See market growing 20% in this festive season: Blue Star

Blue Star saw 50 percent growth in Onam sales against its expectation of 25 percent growth."Post summer, we have been looking forward to the onset of the festival season and Onam always indicates how the rest of the period is going to move and it was excellent. Therefore, I am optimistic about rest of the season," B Thiagarajan, Joint MD of the company told CNBC-TV18.Thiagarajan expects the market to grow by at least 20 percent during the upcoming festive season, that is October to December period.Below is the verbatim transcript of B Thiagarajan’s interview to Nigel D'Souza and Reema Tendulkar on CNBC-TV18.Nigel: Could you tell us how is the festive demand picking up, how has been the last recently celebrated Onam festival as well, did you see a big spurt in demand, could you give us some numbers?A: The Onam season was extremely good. Last year we had grown significantly in Onam, more than 50 percent we grew last year. Therefore, my own expectation is that we should be growing somewhere around 25 percent or something but the market surprised us. We grew by over 50 percent this Onam season. That was quite encouraging. It was unexpected.We all had a very great summer and post summer there was a lull period, we have been looking forward to onset of the festival season and Onam always indicates how the rest of the period is going to move and it was excellent.Given the fact that in Kerala the effect of the Pay Commission arrears, payment or something won't have taken place at all and it is not the Middle East situation is very encouraging. Even then it performed well, so therefore I am optimistic about rest of the season.Reema: Summer was good, Onam sales have been 50 percent versus your expectation of only 25 percent. Give us your expectation for the upcoming festive season -- this October to December period, what should be the expected growth?A: My own expectation is minimum of 30 percent we should do, the full season put together as far as Blue Star is concerned. I am thinking the market should grow by at least by 20 percent. Always we have maintained this that we will grow by 10 percent more than the market. So, therefore my own expectation is that for the festival season 30 percent as the internal goal.Nigel: In the last quarter there was a bit of hiccup in terms of margins. Do you expect that to stabilise going ahead in the coming quarters given that we have seen demand coming back, are there any discounts that you have given?A: No, we didn't have any problems in the margin as far as our segment two is concerned in Q1 at all. The prices were stable, margins were good. There were inventory issues, June -- we carried forward some inventory into July-August. Therefore little bit of discounting is happening but at the same time margin will not be affected because the foreign exchange is stable.Nigel: What did margins look like then?A: I have always said that the operating margin will be between 9.5 and 10.5 percent should be the operating margin outlook for the year. That is what we have been maintaining. We will be able to maintain that.Having said that if at all there is a concern for me or for the industry, it is the rising media cost. So, you are seeing many articles about advertising spends. There are many brands, many categories are fighting for that. Therefore, we may have to step up our advertising spends, that is all the concern is. But my outlook of 9.5 to 10.5 percent is manageable.Reema: One number if you could give us. What would be the margins you would make if Blue Star products were sold on e-commerce platforms like Flipkart and Amazon and many others because sales over there tend to be a lot cheaper. So, do they take up some commission from you all and therefore the margins Blue Star would enjoy be lower? What would be the number there?A: I want to state that the consumer durables category around 12 percent is sold through the e-commerce portals and air conditioners was at five percent. Last year festival season was very good, I earnestly expect that that volume grows to reach somewhere around 10 percent. So, e-commerce channel will contribute to significant growth, that is point number one.Point number two is that as far as the margins are concerned, it is around 1-1.5 percent lower. Blue Star as a brand is not fighting based on the price platform at all. We are interested in using that as a channel of convenience, efficient channel and to reach out to more customers. Still there will be 1.5 percent lower price. There is no doubt about it at all. Even then the operating margin for the whole business will not be affected.