Blue Star appoints KPMG to value West Asia, Malaysia units

One of India’s largest air-conditioning companies, Blue Star plans to reorganize its overseas business to expand operations and optimize tax benefits


One of India’s largest air-conditioning companies, Blue Star plans to reorganize its overseas business to expand operations and optimize tax benefits. Photo: Aniruddha Chowdhury/Mint
One of India’s largest air-conditioning companies, Blue Star plans to reorganize its overseas business to expand operations and optimize tax benefits. Photo: Aniruddha Chowdhury/Mint

Mumbai: Blue Star Ltd, one of India’s largest air-conditioning and commercial refrigeration firms, has appoi-nted KPMG India to value its Malaysia, Oman and Qatar subsidiaries as part of a plan to reorganize its overseas business, expand operations and optimize tax, two people aware of the development said.

“The valuation is a precursor to a future fund raise into these entities as Blue Star aims to consolidate and increase its overseas market share, especially in the commercial refrigeration segment,” said the first of the two persons cited above, on condition of anonymity.

The company, which posted a revenue of more than Rs3,500 crore in fiscal 2016, plans to transfer ownership of Blue Star Qatar WLL, Blue Star M&E Engineering (Sdn) and Blue Star Oman Electro- Mechanical Co. LLC to a new wholly-owned subsidiary in the UAE, it said in an exchange filing on 10 November.

“The process will be completed in the next five months, following which the company will weigh fund raise options. However, the immediate objective of this exercise is to optimize tax payable from overseas income,” said the second person.

“The reorganization of holding structure of the group’s exports business and joint venture companies in Malaysia, Oman and Qatar is part of the overall consolidation plan to help expand its overseas footprint,” said Neeraj Basur, chief financial officer of Blue Star.

“Middle East constitutes a big portion of Blue Star’s overseas market and the reorganization will help the company to serve its clients better. There are no immediate plans to raise funds in the overseas subsidiary after the new UAE-based wholly owned subsidiary of Blue Star gets incorporated,” Basur said.

An email sent to KPMG India remained unanswered till the time of going to press.

Founded in 1949, Blue Star has factories in Ahmedabad, Dadra, Thane and Himachal Pradesh, catering to three segments—electro mechanical projects, unitary products and professional electronics and industrial systems.

While consumer or home electronics are for everyday use/private use, professional electronics are used by professionals to achieve a higher level of precision and quality.

The electro mechanical segment undertakes turnkey projects including design, manufacturing, installation, commissioning and maintenance of central air-conditioning plants, packaged/ducted systems, and variant refrigerant flow systems. Under unitary products, the company offers room air conditioners for residential and commercial application as well as commercial refrigeration products and cold chain equipment.

The three segments contributed 52%, 43% and 5% respectively to Blue Star’s consolidated net sales in FY16. Net sales outside India contributed 13%. The company’s major export destinations are countries in West Asia, Africa and the Saarc region.

The company’s profit after tax (PAT) stood at Rs108 crore on a total operating income of Rs3,627 crore in FY16 against Rs51 crore on a total operating income of Rs3,158 crore in FY15, at a consolidated level.

Blue Star forayed into air purification business in FY16, launching its water purification business in October 2015.

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