INTRODUCTION

COMPANY OVERVIEW

Blue Star is India's largest central air-conditioning company with an annual turnover of Rs 2270
crores, a network of 24 offices, 5 modern manufacturing facilities, 650 dealers and around 2500
employees. Blue Star has business alliances with world renowned technology leaders such as
Rheem Mfg Co, USA; Hitachi, Japan; Eaton - Williams, UK; Thales e-Security Ltd., UK; Jeol,
Japan; ISA, Italy and many others, to offer superior products and solutions to customers. The
Company has manufacturing facilities at Thane, Dadra, Bharuch, Himachal and Wada which use
state-of-the-art manufacturing equipment to ensure that the products have consistent quality and
reliability. Blue Star fulfills the air-conditioning needs of a large number of corporate and
commercial customers and has also established leadership in the field of commercial refrigeration
equipment ranging from water coolers to cold storages. Blue Star's other businesses include
marketing and maintenance of hi-tech professional electronic and industrial products. Blue Star
primarily focuses on the corporate and commercial markets. These include institutional, industrial
and government organizations as well as commercial establishments such as showrooms,
restaurants, banks, hospitals, theatres, shopping malls and boutiques.

VISION, MISSION, OBJECTIVES

• To deliver a world class customer experience.

• Focus on profitable company growth.
• Be a company that is a pleasure to do business with.
• Work in a boundary – less manner between divisions to provide best solutions to
customers.
• Win our people’s hearts and minds.
• Place the company’s interest above one’s own.
• Encourage innovation, creativity and experimentation in what we do.

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 • Build an extended organisation of committed business partners.
• Be a good corporate citizen.
• Honour all personal and corporate commitments.
• Maintain personal integrity.
• Ensure high standards of corporate governance.

HISTORY AND GROWTH OF COMPANY

Blue Star was founded in 1943, by Mohan T Advani, an entrepreneur of exemplary vision and
drive. The Company began as a modest 3-member team engaged in reconditioning of air
conditioners and refrigerators. An expanding Blue Star then ventured into the manufacture of ice
candy machines and bottle coolers and also began the design and execution of central air-
conditioning projects. Then came the manufacture of water coolers. In 1949, the proprietorship
company set its sights on bigger expansion, took on shareholders and became Blue Star
Engineering Company Private Limited. Ever since, there has been a constant and profitable
growth. Blue Star diversified and took up agencies for Material Testing Machines and Business
Machines. The export arena beckoned and the Company began exporting water coolers to Dubai,
where in fact, 'Blue Star' soon became the generic name for water coolers. The sixties and the
early seventies witnessed Blue Star continuing to expand and thrive. A team of dedicated
professionals aided Mohan T Advani in ever furthering his vision of a profitable company
dedicated to its ideals of professionalism and success. Employee strength crossed the 1000 mark
and the company went public in 1969 to become Blue Star Limited, as it continues to be called
today. Blue Star crossed the Rs. 500 crore milestones in 2000 and the Rs. 600 crore milestones in
2002-03. With the boom in construction activity and increased infrastructure investments, the
Company leveraged its leadership position to grow aggressively. In the following three years, the
Company nearly doubled its turnover, clocking Rs 1178 crores in 2005-06. Even more than size,
Blue Star enjoys an enviable reputation as an ethical corporation, ever mindful of its obligations
towards customers, shareholders, dealers, business partners, employees and the environment in
which it operates.

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MILESTONES

4
Year Event
1943 Mohan T Advani establishes Blue Star Engineering Company as a
proprietary firm
1946 Blue Star secures Melchior Armstrong Dessau agency
1947 Worthington selects Blue Star as Indian Partner. Manufacturing of
ice candy machines and bottle coolers begins. Central air-
conditioning system design and execution begins
1948 Manufacture of water coolers commences
1949 Proprietorship converted to Private Limited Companies
1954 Blue Star selected as distributor for Honeywell
1955 GDR Testing machines distributorship begins
1957 Perkin-Elmer tie-up marks the start of the electronics business. GDR
business machines agency commences
1960 Total Income crosses the Rs 1 crore mark
1964 Total employment crosses 1,000
1965 Techniglas Pvt Ltd set up to manufacture insulation material
1969 Factory moves from Colaba in Mumbai to Thane
1970 Hewlett- Packard distributorship commences
First skyscrapers of Mumbai – Air India Building, Express Towers
1972
and Oberoi Hotel set-up – all air-conditioned by Blue Star
1972 Total Income crosses Rs 10 crores. Employment crosses 2,000
Water Cooler manufacturing license granted to Yusuf Alghanim,
1974
Kuwait
Middle East thrust begins. Joint Venture (JV) with Al Shirawi in
1977
Dubai
1977 Hitachi Medical Equipment distributorship begins
1978 Industrial Division commences activity
1980 Bharuch Factory set up
1980-86 Major AC and R projects executed in the Middle East
1983 International Software Division inaugurated in Seepz
1984 York technology collaboration begins
Manufacture of centrifugal packaged chillers commences at Thane
1985
Plant
1986 Total Income crosses Rs 100 crores
1987 Yokogawa Blue Star JV formed
1987 Gandhinagar factory set up for EPABX systems
1988 Blue Star becomes India’s largest central air-conditioning company 5

1988 Manufacturing collaboration with Mitsubishi

MANUFACTURING PROCESS

Blue Star understands that skilled manpower and other staff members are an indispensable part of
the manufacturing set-up and the management should work shoulder to shoulder with them.
Management grade staff too is put through training programs on various aspects of manufacturing
and business. Also, performance awards are announced every year. Apart from enhancing the
skills of the staff, such initiatives create a positive, firm and lasting emotional bond between staff
and company. This in turn contributes to greater productivity.

MANUFACTURING SYSTEMS

The factories make extensive use of IT to enhance productivity and product development
capabilities. All our factories are ISO 9001: 2000 certified BAAN ERP implemented in 3
factories and Himachal under implementation.

RAW MATERIAL AND MATERIAL MANAGEMENT

Sheet metal fabrication

A high degree of repetitive accuracy in sheet metal fabrication is achieved by using specialized
equipment, CNC metal forming machines. The raw material used is prime quality, corrosion-
resistant, galvanized steel for enhanced life of the product. The equipment used for processing the
steel includes CNC machines such as an Amada turret punch press, a LVD / Amada hydraulic
press-break. All these allow for high quality cabinet fabrication within tight tolerances

Power coating plant

The state-of-the-art powder coating plant covers a wide range of very specialized process
equipment, and is fully automated. A water-softening unit treats the raw water before it is utilized
in the automatic hot spray pre-treatment system. It provides an even distribution of chemicals,

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controlled by an auto dosing mechanism that maintains the chemical bath composition with the
help of electronic sensors. After a final mineral water rinse, the components pass through a dry-
off oven under dust-free conditions to remove all traces of moisture. The components are then
transferred into the powder painting booth for coating, where temperature, humidity and dust
levels are controlled. The powder painting equipment, supplied by Nordson, USA, is equipped
with automatic electromechanical oscillators, for even powder deposition.

Desiccant dry air-with a dew point of minus 400 C - helps avoid any moisture
contamination of the powder. A 'smart spray' mechanism senses the conveyor movement and
component geometry to adjust powder flow. Polyester powder - ideally suited for out door
applications - provides the maximum protection against UV deterioration and corrosion. The
components finally pass through a temperature-regulated curing oven to achieve desired gloss and
surface hardness.

Heat exchangers

Experienced engineers create heat exchanger designs using high precision design software, which
are then validated in our test labs. Blue Star also makes sure that the designs are energy efficient
for optimum heat transfer.

Fin and Tube: The sophisticated coil shops have some of the most advanced machines from
USA, Japan and Korea. The Burr Oak coil line produces energy efficient DX heat exchangers.
These have plain or enhanced split fins with grooved copper tubes for maximum heat transfer
efficiency. Then the source plain and inner grooved copper tubes with coated aluminum fin stock
of international quality from leading manufacturers to fit our specifications.

Shell and Tube: Blue Star has shell and tube exchangers using specially enhanced surface copper
tubes and shell design as per Blue Star or TEMA standards. Blue Star uses Heat Transfer
Research Inc. (HTRI design software for these heat exchangers).

Plate Type: Blue Star products also incorporate stainless steel plate heat exchangers for
specialized process applications.

System tubing

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3-axis CNC copper tube-bending machines from Japan fabricate wrinkle-free system tubing to
exact dimensions for a perfect stress-free fit. Special purpose machines carry out operations like
end closing, flaring and forming for good joint formation. Prime quality copper tubes sourced
globally help in optimum product performance.

Brazing

The brazing process is carried out in an inert atmosphere to avoid oxidation and the resultant
impurities from contaminating the refrigerant system. Specially selected brazing equipment and
fixtures are used to produce high quality brazing. The joints are pressure-tested to check weld
strength and leakage. The coils are then tested for fine leaks with ultra-sensitive electronic leak
detectors. An automated coil brazing line from Korea ensures consistent quality brazing and leak
proof joints.

PUF installation

Blue Star fabricates CFC-free PUF insulated panels by using the latest equipment from Cannon.
This enables to achieve a uniform and constant density of insulation for air handling units,
telecom shelters and cold storage panels. Blue Star supply panels of up to 6 meters in length and
25 mm to 125 mm in PUF thickness. PUF insulation expertise finds use in a wide range of
applications such as Air Handling Units, water coolers, deep freezers, reach-in coolers and
mortuary chambers.

Assembly and testing

The final product is assembled sequentially on conveyors, with in-built quality checks during
assembly operations. Pneumatic tools permit torque-controlled rigidity, and specially coated
corrosion-resistant hardware provides firm locking. Each machine is then electronically tested for
leaks and run-tested for performance and electrical safety parameters before packaging.

PRODUCTS

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CENTRAL AIRCONDITION

The building blocks of Blue Star’s solutions are its products. The most comprehensive range of
air-conditioning products in the country. A wide range of models are available in each product
category to ensure that the air-conditioning system design is implemented without any
compromise. All products have been designed on the energy-efficiency platform, and offer a host
of advanced features.

Room air conditioners

By being an expert in the area of central air-conditioning, it also helps us understand the cooling
requirements of a diverse range of applications. This expertise, knowledge and the skills have
helped us to have some of the most technologically advanced and energy efficient air-
conditioning solutions for small spaces.

Commercial Refrigeration

Having been the leaders in commercial refrigeration, we have a wide range of products catering to
various small and large scale industries

Cold storages

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Blue Star’s Cold Storage Division offers us a wide range of cooling and preservation solutions.
Solutions tailored made to suit any industry that requires storage of perishable produce over
extended periods of time without suffering any loss of quality – be it in look, feel, touch, taste or
chemical composition. Industries that find Blue Star’s cold storage solutions enormously useful
include the agriculture sector including horticulture and floriculture units, manufacturers of fresh
produce of any kind, food processing units, pharmaceutical industries, seafood and other similar
industries, as well as the dairy and hospitality sectors, including hotels, restaurants, and eateries.

Specialty Cooling Products

Blue Star has developed specialized products for process applications, IT/ITES, telecom and the
dairy industry. It has diverse experience and have a deep understanding of the demands on air-
conditioning and refrigeration in each industry. This knowledge and domain expertise has helped
in designing and manufacturing a range of specialized products which ensure that critical
applications work seamlessly.

RESEARCH & DEVELOPMENT

Blue Star offers complete engineered products and solutions with differentiated features. With the
extent of climatic conditions varying across the nation, our products are designed to suit the
specific local conditions. Considering the shortfall of Electricity supply, all the products are
designed for energy efficiency. Blue Star products are most preferred in the domestic market
because of energy efficiency features. In the offer, they are widest range of products for varying
applications. This is possible due to extensive research and development that goes behind the
products.

All our factories are equipped with robust R&D facilities and a lot of importance is given towards
continuous up gradation. Currently R&D team constitutes nearly 20% of the manufacturing
division work force. This is a testimony to the significance that R&D has in the product
development process at Blue Star. R&D team is encouraged to update with the latest techniques
and processes in the field and thus are sent to various exhibitions / site visits across the globe.
Consultants from various industries are also hired for specific industrial design projects.

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Blue Star also believes in associating itself with leading global organizations that have done path
breaking work in the field of innovations. The company also has tie-ups with reputed companies
for knowledge sharing and technical institutions like IIT, Mumbai, where individual projects are
executed. R&D at Blue Star also handles customer specific requirements, which require
tremendous amount of expertise in that particular domain. Software that R&D team has deployed
and which is used on a regular basis - Pro-Engineer, Solid Edge, AutoCAD, Pro Mechanics,
R&R, HTRI, Mechanical Desktop, Rhino, Alias, CATIA, IDEAS, Solid Works, Patran,
Hypermesh, Femap, Ansys, Nastran, Fluent, Flow Mechanica and Moldflow. Software packages
including those for system design, air handling unit selection and heat exchanger optimization.

TECHNOLOGY ASSOCIATES

Blue Star has associated itself with global knowledge partners who have been leaders in specific
product manufacturing. Through this partnership, Blue Star has been able to command a
leadership position in the domestic market. Blue Star initially tied-up with York in the mid 1980s.
It has been able to leverage this expertise and learning to manufacture its own Chillers. We now
manufacture our own range of Screw, Scroll and Process Chillers. For Cold Rooms, Blue Star had
tied-up with Kolpak, USA and Heat Craft for Freezing Units. Rheem, USA not only provided
technical support for building the world class Dadra manufacturing unit, but also shared technical
expertise. The foray in precision equipment business was achieved with support from Eaton
Williams. Blue Star now manufactures Precision Control Packaged Units for domestic and global
markets.

BUSINESS ASSOCIATES

In keeping with its win-win approach, Blue Star treats its vendors as not just suppliers, but as
business partners and tries to build long term associations that are profitable both to the suppliers
and to Blue Star. In line with this thought, Blue Star has entered into long term arrangements with
its key suppliers, many of whom are world leaders. For instance, Blue Star sources its
Switchgears from Siemens, Compressors from Danfoss of Netherlands and Refrigerant from
DuPont. General Electric Corp of USA provides Motors, while Hanbell of Taiwan supplies Screw
Compressors. Copeland of USA assists in System Design.Over the years, Blue Star has built a
strong network of suppliers around it. Not only that, the company also helps in the development

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of its smaller suppliers by providing various business related and technical inputs to them. For
instance, since the vendors are also manufacturers, they will benefit from some of the good
manufacturing practices that Blue Star adopts. Blue Star has educated a number of small vendors
on the importance of ISO certification and encouraged them to get certified within a certain time
period. This approach has greatly boosted the morale of vendors and firmly bonded them with
Blue Star. Also, it ensures that the suppliers walk side-by-side with Blue Star on the path to
growth.

MARKETING ACTIVITIES AND MANAGEMENT IN BLUE STAR

EXPORTS

Blue Star has been exporting its products to the Middle East for over two decades. Blue Star
products have stood the test of time in some of the most difficult climatic conditions in the world
such as UAE, Qatar, Bahrain, Oman and Kuwait. On offer it has a comprehensive range of
products such as chillers with screw and hermetic scroll compressors, a wide range of air handling
and fan coil units, duct able packaged and duct able split air conditioners including the heat pump
versions. Blue Star also offers unitary products such as window and split air conditioners, deep
freezers, cold rooms, water coolers and specialized air conditioners for precision control
applications, Variable Refrigerant Flow (VRF) Systems with digital scroll technology and process
chillers with frequency modulation. These world-class products are manufactured at our state-of-
the-art manufacturing facilities in India. All the manufacturing facilities are ISO 9001: 2000
certified, and are powered through integrated Enterprise Resource Planning (ERP) software.
Moreover, most of the products go through stringent tests on reliability and performance in our
test labs.

Blue Star offers a complete range of solutions for heating, ventilation, airconditioning and
refrigeration for industrial and comfort applications.

These include:

• Detailed system design

• Engineering system design

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 • Equipment manufacture
• Procurement
• Construction at site
• Plant commissioning
• Plant operation and maintenance
• Retrofit, revamp and modification of existing plants

SUPPLY CHAIN MANAGEMENT

Rapid growth coupled with volatility of input costs necessitated an agile and adaptable supply
chain. The Blue Star focused on both the efficiency and responsiveness of all aspects of the
supply chain by improving all round execution capability. A combination of short term and long
term view along with the support of business associates helped the
Company tide over the uncertainty and turbulence of increasing input costs. The supply chain
adequately met the increased demands of the market place supporting greater channel and project
business success.

CHANNEL DEVELOPMENT

Blue Star has around 180 systems dealers who exclusively deal in the Company's systems
businesses consisting of packaged air conditioning and cold rooms. These dealers are provided
technical expertise, installation and service competence of a high order. On the other hand, room
air conditioners and refrigeration products, which are simple to install, are sold through a larger
network of approximately 600 dealers. Most of them deal exclusively with Blue Star products in
the HVAC domain. A few are multi-brand, multi-product dealers. The Company has established a
Channel Management Centre to oversee the policy framework, certification and development of
dealers and also put in place a Training Department for training channel partners. During the year,
the Company implemented a number of initiatives in order to strengthen the competence of the
dealer channels and make them more robust. A Management Development Program (MDP) for
systems dealers was held to impart the essentials of managing a business professionally. Systems
dealers were also put through a Sales Management training programme in order to enhance their
sales competence.

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OVERVIEW CLIENTS CASE STUDIES

Malls are mushrooming everywhere. Everyone wants to go to Malls for different reasons such as
for shopping, cosmetics, grocery, jewellery or just to eat out. Malls are seen as a one-stop-shop.
Children enjoy playing, in the play area, while parents, can do shopping. All this calls for a
wonderful, entertaining and engaging ambience; an ambience in which, people feel comfortable
and fresh. This certainly requires an intelligent airconditioning system that will deliver cooling to
customers 24/7

Blue Star with its enormous experience and wealth of expertise can deliver a system, which will
make visitors / guests comfortable and at the same time save money for the mall owners. Blue
Star airconditioning systems offer "value for money". Be it the packaged AC systems or the
Central AC systems, all are exacted to deliver what the customers expect, "Comfort for the
deserving"

Blue Star in the last few decades has done the airconditioning of some of the best and biggest
malls in the country.

These malls stand testimony to the capability of Blue Star to deliver cooling solutions to meet
budget provisions.

The Packaged ACs and Chillers are capable of delivering high Energy Efficiency Ratios.
That means you get more cooling for the same money spent. We have the largest capacity floor
mounted packaged ACs in India. These save enormous floor space while consuming less energy
to deliver more cooling.

The Screw Chillers fitted with 'Hanbell' compressors, are proven for remarkable flexibility,
admirable reliability and tremendous power saving potential.

HUMAN RESOURCE MANAGEMENT IN BLUE STAR

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HUMAN RESOURCE MANAGEMENT

Blue Star takes pride in the fact that the invaluable technical and business knowledge it has
acquired in 65 years as an organization in the field of air conditioning and refrigeration is perhaps
the richest in the country. During the review period, with the substantial increase in business
volume, the Company increased its total head count to 2565 (including the absorbing of 124
employees from Nasser Electricals) as on March 31, 2008, an increase of 18% over the previous
year, while Net Sales grew by 39%. Organizational productivity continued to grow in terms of
sales per person and value added per person. The focus on people development continued at the
same pace with special attention to developing the technical skills of dealers and business
associates. Training in soft skills for Blue Star employees was enhanced with the introduction of
some new training programmes. In order to sustain the positive culture of the Company, a new
corporate programme was introduced called 'The Blue Star Way'. This programme is intended to
create an awareness of, and strengthen the Blue Star Way of working.
A 360-degree feedback system continued to be used to measure behavior of Senior
Managers pertaining to the Corporate Values and Beliefs. Environment, Health & Safety (EHS)
has gained relevance as a new management discipline in recent times. In order to improve its
performance in the EHS domain, the Company decided to provide a corporate focus by creating a
new department called 'Environment, Health & Safety'. The EHS Department will be responsible
for creating standards and conducting workshops to sensitize all employees and business partners
on the EHS norms to be followed in the course of business. The Welfare initiatives include
providing life insurance cover to all employees through HDFC Standard Life Insurance, annual
medical check-ups for employees above the age of 40 years, and the Company subsidizing the
medical insurance premium for dependent parents. The Mohan T Advani Education Trust
disbursed scholarships to employees' children pursuing higher professional education while Blue
Star Sahayata Foundation extended financial assistance to a number of deserving cases for
mitigating emergency medical expenses. Harmonious and constructive relations between the
Management and workmen helped to maintain a cordial work atmosphere and achieve business
growth.

CORPORATE SOCIAL RESPONSIBILITY

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Eco friendly initiative

Blue Star has made significant progress towards minimizing and even eliminating the
environmental hazards resulting from CFCs in certain refrigerants used for cooling. As a matter of
fact, Blue Star is one of the few companies selected in India for funding by "The Multilateral
Fund for the implementation of the MONTREAL PROTOCOL". Blue Star has already introduced
'ozone friendly' centrifugal chillers using HCFC-123, the safe refrigerant replacing CFC-11. Blue
Star also markets absorption chillers which use water as refrigerant. All Blue Star reciprocating
chillers already use HCFC-22 refrigerant which is friendlier to the environment than the older R-
12. The Company actively promotes wider use of large refrigeration systems using ammonia as
the refrigerant. In fact, Blue Star is a member of the International Institute of Ammonia
Refrigeration, USA.

Social initiative

Blue Star firmly believes that organizations must look beyond making profits and should
contribute to the development and welfare of the society. This attitude is most evident in the
outreach initiatives organized by Blue Star's factories. Blue Star factories take active participation
in providing temporary shelters and essentials for the victims of an earthquake, sponsoring health
check-ups and health education programs in local schools. The families of operators are an
integral part of social development. Blue Star gives them appropriate advice on personal matters,
financial and investment matters. The family members are also imparted training on diverse
subjects. They are taught English as well.

Environmental initiative

Blue Star's factories have been exquisitely landscaped with lawns and flowering plants dotting the
campus. Trees have also been planted on a proactive basis even outside the Blue Star factories. As
a responsible organization, special ETP plants are installed to dispose off the wastes generated.
Additionally, all our factories are designed for rain water harvesting.

RISKS AND CONCERNS

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RISKS
The Company has in place an effective Risk Management framework under which all internal and
external risks across the various businesses and functions are periodically identified, assessed and
acted upon by the risk owners to minimize and mitigate their impact. These processes are also
periodically reviewed to ensure their effectiveness.
The Company continues to satisfactorily address the various financial risks relating to interest
rates, exchange rates and credit risks as well as operating risks arising out of high input costs,
changes in technology, customer preferences, increasing size and complexity of contracts and
competitive pressures.

CONCERNS
While the strong fundamentals of the Company and it's sound financial base have placed it in a
strong position to face the vagaries of the market, the overall uncertain economic scenario
coupled with local and global inflation and the high price of oil are causes for concern and
consequently a slow down in the economy could impact the growth of the Company to some
extent in the coming year. The Company will continue to remain vigilant and will proactively
take steps to mitigate the adverse impact, if any, arising out of these concerns.

Employee development

The benefit of a mature business organization with 65 years of operational excellence is that there
are several good systems in place. From a prospective employee point of view, Blue Star offers
the following advantages:

• There are well designed induction and technical orientation programmes. There is a
Corporate Technical Training Organization which delivers a variety of technical training
programmes for the AC&R business. Engineers who join the Electronics Division get a
chance to go abroad for training with the Principals. The Corporate HR runs a menu of
non-technical soft skills training programmes such as Business Communication Skills and
Business Etiquette.

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 • The Blue Star Company has many well designed, time tested HR practices such as setting
the performance objectives at the beginning of the year, reviewing employee performance
every year through an annual appraisal system and an annual compensation review based
on market surveys. In addition to a market aligned salary structure, Blue Star also has a
fairly attractive incentive scheme wherein, the employee gets an incentive based on his
department’s performance coupled with his own performance rating.

• Typically, graduate engineers can look forward to entering real managerial grades within 4
to 5 years. Once an employee enters the managerial grade, he is exposed to a variety of
management education programmes including some programmes at IIM. Ahmedabad.

• Last, but not the least, Blue Star rightly boasts of the Blue Star Way, which is founded on
a set of values and beliefs which have evolved over time. These beliefs have made Blue
Star a highly respected, secular organization. The Company has an excellent track record
of employees working for many decades with the Company. In today’s high attrition
market, the Company continues to enjoy the privilege of retaining many of its employees
for many decades, thanks to its positive work culture.
• The company lays stress on continuously upgrading the skills of operators, so that they
keep increasing their productivity in the face of changing manufacturing practices.
Operators are put through training programs, on passing which they are given certificates.
In the long term, these certificates also become a yardstick for measuring employee
performance. Learning through cross functional activities is encouraged. In addition to
that, staff members and operators are encouraged to exercise yoga, play sports and
participate in community development initiatives. This helps in the overall development of
the individual and improves performance. Kaizen and 5S are an integral part of all factory
operations.

FINANCIAL PERFORMANCE AND DATA ANALYSIS OF BLUE STAR

FINANCIAL PERFORMANCE

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The analysis of the financial performance for the year ended March 31, 2008 in comparison to the
previous year is as under:

1. INCOME
Total Income for the year at Rs.2270.09 crores increased by 41% over the total income of
Rs.1607.41 crores in the previous year. The Total Income includes a profit of Rs.35.32 crores on
sale of shares held in Rolastar Pvt. Ltd. Excluding this profit, the Net Income from sales, work
bills, service and commission increased by 39% from Rs.1594.58 crores in the previous year to
Rs.2221.58 crores in 2007-08.

2. COST OF SALES, WORK BILLS AND SERVICES

The cost of sales, work bills and services during the year was Rs.1690.93 crores and was 76.1%
of the Revenue from sales, work bills and commission as compared to 77.9% in the previous year.
The reduction was attributed to lower cost of imports due to appreciation of the rupee vis-à-vis
USD, value engineering and better material procurement.

3. EMPLOYEE REMUNERATION AND BENEFITS

To support the significant increase in revenues, the number of employees went up by 18% to 2565
at the end of the year. Consequently, the employee cost increased by 25.7% from Rs.122.86
crores to Rs.154.41 crores, including an incentive provision of Rs.18.16 crores as compared to
Rs.11.65 crores last year. The employee cost was 6.8% of the Total Income as compared to 7.6%
for the previous year.

4. OPERATING AND GENERAL EXPENSES

Operating and General expenses amounted to Rs.153.21 crores, increasing by 28.9% over the
previous year. As a percentage of Total Income, the Operating and General expenses for the year
were lower at 6.7% as compared to 7.4% in the previous year.

5. INTEREST
Interest cost at Rs.7.56 crores for the year was lower than the interest cost of Rs.9.55 crores in the
previous year primarily due to the increase in cash flows and tighter control on capital employed,
and was 0.33% of the Total Income as compared to 0.59% in the previous year.

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6. DEPRECIATION
Depreciation charge for the year was marginally higher at Rs.21.97 crores compared to Rs.20.90
crores in the previous year.

7. TAXATION
Provision for taxation for the year was Rs.67.93 crores. This included a provision for tax of Rs.8
crores on long term capital gains on sale of investment and a short provision of Rs.1.8 crores
towards tax for earlier years. After adjusting the above, the provision for tax was 28.1% of the
Profit before tax, as compared to 23.1% in the previous year. The increase was mainly due to the
expiry of the tax holiday benefit on profits of the Dadra plant from the year under review.

8. NET PROFIT
Net profit for the year was Rs.174.09 crores as compared to Rs.71.18 crores in the previous year,
representing an increase of 145%. Excluding an amount of Rs.27.32 crores being the profit on the
sale of shares (net of tax thereon), the Net Profit was Rs.146.77 crores, an increase of 106% over
the previous year. Profit before Tax for the year stood at Rs.242.02 crores, a rise of 161% over the
previous year. Excluding the profit of Rs.35.32 crores on sale of shares, the Profit before Tax was
Rs.206.70 crores, an increase of 123%.

9. CAPITAL EXPENDITURE
During the year, the Company incurred capital expenditure of Rs.47.66 crores as compared to
Rs.39.20 crores in the previous year. This includes capital expenditure incurred for the first phase
of the Company's fifth manufacturing facility at Wada, Maharashtra, which commenced
production during the year. In addition, the Capital Work-in-Progress at the end of the year was
Rs.18.09 crores as compared to Rs.2.41 crores at the end of the previous year.

ANALYSIS OF BLUE STAR

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 Analysis of a company consists of measuring its performance and ascertaining the causes of
the performance. The characteristic of a company for its success are identified (whether
quantitative or qualitative) by means of company analysis. Quantitative indicators of a company
analysis are the financial indicators and operational efficiency indicators. Financial indicators are
profitability indicators and financial position indicators analyzed through income and balance
sheet statements respectively of a company. An analysis of published statements provides
analysis of past. Usually the formats as published by the company might not be directly
understandable to investors. To overcome this, the investors have to identify the factors/variables
that are needed separately. The budgets and cash flow statements give an investor an insight into
the future functioning of a company. Future profitability and operational efficiency can be
worked out. The performance indicators are also linked to shares through ratio analysis to
evaluate performance for investment purposes. The important measures are earnings per share,
dividend per share, price earning multiple etc…

The financial statements of company are the base data through which company analysis is
performed the financial statements reflect the nature of business of the company. The financial
statements are presented in the form of balance sheet and income statement. These statements are
prepared annually after the close of financial year as on 31st march mandatory. It is like financial
snapshots, the companied financial situation at a moment of time i.e. balance sheet as on ______
it lists companies assets and liabilities. It is given in two halves. The top half shows the sources
of funds invested in the business and the bottom half the application of these funds. These
statements as such do not convey any message useful for investors take decision about the
companies past performance and future projections. Ratio is statement of relationship between
two related variables expressed as a percentage fraction or a decimal. Accounting ratios derived
from accounting statement (financial statement). They are classified as profitability ratios,
turnover ratio, leverage ratio, etc. The ratios provide a measure for interpretation of the company
past performance.

RECENT DEVELOPMENTS

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Blue Star at the Threshold of VRF technology. The technology (called variable refrigerant flow or VRF),
invented by Daikin of Japan, is now being developed in India by large and established players including
LG, Voltas and Blue Star. Blue Star, which currently imports and sells Sanyo VRF units in India, plans to
manufacture its own VRF ACs this year, and will position its products competitively against imported ones.
Blue Star recently executed four major projects to set up perishable cargo handling refrigerated facilities at
Ban galore, Pune, Hyderabad and Chennai airports.
Blue Star, leaders in airconditioning, have air conditioned many prestigious establishments such as
Parliament House, Bombay Stock Exchange and Reserve Bank of India. It is this very same expertise that
goes into their new window air conditioners.
Blue Star sets aside Rs 8 crore campaign- The Rs 601-crore Blue Star Ltd— central airconditioning and
commercial refrigeration major—has earmarked a total investment of Rs 8 crore on a new campaign for
this summer, Blue Star Ltd vice-president (marketing) N Sivasankaran told FE. He added: “This is part of
our new brand-building exercise for promoting our entire range of Blue Star ACs. The main objective
behind the move is to showcase Blue Star’s strengths in providing cooling solutions. The value proposition
for the new campaign is ‘Cooling solutions to help your business do better’ ’’.
Blue Star is planning to widen its reach for its recently launched ‘Help line Campaign’ to many markets in
India which will promote its toll- free number 1600-2222-00 to address common customer queries. It
includes queries such as what capacity of AC to buy, whether to buy a window or a split AC among other
things. Besides, it will also provide an SMS option for cell phone numbers. For the purpose, the company
has set up a centralized call centre at Thane in Mumbai.

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CONCLUSION

Blue Star is the largest single source for air-conditioning equipment in India.
Blue Star is India's largest and most preferred air-conditioning and commercial refrigeration
company.
Through its strategic long-term tie-ups with key and critical auxiliary manufacturers, Blue Star
provides its customers many benefits.
The brand’s vision is to deliver excitement to the consumers, by providing comfort at its best.
Complete control over core components & technology.
The company has strong potential to grow & that through greater innovations.
In addition to corporate sector the company has the option to step into the local households by
understanding their psychology.
Blue Star is India's largest central air-conditioning company.
In short it can be said that the company is still growing by making constant efforts.

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BIBLIOGRAPHY

www.google.com
www.information.com
www.bluestarindia.com
www.godrej.com
www.wikipedia.com

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