Dear Shareholders,
It gives me immense pleasure to write to you in my fifth year as the Chairman of Blue
Star Limited.
FY23 Results
As you are aware, Blue Star delivered outstanding financial results in FY23, and it is
right to term it as an "orbit shifting all-round performance." The Company
accomplished several new milestones, migrating to a new level in terms of revenue and
profits; launching new products and services; enlarging its geographical reach and
distribution footprint; enhancing customer service and employee engagement; deepening its
commitment to sustainability, social obligations and corporate governance; and all of this
contributing to significant shareholder value creation.
Total Income of Rs. 8,008.19 crores and Operating Profit of Rs. 492.78 crores for the
fiscal year 2022-23 represented a record performance delivered under challenging
circumstances - the war between Russia and Ukraine, slowing down of major economies across
the globe, weakening of Indian Rupee, continued supply chain disruptions, inflation, and a
higher interest cost burden.
In my first letter to you as the Chairman of Blue Star in June 2019, I had stated,
"With its strong fundamentals, a remarkable portfolio of highly differentiated
products and services, steady adoption of latest technologies and the pool of highly
talented people, Blue Star will continue to grow and deliver value to its stakeholders! I
am excited about the prospects for Blue Star!" I am glad that the Company has come
good on the above promise, continues to invest in enhancing its capabilities, and is
pursuing its next phase of growth.
Resilience & Agility
Driven by the Government's investments in infrastructure, the revival of the private
sector capex cycle and robust household consumption, the Indian economy has held up well,
and the demand for our products and services remained strong, albeit under the cloud of
uncertainty as to whether and when economic growth will be impacted by the global slow
down. Under the circumstances, the short-term as well as medium-term planning remained a
challenge. Most importantly, the uncertainties pertaining to the deadline for the
non-tariff barrier (Quality Control Order) applicable to the import of certain components
made inventory and production planning a complex exercise. As you are aware, Blue Star is
built on strong fundamentals, and the Company demonstrated that it is agile and resilient
with the ability to course-correct its strategy with disciplined execution and result
orientation.
B2B and B2C Business Portfolio
While the Room Air Conditioners business is highly dependent on a strong summer season,
the Electro-Mechanical Projects and Commercial Air Conditioning businesses are dependent
on the construction cycle. The Commercial Refrigeration business is linked to consumption
and the Professional Electronics, and Industrial Systems business is linked to the broader
capex cycle. Blue Star's strategy is to invest in and build both B2B and B2C businesses as
strong engines of growth. You will be happy to note that in a significant development, the
B2B businesses returned to an accelerated and profitable growth path in FY23.
Corporate Governance
High standards of compliance, tight internal financial controls, rigour in risk
management, long-term shareholder value creation, attention to the interests of minority
stakeholders, excellence in stakeholder relationship management, focus on environmental
and social obligations, setting aspirational goals and enabling the enterprise to be
future-ready are the cornerstones of good corporate governance. The Annual Report for the
fiscal year 2022-23 also includes Business Responsibility and Sustainability Reporting
disclosures. As a three-time winner of the Golden Peacock Award for Excellence in
Corporate Governance and two-time winner of the Golden Peacock Award for Risk Management,
I am pleased to report that Blue Star's pursuit is to remain ahead of the curve.
Environment and Sustainability
With every passing year, the call for urgent and focused action to tackle climate
change is growing, and many international and domestic regulations are being introduced.
For example, many more products are being brought under the Energy Labelling programme of
the Government of India. E-waste regulations are being extended to many products, and in
our case, room air conditioners and deep freezers are covered under these regulations. As
a step towards achieving its long-term goal of reaching net-zero by 2070, India now stands
committed to reducing the emissions intensity of its GDP by 45% by 2030. I have always
held the view that sustainability regulations and the obligations arising therefrom offer
both opportunities and risks to business enterprises. It is, for this reason that the
International Sustainability Standards Board (ISSB) has recently published 2 final
standards IFRS S1 and IFRS S2 which will require companies to disclose both
sustainability-related and climate-related risks and opportunities. These standards aim to
institutionalise the sustainability disclosures as an integral part of the financial
reporting.
As I had shared with you in the past, Blue Star is committed to environmental
sustainability, and the Company has always remained a front-runner in developing and
introducing energy-efficient and environment-friendly products for more than two decades.
The Company plays a pivotal role in the preservation of perishables such as fruits,
vegetables, meat seafood and dairy products as well pharmaceuticals and vaccines. Another
area of focus is the circular economy, and Blue Star's portfolio includes recycling,
retrofitting, refurbishment, as well as life extension of not only air conditioning and
refrigeration equipment, but also medical diagnostic devices such as MRIs and CT scanners.
In FY23, the new deep freezer manufacturing facility at Wada received the Platinum Green
Factory rating from the Indian Green Building Council. The Blue Star Innovation Centre at
Thane secured Platinum Green Interiors rating. Blue Star Climatech's Sri City Plant in
Andhra Pradesh is due to receive Green Building certification soon. The Company has begun
work on its Net Zero Mission, and the plan is to identify areas where it can reduce carbon
emissions under Scope 1 & 2, and drive decarbonisation in a phased manner. I am also
proud of the fact that Blue Star will emerge as a significant decarbonisation player in
the exports market, offering sustainable heating and cooling products and solutions in the
coming years.
Bonus Shares
As you are aware, taking into consideration the record all-round performance in FY23
and the long-term prospects for the Company, the Board of Directors, in its meeting held
on May 4, 2023, had recommended a bonus issue of 1 (One) equity share for every 1 (One)
existing equity share to the shareholders subject to necessary approvals. I am pleased to
inform you that all the procedural formalities were completed one week ahead of the
deadline by the Blue Star team, and the shares allotted under bonus issue were admitted
for trading by the stock exchanges with effect from June 27, 2023.
Conclusion
In his letter to the shareholders in 2018, in his capacity as the Chairman of the
Company, Mr Suneel M Advani had laid out six clear strategic objectives that the Company
intended to accomplish by FY21, and these were:
- Growing faster than the market
- Improving profitability through backward integration
- Harnessing the power of digital technologies for greater customer intimacy and
efficiency
- Differentiating ourselves through excellence programmes
- Continuing to improve our return on capital employed
- Investing in human capital
I succeeded Mr Suneel M Advani as the Chairman in 2019, and I am delighted to report
that despite the time lost during the COVID-19 pandemic, the Company not only pursued the
above objectives, but also embraced a couple of more goals, namely, enhancing R&D and
innovation capabilities and expanding the global footprint. I wish to compliment each and
every employee of Blue Star for their perseverance and the continued commitment to the
strategic direction.
I believe the Company has made significant progress towards accomplishment of these
eight goals.
In my last letter, I wrote, "Our medium-term goal is to grow the Company's revenue
from the current Rs.6,000 crores to over Rs.10,000 crores." I am glad that FY23 was a
rewarding year, and that we are moving in the right direction.
Our journey continues, and I can say with confidence that Blue Star will continue to
excel!
Yours sincerely,
Shailesh Haribhakti
Chairman.