air conditioners or chillers. The second part is connected with the cost part of it. You know, you are competing in an international market where they were earlier sourcing from China, and there will be a challenge there. It doesn't happen so very easily.
You know, our direction is as follows: first, get the quality and technology right, and the product differentiation or a unique selling feature. Then it is going to come to the cost, because somebody is negotiating with you, "This is what I got it from China." And that is the path we are working on. That journey will take three-four months. In the meanwhile, you are aware, European market is down, and the United States is down, and, I think the market there are varied opinion. United States, they say post the elections it will revive, and, Europe, we don't know.
But that suits us in a manner of speaking, in the sense that to build our competitiveness, build our manufacturing capacity expansion, which Nikhil talked about, because you have to meet the growing demand of domestic market as well. So, the bottom line is, we have quite a few products in heating, water, or air, approved by a few OEMs. And the products are now world-class. And the second part of it is connected with the cost part of it, we are working. And the third part is we have to expand the portfolio, because each OEM, as we approach the differentiation will have to be there. That is a journey. And as we had maintained, it's a two-three-year journey. Once it is built, it should be a well-oiled machine.
Thank you so much, sir. That's helpful. All the very best.
Thank you.
Thank you. The next question is from the line of Akshen from Fidelity. Please go ahead.
Yeah. Hi, sir. Congratulations on a good set of numbers. I just had one question on... Sorry, one-
We are not able to hear you.
Sorry, can you hear me, sir?
Yeah.
Yeah, sorry. So just on the AC segment, you mentioned that there was a demand-supply mismatch. Towards the end of the quarter, if you could give us some color on how the channel inventory was? That's question one. Question two was, you know, given the kind of demand-supply mismatch that we've seen, could you just talk to the pricing action that the industry would have taken? And, question three was, you know, is there any, you know, changes in, you know, norms with the AC division that we typically keep seeing in a few years that is expected this year, and how do you think that impacts you know? Those three questions. Thank you.
Thank you. First one is that I do, I do not, I think everyone would have planned that. That's what we hear at the industry forums, that broad agreement was, this summer could be harsh, from 25%-30%. I suppose all players subscribe to weather forecast as well, but it came as a surprise. And you would have read many newspaper articles that there is pressure in terms of delivery. And next is, it is not only delivery, you are- once you have the material, you have to have it installed.
In this extreme summer condition, there was also pressure due to service complaints, because at 50 degrees plus, 45 degrees plus, there could be certain models which may even get derated in terms of, it has per the specification, but still there will be a derating. So it is not only a supply pressure, it is an installation service pressure as well. Now, the industry rose to the occasion in order to produce more and mobilize all kind of supply chains and then go ahead and deliver. My estimate is that industry also would have grown anywhere between 50%-60%, depending on the region, depending on the brand. That's what, I, we, we estimate. I do not think, the channel would have had inventory beyond, 1 month, which is, which is a normal norm.
I do not think it would have been more than that at all, because even in June, July, the material were planned hand to mouth facilities, because you know, you know, quite a few critical components are still imported, and that is, that is our understanding. That's what we hear from the channels as well. Now, are there any mitigation measures? And I-- you know, the only solution could be the local supply chain developing. Thanks to the PLI scheme, the supply chain is today. Now, after having planned 25%, if 50+ industry met, it is thanks to the supply chain that has been developed locally.
Other than that, I am not very sure at all, because, look, it could be other way around as well, that you plan for 25% when the market is flat or, or it degrows. That is also possible. So the question here is, it is beyond that, 25-30% is a gambling. I don't think, given the cost of capital, one should be producing every year expecting some 50% growth. I do not think that is the right thing to do. Instead, the industry will prepare for scale-up or scale-down by planning their supply chain. Look, two-three years ago, the sub-assemblies were coming from China. The quantities would have been blocked in December itself.
Then January, February, March, these all would have arrived or will be on high seas. And that was, that is the time the story used to be INR 1,000 crore of inventory of the industry lying, INR 700 crore lying, so on and so forth. Last year, when the summer failed, we didn't hear much of the noise. And this year, again, on the upside, there was shortage, but it was managed well to cope up to even 55%. So that's what the industry will do. Now it is futile to be keeping inventory. It is not only the capital is blocked, in desperation, prices will come down. So once the prices come down, to take it up is a very difficult task. We have...
I would have, in my career, gone through that, at least 15 years in my 40+ year career of trying to, you know, go through this painful period of liquidating inventory post summer season, due to a failed summer season. Now, regulatory changes, it is connected with the energy label change, which is due on first of January 2026. And, therefore, the industry will prepare for that new energy label change. And, the refrigeration related, there is enough time, and it is to move from low GWP, low GWP refrigerant or global warming potential refrigerant, to ultra low or near zero. That is their time till 2035.
Having said that, the industry has been working on old air conditioners which are non-rated or rated 10 years ago, whether there could be a program in order to replace them. There are discussions going on there through certain regulatory guidelines. It can happen. The second one the industry has been asking for is higher energy efficiency products from 28% GST slab to be moved down to 12%.
May happen, may not happen, but there is a Green Credit Scheme which I have been asking whether a five-star air conditioner, some green credit should be given, and so that the consumer benefits, which was all, what was done in Japan or China at some point of time. There are bilateral agencies, including the World Bank, looking at certain programs. You might have read that again in the newspapers, connected with supply chain resilience to be built within India. There is, there is the research and development, you are aware of that, INR 100,000 crore set aside for that, so that we are able to innovate and come out with the technologies. That is the other piece that is working.
Most importantly, the UNEP program as a part of COP28, how to make cooling devices affordable while making it sustainable. People should have access, and they should consume. So the industry is fully aligned, there are interactions and numerous things are happening there. But regulatory-wise, as far as Blue Star is concerned or preparing for the future, we are ahead of the curve. And we are closely involved in this policy formulation exercise, and we are up to date on that. There is nothing to worry.
Thanks for those answers, sir. Just to clarify on the pricing, has industry taken a pricing post the season this year?
Yeah, with effect from June 1 itself, we increased, I don't know about the others. We increased the price to the tune of around 3%.
It's okay. And just to cover-
That was not to, that was not based on, again, in the, in the television interviews, I have clarified. It's not because demand is high, therefore we are increasing the price. It is basically the input costs have gone up, and you are aware of the, the commodities which went up and also the raw material price.
Okay. Thank you. Just one last follow-up from my side, sir. On your, you know, point on channel inventory, where I was trying to come from is that, you know, there was clearly higher demand in June, which the industry couldn't meet. So it could seem logical that, you know, there is a mismatch in primary and secondary sales numbers. So through the year, if demand remains healthy, is there a chance that you could see restocking back at, you know, dealer levels, which could lead to, you know, your sales being higher than the secondary offsets?
No, you would like to share what pleases your ears. We would like to say what pleases us, I tell. At the end of the day, it is all in a... look, you look at the FMCG; there is a demand cycle that is going on. And on the room air conditioners, specifically, there has been the penetration levels are lower. It is, in the urban heat effect, the way the homes are constructed, you need air conditioners, and it is available at affordable prices. What is there? About INR 35,000 or so. And it is happening through consumer finance, and more than 50% of the sale is happening through consumer finance. Therefore, people are going ahead and buying.
So one hopes that the demand continues, and there is equally, there could be a pessimistic view. Whenever there have been a very strong summer season, festival season cannot be that great. Last year, if you see post the summer season, we all said there is a pent-up demand, there is a... The question is that I would be happy that CAGR of 15% is maintained. That, that's what one should look at in the long term. And one should be flexible about that. If the growth is high, I'm able to step in. If the growth is lower, I am able to regulate. That's how we will go about. Otherwise, I just do not know how the consumers will behave.
All right. Thank you, sir.
Thank you. The next question is from the line of Sonali Salgaonkar from Jefferies. Please go ahead.
Sir, thank you for the opportunity. So my first question is, now beyond the summer season, how do you foresee the underlying demand trends, especially in Q2 and Q3? You know, apart from the restocking of channels, but the basic consumer discretionary behavior, are you seeing an uptick in that?
Actually, Jefferies will know much better than me. Going by what is happening in the channels, for this category is concerned, the demand continues to be good. See, at the end of the day, it's not the dealer, right? The dealer is an intermediary. So, the consumer sentiment matters, and I think I believe I can be proven wrong, but the demand is going to be good in Q2, Q3, Q4. And, I would have said that the industry will grow for the full year between 20%-25%. I think it could be even 25%-30% this year. And, we have to watch what is going to happen in terms of other events. Like, for example, the oil price.
If there is some little crisis, simple oil thing can derail for three months' time, the demand outlook. And, the good news is that, summer season has gone on well. So you can relax a bit. It's not a huge pressure. Relax in the sense that you may not have anxiety. Again, the demand will come back. Next big quarter will be for this category, Q4. And we will, to answer your question, the sentiments are good as far as this category is concerned.
Understood. So my second question would be any light you would like to throw on the exports. Your focus on exports are probably targeted for FY 2025. And also, I missed the initial remarks on order book, you know, overall order book, if you could repeat those figures as well. Thank you.
You asked about the-
Exports.
Exports. I think it is muted. I do not think U.S. anything is going to happen. There is some demand connected with some, you know, the inquiries are qualifying. As I told you, we are taking baby steps there. Europe, again, it is the same. So it is only the Middle East. And I do not think it is going to be a needle mover as far as Blue Star is concerned this particular year. So our exports revenue will remain the same like last year, with a marginal growth of some 7% or 6%. That's all is going to happen in our view at this juncture. Now, you asked about, and, Nikhil, you can clarify.
Yeah. So the carry forward order book as on June 30 is INR 6,084.69 crore. For the quarter is INR 1,466 crore, which as compared to INR 1,224 crore last time.
Understood. Thank you, sir. All the best.
Thank you. The next question is from the line of Sanjaya from Ampersand Capital. Please go ahead.
Yeah, sir, just two questions. One is that you have so much cash in your books after the QIP that you had done last year. So can you just tell us, like, how have you changed your CapEx plan, and how much it is for this year as well as next?
Nikhil, you can go ahead.
Yeah. So the, we have not changed our CapEx plan or anything. The, everything is in line with what was planned. So the CapEx plan, for the current year, we should be spending in the region of around INR 450 crore, is the expectation. And if you look at it over a period of, two to three years, it should be in the region of INR 750 crore-INR 800 crore at least. So that's the kind of CapEx which was there earlier also, which we had indicated, and we stick to that plan. Of course, anything comes up in between, we will have to see at that point in time.
The QIP monies were taken for a particular purpose, and they have been used for that, a mix of both manufacturing, R&D, as well as digitalization, and of course, the growing working capital needs. So all of that which were there and which have played out. Probably the cash position which you are seeing is also because of the exceptional quarter one, which has led to very high collections, because of which you are seeing some extra cash, which was not probably anticipated. But, of course, that helps us, making cash available for further growth is required, but there are no change in the plans.
Thank you. And second question is that, I mean, I'm sure you would have already explained, but the non-unitary cooling part didn't really grow much with the project part, in this quarter one, one. Is that something... And the order book at the same time is up, well, around 20% higher. So should we expect a bit of acceleration in the rest of the businesses during the remaining part of the year?
Yeah, it should be. We are indicated that, you know, whenever there is an election year, the order finalization, execution gets postponed. That's about it. There's nothing to worry. Everything is returning back.
Understood. And you, should we be a little cautious about the margin expectation in the future period, or we should be getting into a bit of a better margin trajectory overall, primarily because your integration level of backward integration and everything is, seems much better now than-
It depends on the segment. I'd caution that you don't go by segment one margin. If it happens at 10, it is a bonus. I think you should assume our estimate is 8%-8.5% only. And segment two 8.5%-[9%] And this is as we see it today.
Understood. Thanks a lot, sir, and all the very best.
Thank you.
Thank you. The next question is from the line of Pankaj Tibrewal from IKIGAI Asset Managers. Please go ahead.
Good afternoon, sir, and congratulations on consistent delivery. My question was twofold. One, your aspirations of going global. We have been talking about it, on the U.S. and Europe.
Louder, I'm not able to hear you.
Can you hear me now?
Yeah. Yeah. You, you mentioned your aspiration?
For going global for the last couple of years.
Yeah.
What is the progress right now on the U.S. and the European market? Where are we on that path?
I will clarify to some of your question that, look, each of the markets, each of the. See, first of all, we are not directly entering with our brand, at least as of now. We are very clear that we have the technology that is needed, IP that is needed in the decarbonization area, where variable frequency drives or variable refrigerant flow systems and the heat pumps, including low temperature ones for heating air to air or air to water. That is the profile. Now, where in these two markets are expected to move in that direction because they are heating homes or heating water with conventional technologies of gas or electricity directly applied. So therefore, the opportunity that is mapped is huge for entire global players.
But the pace in which the adaptation will take place, some, many countries had announced some kind of subsidy for pushing the homes and commercial establishment to move. Some countries have not announced. Some countries deferred certain plans. Now, on the whole, you might have seen, in by the international players, the U.S. earning calls or, Japanese earning calls, you would have seen, that, the U.S. and, Europe markets for heating, ventilation, air conditioning is, and refrigeration is somewhat muted, and in some cases it is even, degrowth. That is what is being reported. In our case, I explained that, A, we have to understand the requirements. B, since it is not my own product, I have to make a product for OEM.
I have to ensure I am developing a product which fits with his product portfolio, which means it is custom developed for that particular customer, how he is positioned in respective markets. The third thing is I have to meet the quality standards that are global in nature. And we are happy to report that, with a few OEMs and with a few SKUs we started, we have completed the journey. We are able to design, we are able to develop and test and deliver prototypes, which are, of global quality. That is the direction to the team. The second part is connected with how you will become globally competitive. In this case, global means Chinese prices.
I should be interested in the margin, and with that margin, I should be able to match the prices, which will be a one-year kind of a journey in order to get there. It is not easy for a new market, new product to be competing with China in that scale, to be coming to, because somebody, China plus one means he's not going to pay you some premium and buy. He will be eventually interested in your matching the price. That is the other part of it. The third is connected with when the demand will revive.
So in our case, we are in a manner of speaking. I am making a statement: it is a blessing in disguise. The market is taking time to revive, so that when it revives, I am ready with the prices and the products. So it is a baby step, and it is fine with us. Because the Indian market is growing, I am expanding my R&D capacity. I'm expanding my manufacturing footprint, and it fits well with the strategy. I am not desperate. Now, if you ask me sometime middle of next year, I think, and our intention is, even our board asked that, "What will be our export revenue in about three years' time?" I think we will be in a better position.
And deliberately and, and, very, very firmly, Vir and I keep saying this, that get the fundamentals right before trying to project a number. Because if you look at China, it is not China went and market their products anywhere in the world at all. People were rushing to China to source. Our desire is that we have a product, we have the technology, we have the capability. People should ask us: "Look, can you make for me?" That's a dream. There is a journey to go through that. Till then, this small export revenue is fine with us.
Okay. That's, that's a very helpful answer, sir. The second question is on the MEP project. You know, while the tailwind is very strong, the old memories keep haunting us as old-time investors that, you know, this was a segment which gave us trouble. What are the checks and balances we are making in place that the same thing is not repeated again in this segment, where project overruns and, you know, other things which are part and part of this business? And how much capital allocation can we expect on this business? Because it's been gradually going up now, and, and the old hat, you know, kind of keep me reminding about that risk. So just some clarity.
Very good question, intelligent question, pertinent question. This is a question, whether it is, Vir or myself or board, keep asking ourselves. And therefore, the specific mandate, to, to, Nikhil, for example, and his team, is to closely monitor this on a monthly basis. And, we are aware of this, because we have gone through and endured that problem of, what can happen. So there is enterprise risk management framework, that ERM committee, and the subcommittees within that are spending adequate time in order to understand. And, there is, so the first it starts with the direction. Direction is not market share and, quickly grow. That's not in the DNA of Blue Star. If you are a old-time investor, you will understand that.
Between market share and returns, we are very clear about returns. Between profits and balance sheet, we are very clear that the balance sheet should be strong. Between short term and long term, we are very clear, long term is the important thing. If you ask anybody in Blue Star, the PBT percentage with ROCE, everyone will say ROCE is important. Between ROCE and ROE, we will say ROE is important. So that principles are very clear, and it is in our DNA. Now, we know what all can go wrong. There is a time delay, escalation claims are there or not there. There is when to stop a job, when we will not go ahead and place orders for equipment in a particular project.
If there is a delay, whether time extensions are available, and whether we are contractually compliant there. And there, while booking the order, every major order is put through a due diligence completely. And, the margin considerations and the payment terms consideration and the working capital that will be going in, that is measured. In fact, it is almost on a quarterly basis, Nikhil, Vir and myself, we review this particular business very closely. So we are... I can assure you, the, I think the orders that we have in hand and what capital is being allocated, there is, to the best of our knowledge, there is no shock that can happen.
That is quite comforting, sir, and wish you all the best. And I'm sure in coming years, Blue Star will become a formidable player across the globe. Thank you so much.
Thank you very much.
Thank you. Ladies and gentlemen, this will be the last question for today. It is from the line of Kriti Dalvi from Enam Asset Management. Please go ahead.
Good afternoon, sir, and congratulations for good set of numbers. Just two questions. First, on the cash part, if I see our March year-end, net cash was roughly around INR 456 crore, which has gone up significantly. So congratulations for the same. But just wanted to know, this doesn't include our dividend payout for the last year, and where do we see the year-end cash? Because even if I do the cash flow calculation, it seems to be a significant generation which has happened. So assuming INR 450 crore CapEx guidance, what you have given, for the year as a whole, in Q1, we wouldn't have incurred much CapEx as well.
What is your second question?
Second, sir, on the professional electronics, I mean, this is the third segment of ours. The margins have seen a little severe impact, so if you could throw a little bit more light on that, on what was going to be margins in that particular-
I will answer the second part. First part, Nikhil will be the better person to explain to you on the cash position.
Sure.
It was a muted quarter. You know, that particular business is dependent on the CapEx cycle as well. And we ourselves are a little bit disappointed, but fundamentally, there is nothing wrong there. It should revive. It is that there are supply chain disruptions there in terms of getting the required equipment and completing the delivery. The order inflow there was like segment one. There were certain delays, but it has revived. There is nothing to worry there, but it is not a great quarter for that particular segment. Nikhil, you can clarify regarding the cash.
Yeah. So on the cash-
One thing, the sustain-
Yeah.
You know, sustainable margins will remain in the same zone? Because if I see the segments over a period of time, from the highs of 20+, we are trending to roughly around 13% to, you know, 14 odd %. So these are the sustainable margin one should consider going forward?
No, our intention is to maintain the same margin as last year.
Sure. Thank you.
Yeah. So on the cash position, see, what you are seeing is over the March levels, this cash has gone up substantially because of, as you are aware, it was an exceptional quarter in terms of room air conditioner, and the working capital has got completely released. So that, due to better collections and release of working capital, it has got converted into cash. Of course, as you now again build up the inventory, the cash is going to get used up, because as comes Q4, you need to have stocks in position, inventory in position. So we expect that by year-end, probably we should be back to around INR 350 crore-INR 400 crores cash position. And of course, the regular working capital, CP borrowings, if we do some regular borrowing, that's it.
So this is not a sustainable cash level, INR 1,000 crore, plus the CapEx expenditure also was only around INR 30 crore-35 crore in this quarter. Large part of the CapEx is planned to happen around Q2 to Q4, so that will also use up some amount of cash.
So the treasury income, what we have seen in this particular quarter, one can't extrapolate the same, right?
That's what I'm saying. You cannot extrapolate the treasury income because the cash collections were exceptional in quarter one, and as you build up inventory, as you spend on CapEx, it will go on coming down.
Okay. Thank you. Thank you very much.
Thank you. Ladies and gentlemen-
So-
Due to time constraint... Yes, sir, do you want to say something?
Yes, I'll just put the ending remarks. So thank you very much, ladies and gentlemen. With this, we conclude this quarter's earnings call. Do feel free to revert to us in case of any of your questions were not fully answered, and we'll be happy to provide you additional details by email or in person. Thank you.
On behalf of Blue Star Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.