Blue Star vs Voltas Limited: With rising temperatures, air-conditioning has become a necessity, like a fan. Thanks to the heatwave the demand for air-conditioning has risen across India. And this is benefitting companies that are engaged in the manufacturing of these products.
In this article on Blue Star vs Voltas Limited, we will compare two of the biggest consumer durable goods companies in India. Keep reading to find out!
Table of Contents
Industry Overview
As of FY21, the overall market size for air conditioning products in India declined by 25% to an estimated 13,000 crores as compared to 17,500 crores in FY20. This was majorly due to COVID-19-related disruptions and the subsequent lockdowns.
In terms of market segmentation by residential type, split ACs held the largest share of the room air conditioner market in terms of revenue and volume share in 2021. This was mainly due to shifts in consumer preferences towards adopting energy-efficient products and their rising adoption in residential and SME segments.
Natural causes such as global warming have led to a significant rise in temperature across various regions in India. This growing income level followed by people improving living standards has contributed majorly to the growth of the industry.
In fact, India’s air conditioner market is expected to reach USD6,054.96 million by 2027, which is at a CAGR of 6.08% during this period.
About the company
Blue Star
Blue Star Ltd, is an Indian multinational home appliances company. It stands as the country’s second-largest homegrown player in the air conditioning space.
It has a network of 32 offices, 5 modern manufacturing facilities and two new state-of-the-art facilities being set up, 2621 employees, and 3700 channel partners. The company currently has a 13% market share in the air conditioning industry.
Voltas Limited
Voltas is a part of the Indian multinational conglomerate, the TATA Group. It designs, develops, manufactures and sells products including Air Conditioners, Air Coolers, Refrigerators, Washing machines, Dishwashers, Microwaves, Air purifiers, and Water dispensers. It entered the Home Appliance segment through its 50:50 Joint Venture with Arçelik (VoltBek).
The company has 4 manufacturing facilities in India with more than 8600 employees. As of FY21, the company has a 25.20% market share in the room air-conditioning segment. The company also has a 60% market share in the Spinning Machinery.
Blue Star Vs Voltas Limited – Financials comparison
Let us have a look at the financials of both the companies
Blue Star vs Voltas Limited- Revenue & Net Profit
In terms of Revenue, Voltas limited has a higher margin as compared to Blue star limited. However, both the companies saw a decline in their income in FY21.
The net profit earned by Voltas Ltd. is also higher as compared to Blue star as their scale of operation is larger. In FY21, Voltas earned a profit of Rs. 525 Crores whereas Blue Star Ltd. earned Rs 100 crores.
| Revenue & Net Profit (Rs in Cr) | |||||
|---|---|---|---|---|---|
| 2017 | 2018 | 2019 | 2020 | 2021 | |
| Revenue | |||||
| Blue Star Ltd | 4,385 | 4,639 | 5,235 | 5,360 | 4,264 |
| Voltas Limited | 6,033 | 6,404 | 7,124 | 7,658 | 7,556 |
| Net Profit | |||||
| Blue Star Ltd | 123.05 | 143.96 | 190.06 | 143.25 | 100.35 |
| Voltas Limited | 517 | 572.00 | 508.00 | 517.00 | 525.00 |
Blue Star vs Voltas Limited – How much have the investors earned?
In FY21, both the companies had a similar ROE ratio However, it can be seen that in the years before that, Bluestar has had a higher ratio as compared to Voltas. The Return on Equity ratio shows the efficiency with which the company is able to generate profits.
Coming to the ROCE, which is a metric which considers both Debt and Equity in relation to the net income earned by the company. In the last three years, Bluestar has had a higher ratio as compared to Voltas Ltd.
The earnings per share of Voltas ltd have been higher than that of Blue star ltd in the last two years.
| Return ratios | |||||
|---|---|---|---|---|---|
| 2017 | 2018 | 2019 | 2020 | 2021 | |
| Return On Equity (ROE) | |||||
| Blue Star Ltd | 20.31 | 18.98 | 25.16 | 16.99 | 11.76 |
| Voltas Limited | 17.62 | 15.92 | 14.12 | 12.42 | 11.4 |
| Return On Capital Employed (ROCE) | |||||
| Blue Star Ltd | 19.91 | 20.9 | 25.03 | 19.12 | 16.25 |
| Voltas Limited | 23.04 | 21.61 | 17.99 | 17.16 | 15.08 |
| Earnings Per Share (EPS) | |||||
| Blue Star Ltd | 12.88 | 15 | 19.74 | 14.88 | 10.42 |
| Voltas Limited | - | 17.3 | 15.35 | 15.63 | 15.87 |
Blue Star vs Voltas Limited – How does the company’s valuation look like?
The sectoral PE for both companies is 56.62. Bluestar Ltd had a PE of 89.96 in FY21 whereas Voltas had a ratio of 63.11 in the same year. This shows that both the companies are slightly overvalued.
The P/B ratio measures the market’s valuation of a company relative to its book value. A lower ratio is considered ideal. In comparison, Voltas has a lower ratio than Blue Star Ltd.
The EV/EBITDA ratio is used as a valuation tool to compare the value of a company to its cash earnings. The lower the ratio the better it is. Blue star ltd has a lower ratio than Voltas Ltd.
| Valuation Parameter | |||||
|---|---|---|---|---|---|
| 2017 | 2018 | 2019 | 2020 | 2021 | |
| Price to Earnings Ratio (PE) | |||||
| Blue Star Ltd | 53.8 | 50.28 | 34.36 | 30.97 | 89.96 |
| Voltas Limited | - | 35.87 | 41.06 | 30.63 | 63.11 |
| Price to Book Value (P/B) | |||||
| Blue Star Ltd | 8.82 | 9.17 | 7.48 | 5.67 | 10.2 |
| Voltas Limited | 4.12 | 5.26 | 5.07 | 3.7 | 6.64 |
| EV/EBITDA | |||||
| Blue Star Ltd | 26.24 | 26.63 | 18.26 | 14.05 | 30.28 |
| Voltas Limited | 17.33 | 24.37 | 26.13 | 18.56 | 42.82 |
Blue Star vs Voltas Limited – Shareholding pattern in the company
Blue Star vs Voltas Limited- Future Prospects Of The Company
Blue Star Ltd: The main focus of the company is to expand their distribution reach and make the company more eminent in both B2C and B2B segments. Apart from that, the management of Blue Star Ltd will also continue to make their operations more efficient and sustainable.
It will soon foray into the mass premium segment through which it aims to gain a 15% market share in India by 2024.
Voltas Limited: The management of the company is positive going forward about the sentiments of the consumer and expects that the sale momentum will continue.
To better serve its customers, the Tata group of companies will focus more on improving its order book. Apart from that, the company will also work on establishing a presence across other business verticals as well with the goal to become one of the leading consumer durable brands in India.
In closing
In this article, we looked at two of the biggest companies that are engaged in the consumer durable goods business in India. Both the companies have a significant share in the market and are giving a neck to neck competition against each other.
Going forward the company with better strategies will be better positioned in the market. That’s all for this post on Blue Star Ltd vs Voltas Limited. Happy Investing!
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