Management Analysis of Blue Star Limited

NSE: BLUESTARCO

ASHOK M ADVANI | CHAIRMAN EMERITUS

Ashok M Advani professional career with Blue Star spanned more than 47 years, including 33 years as Chairman. During this period, revenues multiplied more than 400 times and the Company established itself as a leader in the Air Conditioning and Commercial Refrigeration industry in India. He retired from the Board in November 2016.

SUNEEL M ADVANI | CHAIRMAN EMERITUS

Suneel M Advani spent his entire working career at Blue Star, starting as a management trainee in 1969 and moving up steadily to become President and Vice Chairman in 1984. He retired from his executive position in 2014, and was designated Vice Chairman of the Board. He was elevated to Chairman of the Board from December 2016. After spending 50 years in the Company, including 36 years on its Board, he retired as Chairman of the Board on March 31, 2019. In recognition of his long and exemplary leadership at Blue Star, he was appointed Chairman Emeritus.

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VIR S ADVANI | CHAIRMAN & MANAGING DIRECTOR

Vir S Advani moved to Blue Star as Vice President of Corporate Affairs and later became Executive Director in 2010. In April 2016, he was appointed as the Managing Director of the Company, and in April 2019, he was elevated to Vice Chairman and redesignated as Vice Chairman & Managing Director. In April 2024, he assumed the position of Chairman & Managing Director at Blue Star.

B THIAGARAJAN | MANAGING DIRECTOR

B Thiagarajan has handled various assignments in Service Business, Corporate Communications & Marketing and Corporate Affairs & Planning before he was promoted to President of AC&R Products Group in 2009. He was elevated to the Board in 2013 and was appointed as Joint Managing Director in 2016 before taking charge as Managing Director with effect from April 2019. He currently oversees the Air Conditioning and Refrigeration business operations in India, including Sales & Marketing, Manufacturing, R&D, Supply Chain and Customer Service. He also oversees Corporate Communications and Public Relations functions.

P V Rao | Executive Director

P Venkata Rao joined Blue Star in 1985 and has had a long and successful career with the Company. Throughout his tenure of 36 years, he has held various roles and responsibilities and played a significant role in the turnaround of the Electro-Mechanical Projects business, making it a profitable segment with a differentiated value proposition of Superior Projects Delivery.

Independent directors’ qualification:

• The Independent Directors at Blue Star Ltd. bring diverse expertise in finance, law, advertising, sales, marketing, technology, human resources, and general business management.

• All Independent Directors have confirmed compliance with the independence criteria specified under the Companies Act, 2013, and the Listing Regulations.

• They have registered with the Independent Directors' databank maintained by the Indian Institute of Corporate Affairs.

• All directors meet independence criteria under Section 149(6) of the Companies Act and SEBI Listing Regulations, ensuring compliance and transparency. Their collective experience drives sustainable growth and strengthens corporate responsibility. {2}

Board efficiency {2} :

• The attendance of board members at the company meeting during FY24-25 shows a high level of commitment.

• The board meeting was held 5 times in FY24 and all the members actively participated in all five meetings. However, Independent Directors G. Murlidhar and Vipin Sondhi were unable to attend all meetings as they were appointed mid-year and therefore joined after some of the meetings had already taken place.

• The interval between two consecutive Board meetings was maintained within the statutory limit of 120 days, ensuring compliance with regulatory requirements.

• Shows the efficiency of the board This strong attendance shows strong engagement by the board in corporate governance of the company.

Relationships in the board {2} :

• Sunaina Murthy is the sister of Vir S Advani, the Chairman and Managing director of the company.

• Mr. Suneel M Advani (Chairman Emeritus) is the father of Vir S Advani( Chairman and Managing Director).

Corporate transactions {2} :

The company ensured transparency in related party transactions during FY24, with all dealings on an arm’s length basis and in the ordinary course of business. No material transactions required disclosure in Form AOC-2 as per regulatory definitions.

• A non-current loan of ₹4.46 crore was provided to a joint venture in FY24.

• The company extended a current loan of ₹25 crore in the form of an inter-corporate deposit to a subsidiary in FY24.

• A loan was given to Blue Star Climatech Limited, a subsidiary of Blue Star, to meet working capital requirements. The maximum outstanding amount for this loan during FY24 was ₹35 crore, with ₹25 crore remaining outstanding as of FY24.

• Corporate guarantees were provided to Blue Star International FZCO, a subsidiary, to support its working capital needs as part of the ordinary course of business.

Composition of Audit, Remuneration, and Nomination Committee {2} :

• Audit Committee Composition: The Audit Committee comprises 3 independent directors—Anil Harish (Chairman), Arvind K Singhal, and Shailesh Haribhakti—and one executive director, B Thiagarajan. Shailesh Haribhakti's tenure as an Independent Director ended on March 31, 2024, and he was replaced by G Murlidhar, who joined the Committee on May 2, 2024.

• The Nomination and Remuneration Committee: The Committee consisted of three Independent Directors—Sam Balsara (Chairman), Anita Ramachandran, and Shailesh Haribhakti—and one Non-Executive Director, Dinesh N Vaswani. Shailesh Haribhakti's tenure as an Independent Director ended on March 31, 2024.

• Both Committee's composition complies with Section 177 of the Companies Act and Regulation 18 of the Listing Regulations.

Managerial Remuneration Analysis

• This remuneration table shows that the remuneration was linked to revenue performance as a 21.41% increase in sales (₹7,977cr. in FY23 to ₹9,685cr. in FY24), leading to a remuneration increase of 34.6% in FY24.

• Despite the growth in sales, PBT and PAT declined in FY24 compared to FY23, attributed to the appointment of two new independent directors, Mr. G Murlidhar and Mr. Vipin Sondhi, effective January 30, 2024.

• The median remuneration for the BOD is 30.35x for males and 32.85x for females. Compared to peer company Voltas, the median remuneration is 24x for males and 22x for females which shows that Blue Star has a higher median remuneration.

• 10.26% increase in the median Remuneration of employees in the financial year.

Management Efficiency

• According to management, Segment I’s margin is anticipated to range between 7.5% and 8%, while Segment II’s margin is projected at 8.5% to 9% for Q2FY25. In November (Q2FY25), Segment I achieved an improved margin of 8.3%, while Segment II recorded a margin of 7%. {3}

• Management continues to prioritize investments in manufacturing capacity, R&D, and digitalization initiatives, maintaining an optimistic outlook for FY25 driven by these efforts.

• The management had forecasted a growth rate exceeding 30% for the full summer season and achieved a growth of 28.7% in Q1FY25, aligning closely with their expectations. {3}

• The company aims to increase its market share to 15% in FY25, building on its FY24 market share of 13.75%. {3}

• Although supply chain disruptions and regulatory changes impacted the Commercial Refrigeration segment, management remains confident about its recovery, expecting the segment to grow steadily in Q4FY24 and stabilize post-October, with no major concerns anticipated moving forward. {3}

Full Coverage

Management Analysis of Blue Star Limited

Independent directors’ qualification:

Board efficiency {2} :

Relationships in the board {2} :

Corporate transactions {2} :

Composition of Audit, Remuneration, and Nomination Committee {2} :

Managerial Remuneration Analysis

Management Efficiency

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