ANALYST MEET

Presentation by

Ashok M Advani,
Chairman & Managing Director

May 26, 2006

 Agenda

• About Blue Star

• Financial Highlights

• Business Highlights

• The Way Forward

About Blue Star
Leadership

Blue Star is India’s largest and preferred

central airconditioning and commercial
refrigeration company
History
• Founded by Mohan T Advani in 1943
• Over 62 years of profit, growth and excellence
• 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 dividend payment
• Ethics-driven business philosophy
Blue Star today
Total Income Rs 1179 crores
Net Profit Rs 49 crores
Employees 1999
Manufacturing Plants 4
Offices 23
Dealers 570
Enhancing shareholder value
• Six bonus issues and two rights issues since
listing in 1969
• Spin-off of International Software Division into
a separate company – Blue Star Infotech in
2000
• Buy-back of shares in FY02 and FY03
• Exit from Yokogawa JV in 2003
• 5 for 1 Stock-Split recommended by Board in
2006
• Consistent record of dividends
Financial Highlights
 Blue Star Financial Performance (Rs. crores)
2005-06 2004-05
Total Income 1178.62 930.92
Growth over previous year +27% +30%
Operating Profit (PBDITA) excl Non-operating income 86.68 57.85

Profit Before Tax 69.09 52.44

Growth over previous year +32% +13%
Profit After Tax 48.90 39.16
Growth over previous year +25% +20%
Shareholders’ Funds 172.71 148.42

Borrowings 75.87 37.28

Capital Employed 248.58 185.70
Operating Cash Flow 18.36 15.34
Key Ratios
2005-06 2004-05
Gross Margin 22.50% 21.80%
Operating Margin (excl. Non operating Income) 7.40% 6.30%

Return on Capital Employed 30.10% 30.00%

Return on Shareholders' Funds 28.30% 26.40%

Earnings Per Share (Rs.) 27.19 21.77

Dividend Per Share (Rs.) 12.00 10.00

Capital Turnover 4.74 5.01
Debt/Equity 0.44 0.25
Inventory Turnover 6.06 6.98
Receivables (Days Billings Outstandings) 74 78
Total Income
(Rs.crores)
1400

1200
1179
1000
(Rs. crores) 931
800
716
600
601
400 517

200

0
2001-02 2002-03 2003-04 2004-05 2005-06

CAGR = 22.9%
Profit After Tax

(Rs.crores)
60

50
48.90
40
39.16
30 32.55
31.04
27.45
20

10

0
2001-02 2002-03 2003-04 2004-05 2005-06

CAGR = 15.5%
Capital Turnover
6
5.00
5
5.00 4.74
4.71
4
4.19
3

0
2001-02 2002-03 2003-04 2004-05 2005-06
Return on Capital Employed
40%
33.3% 33.8%
35%
30.1%
30%
30.0%
25% 26.7%
20%
15%
10%
5%
0%
2001-02 2002-03 2003-04 2004-05 2005-06
Return on Shareholders’ Funds
30%
26.9%
28.3%
25% 26.4%
24.6% 25.1%
20%

15%

10%

5%

0%
2001-02 2002-03 2003-04 2004-05 2005-06
Earnings Per Share & Dividend Per Share
Dividend per share Earnings per share
(Rs.)
30 27.18

25 21.77

20 18.10
16.79
13.52
15
12
10
9 9
10
6.5
5

0
2001-02 2002-03 2003-04 2004-05 2005-06
Shareholding Pattern

39.61% Promoters

38.40% Indian Public

9.70% Financial Institutions/Banks/

Mutual Funds
8.07% FIIs

4.22% Bodies Corporate

Carry Forward Order Book
(Rs. crores)

Segment March 05 March 06 Growth

Central Airconditioning 356 442 24%

Cooling Products 24 44 83%

Professional Electronics 30 49 63%

TOTAL 410 565 38%

Business Highlights
Business Segments

1. Central Airconditioning Systems

2. Cooling Products

3. Professional Electronics and Industrial Equipment

Central Airconditioning Systems
Revenue growth
(Rs. crores)

900
800 821

700
600 651
500
479
400
300
200
100
0
2003-04 2004-05 2005-06
Central Airconditioning Systems

• Design, manufacturing, installation, commissioning and

maintenance of large central airconditioning plants
• Packaged and Ducted Split airconditioners
• Special application products such as Process Chillers,
fail-safe airconditioners for Telecom
• Energy efficiency as the technology platform; pioneers
of products which save power
Central Airconditioning Systems

• Eco friendly products

• Various service products including Energy
Management, Indoor Air Quality Management, Water
Management; Revamping and Retrofitting for existing
installations
• Value added products for the export market
Central Airconditioning Business Model

 Large systems (above 100 tons)

• Manufacturer of equipment
• System Designing Specialists
• MEP Contractor (mechanical, electrical, plumbing)
• Value added Service Provider

 Packaged systems (5 – 100 tons)

• Manufacturer of equipment
• Marketed through Channels
• System Integrator
• Value-added Service Provider
Central Airconditioning Market Size

Blue Star
30%

Market Size : Rs 2800 crores

Cooling Products
Revenue growth
(Rs. crores)
300
271
250

200 210

150 168

100

50

0
2003-04 2004-05 2005-06
Cooling Products
• Wide range of window and split airconditioners
• Comprehensive range of commercial refrigeration equipment
– Cold Storages
– Deep Freezers
– Water Coolers
– Bottled Water Dispensers
– Bottle Coolers
• Contemporary products with power saving design
• Custom-designed products for export markets
Cooling Products Business Model

• Manufacturer of equipment
• Marketed through Channels
• System Integrator
• Value added Service Provider
• Prime focus on the corporate and commercial
segments
Room Airconditioners Market Size

Room Airconditioners Market Size

Blue Star
4%

4%

Market Size : Rs 2800 crores

Refrigeration Products Market Size

Blue Star
25%

25%

Market Size : Rs 400 crores

Range of Cold Chain & Commercial Refrigeration
Equipment
Equipment supplied by Blue Star
Collection
Grading
Sorting
FARMERS Pre Cooling
Cold Storages
(storage, pack houses) Controlled Atmosphere Storages
High Humidity Storages
Bulk Milk Coolers

Mobile AC&R vans (sourced through

TRANSPORT partners)

Cold Storages
Deep Freezers & Display Freezers
RETAILER Visi Coolers
Milk Coolers
Beer Coolers
Chest Coolers

Water Coolers
CONSUMER Bottled Water Dispensers
Deep Freezers
Professional Electronics & Industrial Equipment
Revenue growth
(Rs.(Rs.
crores)
crores)
90
80 80
70 +35%
60 +18% 59
50
50
40
30
20
10
0
2003-04 2004-05 2005-06
 Professional Electronics & Industrial Equipment
• Representation in India for world-renowned professional
electronic equipment manufacturers from USA, Europe,
Japan such as Hitachi, Thales e-security, Panametrics & Jeol,
amongst others
• 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
Professional Electronics & Industrial Equipment
Business Model

• Import–distribution Business
• Representing renowned manufacturers around the
world
• System Integrator
• Value-added Services Provider
Major National Accounts…
 Some Prestigious projects executed
Parliament House Infosys, Bangalore Hotel Grand Hyatt, Mumbai

Rashtrapati Bhavan IMAX Adlabs, Mumbai DLF Square, Gurgaon

Some International prestigious projects executed

Ritz Carlton Hotel, State Bank of Mauritius, Al Mansoury Plaza,

Malaysia Mauritius UAE
Product Exports

• Product Exports grew by a healthy 34% to Rs 63.11

crores in FY06
• Blue Star has recently enlarged its range of products in
the international markets
• Offers central airconditioning products apart from
traditional cooling products
• These products, which compete with global brands,
have been very well received in the market place
International Projects
• Joint Venture with Arab Malaysian Group in
Malaysia for central airconditioning projects since
1993
• Selective in bidding for international projects
considering the domestic boom
• Bid for a few prestigious projects in the Middle East
and Mauritius
• New branch being opened in Qatar
The Way Forward
 Strategic Agenda
• Pursue profitable growth at a rate higher than market growth
• Remain focused on core businesses:
- Airconditioning
- Commercial Refrigeration specifically Cold Chain
Infrastructure
- Professional Electronics
• Maintain market leadership
• Continue to invest for future growth:
- Capacity expansion
- Technology and new product development
- Brand building
- Channel Development
- Human Resource Development
 Strategic Agenda
• Reward stakeholders including
- Shareholders
- Employees
• Fulfill Corporate Social Responsibilities
• Globalise the Blue Star brand
 Strategic Challenges
• Value engineering and cost management initiatives to
maintain gross margins in a competitive market facing
inflationary cost pressures
Several innovative programmes are in place, and the results
are beginning to show up

• To restore capital turnover to 5.0 by watchful control of

working capital
Strict control of inventory and focus on cash collections

• Attracting and retaining talent

Blue Star is one of the preferred employers in the
engineering industry and Employee Engagement is a
corporate driven programme
Central Airconditioning Systems

• Growth drivers
- Favourable economic environment
- Major investments in infrastructure and
construction
- Boom in IT/ITES, retail, entertainment and
manufacturing sectors
Central Airconditioning Systems
• Competitive Strengths
- Blue Star is the undisputed market leader
- Blue Star is also recognised as Experts
- Comprehensive range of superior products and
services
- Large base of satisfied customers
• Outlook
- Market expected to grow at 25% in FY07
- Blue Star is confident of outperforming the
market growth rate
Cooling Products - Room Airconditioners
• Growth Drivers
- Favourable economic environment
- Growth of small and medium enterprises
- Affordability of airconditioners
• Competitive strengths
- Focused on corporate and commercial segments
- Innovative and specialised solutions and products
such as mega split and hiper split ACs
- Since demand for split ACs is growing more than
window ACs, Blue Star is well positioned
- Reputation as ‘airconditioners from experts’
Cooling Products - Room Airconditioners
• Outlook
- Market of corporate and commercial room
airconditioners expected to grow at 20% in FY 07
- Blue Star plans to grow in line with the market
growth rate
 Cooling Products – Refrigeration Products
• Growth Drivers
- Government’s focus on building cold chain infrastructure
- Emergence of super markets
- Boom in fast food chains
- Horticulture, sea food and processed food exports
on the rise
• Competitive Strengths
- Blue Star is the only branded player offering the
entire range
- Six decades of experience
- Know-how of preservation and life extension for
perishables
- Large installed base
Cooling Products – Refrigeration Products

• Outlook
- Market is expected to open up in a big way;
(FDI in retail?)
- In FY07 market growth estimated at 20%
- Blue Star will outperform the market growth
rate
Professional Electronics & Industrial
Equipment
• Growth Drivers
- Favourable economic environment
- Increased investments in R&D and quality
control, manufacturing & service sectors
specifically steel, petroleum, healthcare, banking
and communication
- Customers’ willingness to invest in
sophisticated high-end equipment
 Professional Electronics & Industrial
Equipment
• Competitive Strengths
- Over five decades of experience in this niche
business
- Strategic partnerships with renowned global
manufacturers
- Value added solutions
- Technical expertise to handle servicing of sophisticated
imported equipment
 Professional Electronics & Industrial
Equipment
• Outlook
- Market growth will vary depending on the
product category
- Blue Star well positioned to grow at a rate
higher than the market
 In Conclusion
• Market is witnessing unprecedented sustained
growth
• Blue Star is well placed to leverage the
available opportunities
• The Company is poised to outperform the
market growth
Thank You