Airconditioning and refrigeration company Blue Star Ltd. has opened a new plant in Sri City, Andhra Pradesh. The factory's first phase has a capacity of 3 lakh room AC units, with the potential to scale up to 1.2 million units by the financial year 2027.

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"We are manufacturing 25,000 room AC units per month, but are aiming to produce about 1 lakh units per month by phase-3," said B Thiagarajan, Managing Director at Blue Star Ltd., in an exclusive chat with CNBC-TV18.

The plant's present-day capacity of 3 lakh room ACs will add to Blue Star's existing capacity of 6 lakh units in the segment, produced at its Himachal Pradesh plant.

Blue Star has invested Rs 350 crore in the present phase of the plant, with provision for an additional investment outlay of Rs 200 crore by the time phase-3 is launched in the financial year 2027.

"We have invested about Rs 156 crore in plant machinery through the government's PLI (production-linked incentive) scheme and are expecting about Rs 73 crore by way of a PLI benefit," Thiagarajan added.

The timing of the plant's launch comes even as Blue Star is projected to end FY-23 with sales of 8 lakh room AC units. It has projected sales of a million units in FY-24. "We have bought an additional 40 acres near our plant in Sri City to manufacture commercial products," said Thiagarajan.

He added that the backward integration at the new plant will reduce the company's dependency on China for components.

Along the lines of its new plant, Blue Star Ltd. has also announced the launch of 75 SKUs built along key energy parameters. The focus, here, the company claims is on affordability with its room AC range starting at an MRP of Rs 29,990.

"We are focusing on product affordability as we want to grow our market share in the home AC segment from 13.5 percent to 15 percent by the financial year 2025," said Thiagarajan.

He added: "We are targeting (revenue) growth of beyond 25 percent (in the financial year 2024) despite margin pressures and supply chain constraints."

With the Indian room AC market presently at 8 million units, the Blue Star boss predicted a significant jump in the next few years: "The Indian room AC market will jump to 10 to 25 million units in the next 2 to 3 years."

A large part of that projection will come from rural markets as Blue Star expects 66 percent of its sales to come from tier-2 and tier-3 towns.

The focus on infrastructure spending in the union budget could also be a key growth driver. Then, there's the focus on consumption too, thanks to the easing of slabs in the new income tax regime.

"Budget tax sops may be overplayed but consumption is increasing for different reasons," said Thiagarajan. "The focus on infrastructure spending and manufacturing capacity expansion will increase employment and consumption. So, IT benefits are merely the icing on the cake or an add-on."

As the company begins executing its growth plans for the remainder of the fiscal, Thiagarajan said supply chain constraints are a reality that Blue Star has learned to live with.

"We have learned to cope with it - our inventory holding is higher than financial year 2020 levels," said Thiagarajan. "Sourcing lead times have reduced and have returned to financial year 2020 levels," he added.

While the company expects lead times to improve in the next few months, global uncertainties remain.

Shares of Blue Star Ltd. are trading 0.71 percent higher at Rs 1,367.90.

(Edited by : Rukmani Krishna)