GST: Massive demand surge likely after September 22, says Bluestar MD Thiagarajan

Blue Star expects a sudden rush in air-conditioner sales after September 22, when the GST rate cut on appliances takes effect. Managing Director B Thiagarajan said buyers have been holding off purchases and will likely return in large numbers once the lower tax rate kicks in.

“Post 22nd September, there will be more demand because the people have not bought, there will be a sudden rush. So, therefore, the inventory has to be managed,” he told Fortune India.

The company, however, is not worried about meeting the demand. With a weak summer leaving dealers and manufacturers saddled with stock, supply for the festive months is expected to be smooth. “My estimate is that since summer season did not do well this year, there is enough inventory with the dealer and we have enough inventory. September-October will not be an issue. For October-November-December, we will have to see how much is happening around Diwali and then produce for New Year,” Thiagarajan explained.

He pointed out that the industry was banking on a strong summer that never came. “Summer season failed this year. Summer was supposed to grow by 25-30% but it was negative growth of 25%. There is a huge amount of inventory in the market,” he said.

The September quarter is traditionally a lean period for cooling products, but the tax cut could change the rhythm of sales. “Now, the question is that there is some purchase that takes place during this period, it’s not a peak season. But since the GST has come down, and the summer season was bad, it is probable that there is a latent demand and therefore people will end up buying,” Thiagarajan said.

Dealers are expected to face some working capital pressure as they liquidate stock purchased at the higher GST rate, but the inventory cushion, coupled with pent-up demand, could set the stage for a stronger close to the calendar year.