The stock of Blue Star has been beaten down in the market on poor fundamental performance. Drop in orders for the company's Electro Mechanical Projects (EMP) segment which contributes close to 60 per cent of sales, following poor demand from the IT sector and delayed execution of many commercial projects hit the company's top-line growth. The company's operating profit margins too were under pressure on the back of cost overruns in the EMP segment, increase in input prices because of weak rupee.

For the nine months ended FY12, the company's sales was down three per cent. Blue Star incurred a loss of Rs 43 crore against a profit of Rs 98 crore during the same period last year, following a sharp rise in interest costs.

The only segment to have recorded sales growth in the above period was the cooling products division, thanks to the company's efforts to penetrate into the retail segment of air-conditioners from the office space.

The company was unable to pass on input price increases to the customer as most of the projects were on fixed price contracts. Delayed progress of work and delayed receipt of payment from many projects increased the company's working capital requirements. Higher borrowings and the ensuing interest cost impacted profits further.

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