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ANALYST MEET
Presentation by
Ashok M Advani, Chairman & Managing Director
May 28, 2007
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Agenda
• About Blue Star
• Financial Highlights
• Business Highlights
• Construction boom
• Retail boom and cold chain
• Outlook
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
About Blue Star
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Introduction
• Blue Star is India’s largest central airconditioning and commercial refrigeration company
• Founded by Mohan T Advani in 1943• Listed on Bombay Stock Exchange in 1969• Only 50 Indian companies listed on BSE are more
than 60 years old- Blue Star is one of them• Professionally managed; largest pool of HVAC
engineers in the country• Focused on corporate, commercial, and
institutional customers• Unbroken record of profits and dividend payment
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Blue Star today
Total Income Rs 1607 crores
Net Profit Rs 71 crores
Employees 2181
Manufacturing Plants 4 (plus 1 under construction)
Offices 23
Dealers 680
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Market Capitalisation
455
1275
148 254
1888
0
500
1000
1500
2000
31 Mar 03 31-Mar-04 31-Mar-05 31-Mar-06 31-Mar-07
(Rs crores)
- -
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Financial Highlights
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Blue Star Financial Performance2006-07 2005-06
Total IncomeGrowth over previous year
1607.41 +36%
1178.62+27%
Operating Profit (PBDITA) excl Non-operating incomeGrowth over previous year
116.92 +35%
86.68+50%
Profit Before TaxGrowth over previous year
92.60+34%
69.09+32%
Profit After TaxGrowth over previous year
71.18+46%
48.90+25%
Shareholders’ Funds 212.97 172.71
Borrowings 89.05 75.87
Capital Employed 302.02 248.58
Operating Cash Flow 60.12 18.36
(Rs crores)
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Key Ratios2006-07 2005-06
Gross Margin (excl. Non operating Income) 22.40% 22.80%
Operating Margin (excl. Non operating Income)
7.30% 7.40%
Return on Capital Employed 32.1% 30.1%
Return on Shareholders' Funds 33.4% 28.3%
Earnings Per Share (Rs.) 7.91 5.44
Dividend Per Share (Rs.) 3.00 2.40
Capital Turnover 5.32 4.74
Debt/Equity 0.42 0.44
Inventory Turnover 6.61 6.06
Receivables (Days Billings Outstandings) 80 74
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Carry Forward Order Book
Segment March 06
March 07 Growth
Central Airconditioning
495 633 28%
Cooling Products 21 48 128%
Professional Electronics
49 74 51%
TOTAL 565 755 34%
(Rs. crores)
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Total Income
CAGR = 30.9%
716.06
930.92
1178.62
1607.41
0
300
600
900
1200
1500
1800
2003-04 2004-05 2005-06 2006-07
(Rs crores)
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Profit After Tax
71.18
48.90
32.5539.16
0
20
40
60
80
2003-04 2004-05 2005-06 2006-07
CAGR = 29.8%
(Rs crores)
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Return on Capital Employed
33.80%30.00% 30.10%
32.10%
0%
10%
20%
30%
40%
2003-04 2004-05 2005-06 2006-07
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Return on Shareholders’ Funds
25.10%26.40%
28.30%33.40%
0%
5%
10%
15%
20%
25%
30%
35%
40%
2003-04 2004-05 2005-06 2006-07
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Earnings Per Share & Dividend Per Share
1.80 2.002.40
3.00
3.62
4.35
5.44
7.91
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
2003-04 2004-05 2005-06 2006-07(* Face value Rs 2.00 per share. Previous years’ figures on a like-to-
like basis)
Earnings
Dividend
Rs.
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Shareholding Pattern (as on March 31, 2007)
40.30% Promoters
37.65% Indian Public
8.39% Financial Institutions/Banks/ Mutual Funds8.44% FII holdings
5.22% Bodies Corporate
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Institutional Investor Holding
12.68%
17.85%
21.99%
0%
5%
10%
15%
20%
25%
31/03/05 31/03/06 31/03/07
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Business Highlights
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Blue Star Differentiators• Focused on corporate and commercial
customers• Differentiated products and value added
services• Technical, engineering and contracting
expertise• Employees and business partners tuned to
customer oriented specialist/expert culture• Delivering a world-class customer
experience• Value-driven work ethics
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Achievements in FY07• Consolidation of leadership in central and
packaged airconditioning segment• Over 150 Blue Star screw chillers installed
and commissioned• Dominated the telecom shelter
airconditioning business with over 50% market share
• Volumes of split airconditioners grew 75%• Tie-up with ISA, Italy for supermarket
refrigeration equipment• Several new customer accounts in the cold
chain business
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Business Segments
1. Central and Packaged Airconditioning Systems
2. Cooling Products
3. Professional Electronics and Applied Industrial
Systems
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Central and Packaged Airconditioning Systems
• Design, manufacturing, installation, commissioning and maintenance of large central airconditioning plants
• Wide range of chillers, air handling units and fan coil units
• Comprehensive range of packaged airconditioning systems
• Energy efficiency as the technology platform; pioneers of products which save power
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Central and Packaged Airconditioning Systems – Revenue
1124
821
651479
0
200
400
600
800
1000
1200
2003-04 2004-05 2005-06 2006-07
(Rs crores)
CAGR = 32.8%
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Central and Packaged Airconditioning Systems – Segment Result
102.2
80.03
60.3246.29
0
20
40
60
80
100
120
2003-04 2004-05 2005-06 2006-07
(Rs crores)
CAGR = 30.2%
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Opportunities from National Accounts
• 40% of central airconditioning revenues from National/Major Account customers
• All of them have significant growth potential
• Blue Star expected to garner a major portion of the HVAC requirement from these customers
Reliance Future
DLF Shoppers’ Stop
Infosys Satyam
Café Coffee Day Wipro
HCL ICICI
Hutch RMZ
HDFC Raymonds
HSBC PVR
Moser Baer Dr Reddy’s
Microsoft Bharati
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Cooling Products• Comprises
– Room Airconditioners
– Commercial Refrigeration Products & Systems
• Wide range of window and split airconditioners
• Comprehensive range of commercial refrigeration equipment
– Cold Chain equipment– Deep Freezers– Water Coolers / Bottled Water Dispensers– Bottle/ Milk Coolers
• Contemporary products with power saving design
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Cooling Products – Revenue
168210
271
372
050
100150200250300350400
2003-04 2004-05 2005-06 2006-07
(Rs crores)
CAGR = 30.3%
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Cooling Products – Segment Result
4.31
13.17
23.46
-2.56-5
0
5
10
15
20
25
2003-04 2004-05 2005-06 2006-07
(Rs crores)
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Service Business• Blue Star is India’s largest AC&R service
provider • Maintains over 1.5 million TR of equipment • 25,000 customers• Service Portfolio includes
• System maintenance• Spare Parts• Energy Management• Air Management• Water Management• Upgrades/Enhancements/Revamp/Retrofit• Remote Monitoring• Integrated Engineering Facilities Management
Services
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Product Portfolio
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Product Portfolio
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Product Portfolio
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Manufacturing
• Specialize in manufacturing a variety of highly engineered and custom-built products
• High level of product development capabilities
• Over 225 models manufactured across 25 product lines
• Lean manufacturing and world-class practices
• Globally competitive
• Capacity expansion underway in line with growth
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Exports• Exporting water coolers for over five
decades• Window and split ACs for high ambient
temperature conditions have been well received in the Middle East and Iraq
• Customised ducted systems and heat pumps for the Middle East and Europe
• Central airconditioning products such as AHUs and FCUs also exported
• Opened office in Doha recently for project and product requirements from the region
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Exports - Revenue
37.84
61.1868.16
89.99
0102030405060708090
100
2003-04 2004-05 2005-06 2006-07
(Rs crores)
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Professional Electronics & Applied Industrial Systems• Import-Distribution of professional electronic
equipment from world-renowned manufacturers• Wide range of complex, hi-tech and large value
equipment in– Medical Electronics– Material Testing Equipment and Systems– Data Communication Products and Systems– Test and Measuring Instruments– Analytical Instruments– Industrial Products and Systems
• Catering to Healthcare, Manufacturing, R&D, Quality Control, Petrochemicals, Banking etc
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Professional Electronics & Applied Industrial Systems – Revenue
5059
80
104
0
20
40
60
80
100
120
2003-04 2004-05 2005-06 2006-07
(Rs crores)
CAGR = 27.6%
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Professional Electronics & Applied Industrial Systems – Segment Result
20.62
15.27
12.0111.19
0
5
10
15
20
25
2003-04 2004-05 2005-06 2006-07
(Rs crores)
CAGR = 22.6%
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Construction boom
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Trends
• Construction boom driven by IT/ITES, Retail and Infrastructure projects
• Major growth plans announced by several players in these segments
• Special Economic Zones (SEZs) are also expected to drive growth
• The above trends will translate into significant airconditioning and even refrigeration opportunities
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
IT/ITES
• IT/ITES services expected to grow in excess of 25% per annum over the next 3 years
• An estimated 1.4 million people will be added till FY10
• Office space of over 100 million sq ft will be needed
• Translates into airconditioning requirement of over Rs 1500 crores
• Blue Star enjoys a preferred partner status with Infosys, HP, Satyam, Wipro, HCL, Cognizant, Microsoft - major players driving growth
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Retail, Malls & Multiplexes
• Based on plans announced by major players, 150 million sq feet of space will be added
• Translates into an airconditioning requirement of over Rs 2250 crores
• In addition, multiplexes expected to add 700 screens over the next 3 years
• Blue Star enjoys strong relationships with Reliance, Pantaloon, Shoppers’ Stop, Bharati, DLF, RPG, PVR, Adlabs and Vishal Megamart - main players driving growth
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Opportunities from Telecom Segment
• Blue Star’s telecom business for airconditioning cell sites grew 185% in FY07
• Blue Star enjoys a dominant 50% market share
• Subscriber base expected to double over the next 3 years to 500 million necessitating 150,000 additional cell sites
• Translating into an airconditioning opportunity of Rs 1000 crores
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Opportunities from Industrial Segment
• XI Fifth year plan includes addition of 48,000 MW of thermal power
• Blue Star has already executed major power plant projects for NTPC, NPCIL and Jindal
• Blue Star expects significant power plant project orders in the medium term
• Another fast-growing segment is pharma • Blue Star has strong credentials and
expertise in the pharma segment as well
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Contracting Opportunities
• The construction boom will fuel growth in HVAC contracting business
• Currently, 15% of mega projects involve integrated mechanical, electrical and plumbing contracting
• Blue Star has developed capabilities in this area
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Retail boom and cold chain
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Retail Revolution: Where?
Home needsSuper market chains(Reliance/Hypercity etc.)
EateriesBranded/Formatted Chains (Café Coffee Day, McDonalds etc.)
Luxury GoodsMalls with multiple brand outlets &Stand alone chains
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
The Cold Chain
Production
Logistics
Retail Sales to Consumer
Bulk Usage by Eateries & Restaurants
Exports
Driver = Super Markets
Driver = Increasing eat-out culture
Driver = Entry of Corporates
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Name of the Company
Planned Investment Likely foreign partner
Reliance Retail Rs.25,000 Cr. over 5 yrs
Direct
Bharti Retail Rs.20,000 Cr. over 5 yrs
Wal Mart
Aditya Birla Retail Rs.15,000 Cr. Over 5 yrs
Direct
Food World Rs. 1,000 Cr over 2 yrs
Already present in India
Spencer’s Rs. 1,000 Cr. Over 2 yrs
Direct
Vishal Mega Mart Rs.1,250 Cr. over 4 yrs
Direct
Hyper City Rs.1,200 Cr. over 4 yrs
Home Retail Group
Total (approx) Rs.60,000 Cr. +
Large-scale Super Market Investments Planned
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Retail Format Airconditioning Refrigeration %
Investment Investment Format
Per Store Per Store
Hyper Market (100,000 sq.ft.) Rs.200 lakhs Rs.150 lakhs 4%
Super Market (20,000 sq.ft.) Rs. 32 lakhs Rs. 30 lakhs 16%
Convenience Store (2500sq.ft.) Rs. 4 lakhs Rs. 6 lakhs 80%
Distribution CentresOne for every 50 stores Rs.100 lakhs
Bulk StoragesMany
Transport Refrigeration UnitsMany
Supermarkets will drive cold chain…
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Supermarkets Business Opportunities - Expectations(4 year period commencing April 2007)
Total
investment
Rs 60,000 Cr.
AC Potential
Rs 3000 Cr
Blue Star
Share
Rs.900 Cr
Front endRefrigeration
PotentialRs 1500 Cr.
Blue Star
Share
Rs.250 Cr
Back end
Refrigeration Potential
Rs 1500 Cr.
Blue Star
Share
Rs.500 Cr.
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Outlook
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Outlook
• The macro economic trends are favourable
• Blue Star in a strong position to leverage the opportunities available
• All three lines of business performing well• The Company is poised to outperform the
market growth
Analyst MeetAnalyst MeetMay 28, 2007May 28, 2007
Thank You