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• Company overview 4
• Vision, mission and objectives 4-5
• History and growth of the company 5
• Milestones 6-7
• Manufacturing process 8-10

• Products 11
• Research and development 12
• Technology associates 13
• Business associates 13 -14

Marketing activities and management in BLUE STAR 15-17

Human resource management in BLUE STAR 18-24

Financial data analysis 25-41
Reference 42




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.


• 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
• 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.
• 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.


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


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
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,
Middle East thrust begins. Joint Venture (JV) with Al Shirawi in
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
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
1988 Manufacturing collaboration with Mitsubishi
Assembly of personal computers under the brand name ‘Quantum’
1988 7
1989 JV with Hewlett-Packard and Motorola

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.


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.


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, 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 40 0 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

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.


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.



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

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.

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.


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


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 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






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.


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.


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.





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.

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.


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.

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.

• 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.

Career at BLUE STAR

Since engineering and technical expertise are at the heart of the Blue Star value
proposition, engineers constitute the bulk of Blue Star’s recruitment. Consequently,
engineers (graduate as well as diploma) can find technically satisfying and well paying
jobs in the following areas of Blue Star

Air conditioning Projects Division:

Mechanical engineers are deployed in 3 different disciplines i.e. Sales, Design &
Engineering and Construction. Blue Star also entered the commercial building electrical
business since 2008. Consequently, electrical engineers (graduate and diploma) can also
find careers in the Electrical Projects


Blue Star manufactures a wide range of air conditioning and refrigeration equipment at
its five factories. Here, careers can be made in R & D, Production, Production Planning,
Manufacturing Engineering, Quality and Reliability and Procurement. Graduates as well
as post graduates in mechanical, electrical and electronics engineering can find rewarding
careers in Blue Star’s manufacturing group.

Air-conditioning & Refrigeration Service Division:

Here again, engineers constitute the bulk of recruitment. Careers can be made broadly in
3 disciplines viz. Service Marketing, Service Delivery and Service Specialists’ Group.

Channel Businesses:

Packaged air conditioners, room air conditioners, refrigeration products and cold storages
are mostly executed through licensed channel partners. Consequently, engineers as well
as MBAs with an aptitude for marketing can develop satisfying careers in any of the
channel businesses.

Management Services:

Like in all large corporate, the Company has well structured management service
departments such as Procurement & Logistics, Finance and Accounts and Human
Resources. Blue Star looks for talented professionals with appropriate qualifications for
these departments.

Work with BLUE STAR

An industry that’s over Rs. 12,000 crores can be the opportunity to meet your ambitious
career goals. The cooling industry is thriving in a rapidly developing industrial landscape
wherein almost every major corporate and commercial segment needs to cool down with
efficient cooling systems. No wonder the company is slated to grow at a rate of more than
30% in the next few years. And this is the point where the cooling company really
becomes hot.

To propel career in this arena, one definitely need an organization that has what it takes
to command a leadership position in the industry. Blue Star is the India’s largest central
air-conditioning and commercial refrigeration company with over six decades of
experience in providing expert cooling solutions. It has been associated with the most
prestigious installations and projects in the country and enjoys a preferred partner status
in most of the high growth segments. The Company has tripled its turnover over the last
three years and continues to be on a strong growth trajectory.

Chapter -4


BALANCE SHEET as at March 31st 2007

PROFIT AND LOSS ACCOUNT for the year ended March 31st 2007


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

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.


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


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.

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.

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.

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

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.

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%.

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

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.

Table showing analysis of BLUE STAR for consecutive three years 2006-2008
Years 2008 2007 2006
Net sales 222158.7 159458.2 117067.4
Gross profit 53065.8 35189.14 26442.04
Gross profit ratio 23.88 22.06 22.58
Operating profit 20107.81 8932.2 6686.58
Operating profit ratio 9.05 5.6 5.71
Net profit 17409.47 7118.1 4890.44
Net profit ratio 7.83 4.46 4.17
Assets 30367.16 30853.04 25763.5
ROI 57.32 23.07 18.98
Equity 26354.62 21296.64 17271.06
ROE 66.05 33.42 28.31
Assets turnover ratio 5.56 4.02 3.51
Total assets to net worth 1.15 1.44 1.49
EBIT to total asset 66.21 28.95 25.95
Profit available to share holders 66.05 33.42 28.31
Inventory turnover ratio 1.63months 1.63months
Debtor turnover ratio 108.28days 67.47days
Current ratio 0.22 0.42 0.45
Debt equity ratio 0.14 0.42 0.44

The interpretation for profitability ratio analysis is as follows
In year 2008, the GP ratio increased marginally by 1.8% where as percentage increase in

Sales during this year over the previous year are 39%. It is observed the cost of sales
have increased disproportionate to increase in sales (4% approximately) i.e. more than
percentage increase in sales.
Another contributory to lower GP ratio is reduction in selling price to meet the
competition; this information is not available in the published accounts.

Operating ratio increased by 4% during the year 2008 though the previous year, operating
ratios are steady. The cause for this appears to be increase in sales without increasing
operating and general expenses during the year 2008. Net profit ratio is also showing an
increase of 3.5% due to the same reasons as for operating ratios. Return on assets has
increased due to increase in profits without an increase in assets i.e. better utilization of
assets in year 2008. Return on equity has doubled in year 2008 because of net profit
increase and nor increase in the equity of the company in 2008 though in the previous
year 2007 there was a sharp increase in equity.

The following are the financial performance ratios:

Gross profit ratio

Gross profit
Gross Profit ratio = --------------- X 100
Net sales

Gross profit = sales + commission – cost of sales

Net sales = sales + commission

Table showing gross profit ratio of BLUE STAR for consecutive three years 2006-2008
Year 2008 2007 2006
Net sales 222158.67 159458.24 117067.43

Gross profit 53065.8 35189.14 26442.04
Gross profit ratio 23.88 22.06 22.58

The gross profit ratio for last 3 years is almost steady around 22.5 %( average). However
the sales have increase in the past 2 years over 2006 an increase in sales normally should
give increase in gross profit. However in the case of BLUE STAR Co. this is not true.
They are two reasons for GP not increasing in sympathy with sales
1) Selling price per unit might have being decreased to increase the volume of sales
resulting in sales.
2) Secondly the cost of sales might increase disproportionate to increase in sales
The profit and loss account shows that one of the reasons for GP not increasing is
increase in cost of sales over the previous year.

Operating profit ratio

Operating profit
Operating profit ratio = ---------------------- X 100
Operating profit = gross profit – (employee remuneration and benefit + operating and
general expenses + depreciation)

Table showing operating ratio of BLUE STAR for consecutive three years 2006-2008
Year 2008 2007 2006
operating profit 20107.81 8932.2 6686.58
sales 222158.7 159458.2 117067.43
operating ratio 9.05 5.6 5.71

The operating profit ratio has increased significantly. This increase in operating profit is
attributed to increase in sales. The ratio indicated that despite increase in sales value the

operating expenses like office and selling have been contained to get better operating

Net profit ratio

Net profit
Net profit ratio = ------------- X 100

Table showing net profit ratio of BLUE STAR for consecutive three years 2006-2008 ( in

Year 2008 2007 2006

net profit 17409.47 7118.1 4890.44
sales 222158.7 159458.2 117067.43
net profit ratio 7.83 4.46 4.17

Net profit ratio is also increasing like operating ratio.

Return on investment and assets turnover ratio

Net profit
Return on investment = -------------- X 100
Total assets

Table showing return on investment ratio of BLUE STAR for the three consecutive years
Year 2008 2007 2006
net profit 17409.47 7118.1 4890.44
total assets 30367.16 30853.04 25763.5

return on investment 57.32 23.07 18.98

This ratio indicates the profitable use of available assets. The assets increased in the past
two years as compared to 2006. Therefore the return on ratio increasing is a normal
phenomenon but during 2008 this ratio doubled which indicated efficient utilization of
available resources.

Assets turnover ratio

Cost of goods sold

Asset turnover ratio = -----------------------
Total assets

Table showing assets turnover ratio of BLUE STAR for the three consecutive years
Year 2008 2007 2006
cost of goods sold 24201.97 124269.1 90625.39
total assets 30367.16 30853.04 25763.5
assets turnover ratio 5.56 4.02 3.51


Turnover ratios help in identifying how the available assets are managed to yield better
results. The asset turnover ratio is increasing for past 3 years.

Return on equity
Net profit
Return on equity = ---------------------
Shareholders equity

Operating profit
EBIT to total assets = ---------------------- X 100
Total asset

Profit after tax

Profit available to shareholders = ----------------------- X100
Net worth
Table showing return on equity of BLUE STAR for the three consecutive years

Year 2008 2007 2006

net profit 17409.47 7118.1 4890.44
shareholder equity 26354.62 21296.64 17271.06
return on equity 66.05 33.42 28.31
EBIT TO TOTAL ASSETS 66.21 28.95 25.95
Profits available to
shareholders 66.05 33.42 28.31

The return on equity has doubled in the year 2008. Therefore it is an indicator of growth
in shareholders wealth.

Inventory turnover ratio and debtor turnover ratio

Average inventory

Inventory turnover ratio = -------------------------- X 12 months
Cost of goods sold

Opening inventory + closing inventory

Average inventory = ----------------------------------------------------

Average a/c receivable

Debtors turnover ratio = ----------------------------------- X 365 days
Net sales

Sundry debtor opening + sundry debtor closing

Average a/c receivable = ----------------------------------------------------------

Table showing inventory turnover and debtor turnover ratio of BLUE STAR for the two
consecutive years 2007-2008
Year 2008 2007
inventory turnover ratio 1.63months 1.63months
debtor turnover ratio 108.28days 67.47days

Despite increase in turnover the inventory turnover ratio is steady at 1.63 months which
reflects a good inventory control practices followed by the company.
The increase in outstanding debtor from 67.47 days to 108.28 days indicates the company
has modified (liberalized) their credit to increase their sales. The percentage increase in
sales in 2008 supports this view.

Total assets to net worth

Total assets
Total assets to net worth = ----------------
Net worth

Table showing total assets to net worth for BLUE STAR for the year 2006-2008
Year 2008 2007 2006
total assets 30367.16 30853.04 25763.5
net worth 26354.62 21296.64 17271.06
total assets to net worth 1.15 1.44 1.49

This indicates that besides shareholders funds the companies inducting debt in the capital
structure such type of capital structure is set to be levered by using debt as a financial
lever. The company is able to give better return to equity shareholders which reflected
in ROE.

Liquidity ratio

Current asset
Current ratio = ---------------------
Current liability

Table showing current ratio of BLUE STAR for the three consecutive years 2006-2008
YEAR 2008 2007 2006
current ratio 0.22 0.42 0.45

The ideal ratio for current asset and current liability is 2:1. However this need not be
blindly applied in all cases. If a company has more liquid assets there is no threat of
temporary insolvency due to poor current ratio.

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