B Thiagarajan, MD of Blue Star, spoke to CNBC-TV18 about the impact of the government's corporate tax cut on their business.

Welcoming the corporate tax cut move, Thiagarajan said, “Our effective tax rate was 32 percent last year and it would have been somewhere around 31 percent this year. So, setting aside certain concessions we will forego if we move to this regime, we should be gaining in terms of EPS anywhere between 4.5 percent and 5 percent.”

“Unlike a few other corporates, we will pump in this extra money into the capital expenses. We have been on an indigenization mode and we will accelerate indigenization or reduce in-China dependency. That is how we will utilize that additional income,” he added.

Speaking about the capex plans, he said, “This particular year we are looking at indigenizing deep freezers. So close to around Rs 120 crore is being invested in Vada in Maharashtra. Sri City plant which we had acquired the land there, we would have looked at FY22-23, we may end up accelerating that because the room air conditioner market continues to be good. I think we will accelerate the capital investment there. So the entire plant should get frozen sometime in January-February 2020.”

On the air conditioners, Thiagarajan said, “Unlike many other durables, air conditioners have been witnessing and even during Onam season we witnessed good growth. I think that will further grow.”

Talking about the demand ahead of the festive season, he said, “The Onam season is an indication because there were floods. I thought Onam season will be a washout, the markets are priced close to around 40 percent growth over last year, but last year also there were floods. The year before there was around 12 percent growth. Going forward I think the festival season should be somewhere between 12 and 15 percent growth. Having said that, the demand is for lower-end products and 40 percent of the sales have been through consumer finance schemes.”

On the discounts, he said, “I do not think there is room for more discounts because the dollar has moved up. We have to keep a close watch on the exchange rates because copper and quite a few components still get imported. So, I do not think there is headroom for margins. The competition is stiff and the reach is becoming very complex; with 65 percent of the market for us is tier III, tier IV, and tier V. To reach out, the advertising expenses we have to pump them. So, I do not think there will be price dilution. I would be happy if we maintain last year margin levels and marginally improve that.”