GROWTH OF THE UPS INDUSTRY

The year 2005-2006 saw the industry netting revenues to the tune of 1826 crores INR. This is exclusively the end-user sales figure. However the over all industry revenue was estimated at 2506 crores INR. The reason why the total industry revenue is much higher then the actual end-user sales is because many a companies procure finished products from others & brand them as theirs, and our survey team gets the turnover from both resulting in duplication. This year we have painstakingly collected this additional information so that we can come to the exact end-user sales figure.

Many a companies do shy away from telling us that they have got the product outsourced from another manufacturer. With nearly 738 companies responding to our survey, giving us the information we sought in great detail, knowing fully well how much the company has manufactured with excise paid. And also trying to find out, which companies procure finished products from others & brand them as theirs, an exercise which has never been done in the history of Power Electronic Industry, before. We are sure the figure which we have arrived at i.e. the actual end-user sales revenue of 1826 crores INR is very much close to the exact size of the industry.

Growth wise it has been a very good year for all majors. Revenue wise : Industry grew by 18.37 % up from 12.40% in 2004-2005. A growth of nearly 6.0% over previous years growth while Volume wise : Industry grew by 39% over previous year. This is a clear indicator of shrinking margins. One must be clear in mind that this is a very good performance considering the stiff competition and the squeezed margins the companies are facing.

Of the total revenue of 1826 crores, Online UPSs accounted for 84% while Offline / Line interactive UPSs accounted for nearly 14% while other products including CVT accounting for remaining 2%, CVT crashed to a all time low. Elent controls the CVT market with nearly 60% of the CVT market share. Of the total revenue organized sector accounted for nearly 60% while 24% came through semi organized sector while 16% share still remains with the unorganized fly by night operators.

BRIGHT PROPECTS

R K Bansal,
Managing Director,
Uniline Energy Systems Pvt. Ltd., New Delhi.

With India assuming a key role in Asia, businesses have become attuned to the fact that they need robust infrastructure to attract and retain investors. According to Mr. R K Bansal of New Delhi based Uniline Energy Systems Pvt. Ltd., upcoming businesses realize the importance of factoring network uptime in as a key component in the overall business model. Apart from understanding the critical load requirements, businesses are beginning to pay special attention to the environment in which the application will run and are thus increasing the demand for power quality audits.

Today, vendors have power solutions specifically designed to meet the needs of an Internet data centre with several enhanced features. Efficiency and reliability most often depend on the type of unit, the load and the environment. The higher a unit’s efficiency, the lower the operating cost. The type of load being protected is an important consideration too. It is to address all this we have entered in to a technical tie-up with M/s Digital Data Systems, Europe. “With their technical know how for assembling higher capacity UPS systems, we will be able to deliver customer satisfaction to the hilt”, he laments. Mr. Bansal believes that believes that the IT industry is in a boom stage and is growing in double figures, however the power electronics
industry is growing at even faster pace, many new avenues are opening up in bio-medics, tele-communications, process automation and in almost every sphere of life, this also indicates the future is very bright keeping in mind the current utility power scenario of the country.

Narayan Sabhahit, MD, Techser Power Solutions Pvt. Ltd., Bangalore.

Many industry stalwarts feel the situation will further improve in the times to come. Mr. Narayan Sabhahit Managing Director, Techser Power Systems Ltd, Bangalore, feels that the growth rate in the market has been encouraging and UPS shipments taking a cue from the PC market have also witnessed a very significant growth. “With UPS industry thriving in interesting times with growth in industries such as IT/ITeS, Telecom, Banking, Insurance and manufacturing. What is relevant is that all of these have their typical power conditioning needs and an all round growth, right from entry level products to high-end UPS can be predicted. As always, Quality of the product & support package will remain paramount to us.”, he laments.

According to Mr. Arvind Tiwari, Chief Operating Officer WeP Peripherals Ltd., Bangalore although growth continues to happen in volume terms in India, some technology adaptations are expected that will change the way an Indian customers perceives an UPS.

Mr. Pradeep Pimpley of DB Power Electronics Pvt. Ltd. believes that the UPS penetration is now taking place in cities and towns outside the top 20 cities. According to him “Today the development process in every vertical is witnessing a speedy growth. Interpretation of word ‘development’ in its correct form, has been taken seriously by the concerned agencies / authorities. The Infrastructure development required to address the challenges of 21st century is being put in to place.

Pradeep Pimpley,
VP Operations
DB Power Electronics Pvt. Ltd., Pune.

This is a good sign to a certain extent Government is also keen in making efforts towards Power sector reforms, building roads, IT, Telecom and other infrastructure.” Indian IT and ITEs industry, the darling of Indian Business, today is placed in a special category by the International community.

Mr. Pimpley believes that all this put together, there is growth pattern happening. These are the areas where continuity of power is very essential, since these companies are facing the Global Challenges. And hence the demand for the UPS and Complete Power solutions is on the rise. Especially in IT, Infrastructure, Small and Medium enterprises, Engineering and Automation, Hospitality, Banking etc.

NEW TRENDS IN UPSs.

Today’s UPS units should be capable of supplying non-linear type loads without de-rating or degradation in total harmonic distortion (THD). This would require the computation of critical electrical loads, before selecting the UPS capacity, considering the power requirements of each piece of equipment to be protected. An ideal UPS system should take care of the output voltage and frequency regulation. Finally, a good UPS should also allow for 25 to 30 percent future expansion. In addition, the service capabilities of the UPS manufacturer also matter greatly in case of mission-critical applications. Some of the recent innovative features that have been introduced in the UPS over the past year are load bus synchronization (multi-level redundancy), remote monitoring software (Web-based monitoring) and DSP-based UPS systems.

R. Chellappan, MD,
Numeric Power Systems Ltd., Chennai.

According to Mr. R Chellappan of Chennai based Numeric Power Systems Ltd : The high-end UPS segment is a value-driven business. Today the driver for the high-end UPS segment is the cost of downtime due to the non-availability of critical systems. Manufacturers and service providers are looking to reduce operating costs and raise productivity. In the early days, companies just concentrated on increasing efficiencies but now the focus has shifted to reducing downtime. As most Indian organisations, especially in the software services and BPO sector, have to abide by strict SLAs (Service Level Agreements), there is strong demand from this segment for UPS solutions. As these facilities cannot be down even for maintenance purposes, it requires a completely different structure of power solution, which encompasses the concepts of multi-level redundancies, right from the grid to the load point (including distribution) and not just for the UPS. Technology-savvy customers insist on solutions based on true online technology for their critical applications in this space, as they would not like their load to be exposed to even frequency fluctuations at any point of time. Neutral isolation also becomes essential in such facilities to avoid any noise or disturbances entering the network. “Numeric Product are well tuned to address all these and that is one of the prime reasons why we have been able to retain and repeat major orders”, he laments.

Sandeep Nair, MD,
Emerson Network Power (India) Pvt. Ltd.

According to Mr. Sandeep Nair, Managing Director, Emerson Network Power (India) Pvt. Ltd. In case of large installations, a customer is more worried about the quality rather than the pricing.  Across the world, Emerson is known for its high quality work, quickest turn around time and best after sales support. At Emerson, we are not box pushers or merely solution implementers. We act as consultants, who recommend the kind of solution that is required for a particular location based on a detailed site study. Because of the above, clients see value in our offering and are not particularly focused on the monetary aspect. Moreover, Emerson has always been on forefront of innovation we come across as the most trusted advisor to the client, he adds.

In the case of the low-end segment, the UPS is bought typically for single PC applications. Most applications are not very critical and hence users can afford to go in for offline or line interactive UPS. These UPS systems offer value for money to the customer in this segment, and price is the deciding factor. Other users in this segment, those whose work is critical, go in for online UPSs.

ARVIND TIWARI, COO WeP

Talking of low-end line interactive UPSs Arvind Tiwari – Chief Operating Officer WeP Peripherals Ltd, Bangalore, which operates only in the Line Interactive segment, says we have been focusing on our offering. WeP realizes that in the future business can be sustainable only if it offers differentiated, value-added products to the consumer. With this philosophy towards the UPS market, we have launched – a multi-functional next generation UPS called as TOP.UPS Under brand “0 WeP”, that offers the consumer added benefits like a mobile charger, Front rotational lamp, Digital clock and CD-rack, and is ergonomically & aesthetically so very pleasing that will become a real desktop assistance.

However Mr. S Srinivasan of Numeric Power System feels that ergonomically & aesthetically designed UPS may be fine but ultimately it is the quality and good after sales service that matters. This is how we have been able sell very large numbers of line-interactive UPS systems in very short span of just over 2 years since launch, he laments.

Softdisk feel that aesthetically designed UPS with high quality good after sales service will come out winners.

I B Rao,
MD, Power One Micro Systems Pvt. Ltd.
Bangalore

THE CHINISE DOMINANCE

For the past two-three years the Indian UPS industry has been facing stiff competition from Taiwanese/Chinese players who by virtue of mass production have advantage on pricing on smaller UPS where as in larger UPS, European players will fight the Indian manufacturers and that too with plants located in China. “We feel there is a trend in the market where slowly manufacturing activities are shifting to sourcing because of low cost kits available for cheaper price but the threat is whether these kits are suitable for Indian power conditions requiring UPS to give higher back up time and extreme temperature fluctuations like high especially in summer. People are simply carried away by price tags rather than compatibility of these kits to our country.

Today no company in India can claim they are actually manufacturing atleast in lower kVA ratings. If doing some cosmetic work and fixing some nuts & bolts amounts to manufacturing then that be it, laments Mr. I B Rao, of Bangalore based Power One Micro Systems Pvt. Ltd.

N P Krishnan,
Director Marketing,
Consul Consolidated Pvt. Ltd.,Chennai.

Mr. N P Krishnan, Director Marketing of Chennai based Consul Consolidated Pvt. Ltd., believes that the Market is as good as ever. However the lower capacity UPS systems upto 5 kVA are no more economical to manufacture in India. Products from China and Taiwan are flooding the market, but of poor quality is not suiting our conditions. We are waiting and watching what turn the industry is going to take., he laments.

Ullas Potnis,
MD, Aplab Ltd., Thane.

Similar views were expressed by Mr. U S Potnis, Managing Director of Thane based Aplab Electronics Limited according to him UPS is a growing market and is fed to large extent by imported UPSs in small ratings of 1-5 kVA, mainly from China, Taiwan etc. because of the economics of that are suitable to most Indian companies. But he too agrees that they are not perfectly suitable to vagaries of Indian Power conditions. He further adds those importing UPS kits make cosmetic changes and sell it out as their brands.

This is cost effective to those with smaller turnover and also those operating from tax free zones like Parwanoo.

He adds at Aplab “Our concentration is on the Middle & Higher range of UPSs. We have a huge demand of these UPS Systems from BPOs & CALL CENTERs”, he laments.

Arun Ghosh,
MD, Hita Technology Private Ltd., Kolkatta.

Softdisk believes that although most of the manufacturers today are importing from China and Taiwan, but certain companies like Delta Energy Systems India Pvt. Ltd., an 100% subsidiary of Delta Group, world wide leaders in Power Electronic Equipments and Best Power Equipments India Pvt. Ltd. marketing BPE-Ablerex brand of UPS systems under a co=branding agreement having manufacturing facilities in China & Taiwan & Hita Technology Pvt. Ltd. are more true to customers on telling them how and where they are manufactured in comparison to certain Indian companies outsourcing to China/Taiwan and branding them as their own.

According to Mr. Arun Ghosh of Hita Technology the UPS market is now polarized to MNC/imported category and local make. The tilt is towards MNC/imported category. This is mainly due to the Latest technology, compactness, look etc. Even local manufacturers now started importing to stay in the competition. In near future, only Imported reliable UPSs will be favored and rule the market like Computers where one can only find MNC / Imported brands nowadays.

Softdisk believes that finally it all boils down to service, companies with better service infrastructure will always survive.

FOREIGN COLLABORATIONS

Taking of collaborations it has been a year full of alliances and divorces. There is not a single company in top 20 list which does not have a foreign collaboration. Either these foreign companies are directly present in India thru 100% subsidiary or thru JV, technical tie-ups or a distribution arrangement. Only exception to this list is Delhi based Tritronics India Pvt. Ltd., headed by Mr. Rajeev Chatrath, who preferred to duck this question when queried, why no tie-ups?

Talking of tie-ups, Consul’s Krishnan is very optimistic, “We are currently celebrating our Silver Jubilee Year and gunning for a turnover of 100 crores this year and at present we are on the right track and target.” The tie up with GE Digital Energy has given us many valuable entries and this will open more doors. “The overall scenario has never looked so good in the past and we are looking forward to a very good year.”, he laments.

Here it worth mentioning that GE has many distributors in India, Consul, Hi-Rel, Infinity Power, SuKam and GE also directly sell to its Global & National Accounts. This results in cross tendering between its distributor making the customer suspect about who will provide the service. GE Digital Energy Country Head Yogesh Bharadwaj when queried on this said each one of them has their territory defined. When pointed out that Consul & Hi-Rel are very much National Players and a case which GE lost due to very reason was brought to notice, he pledged ignorance and said it must be one off case. This certainly is a very peculiar marketing strategy.

MGE decided to part ways with Numeric and decided to go alone. This resulted in Numeric & Socomec joining hands together in a 50-50 joint venture, resulting in yet another formidable formation. Power One tied up with EPI, Uniline has a technical tie-up with Digital Data Systems of Europe. Techser has collaborated with Autometers who inturn have technical collaboration with Powertronix of Italy. Aplab has a technical tie-up with Ward of China for its rack mounted online UPS systems. Electronic and Controls tied up with Newave, with worldwide headquarters in Quartino, Switzerland for their Conceptpowerä Modular three phase UPS solution. Ablerex operates thru BPE, while APC, Emerson, Eaton, Powercom & Delta have direct presence thru 100 percent subsidiaries.

Deepak Sharma, Managing Director,
Eaton’s Power Quality Pvt. Ltd., New Delhi.

Speaking on these new alignments, Deepak Sharma, Country Manager, Eaton Electrical laments “I think these developments have greatly impacted those people who were actually involved in the alignment shifts. To an extent customers now feel more secure while doing business with those
companies that are independently positioned to service their requirements.

Although these collaboration are good from customer point of view who can now choose from a array of best of technology, but the companies already established in India are facing what can be termed as employee pouching.

Talking of Employee Pouching Mr. Sharma says “While a large number of employees were approached and a significant number of them received offers. We have not been severely impacted as actual loss of employees has not been high. Most have opted not to accept.” According to him Eaton is viewed as an ethical, stable and fair employer by most people. Employees have seen that good performance is rewarded and that development inputs are consistently provided thus adding long term value to them.

They also recognize that Eaton Electrical, the parent organization of Eaton Power Quality has ambitious plans for India and that there will be significant growth opportunities for consistent performers. All of these have probably resulted in low turnover amongst employees.”

According to Sandeep Nair of Emerson Network Power India Pvt. Ltd. Industries across have been facing the problem of lack of skilled manpower and attrition. I would like to state here that our employee-friendly HR policies are aligned with the HR policies at Emerson Worldwide. Our training modules, growth plans, policies are designed to add value to an individual professionally and personally. This is one of the key reasons why we have not been affected so much by shortage of manpower in the industry.

Here it is worth mentioning that what Mr. Chellapan had to say “Poaching the employees (knowing well that they are under service agreement and court injunction etc.) is a covered approach as some companies want to enjoy others hard work and easy route using their money power. This may not last long as such poachers have thrown out some people already as their expectations are not met with by some of the people whom they poached. Pouched once are being treated as commodities with no human values. The senior team that has been delivering good results stayed with Numeric. The poaching has disturbed one other leading company also and all such things will have their own effect later.”, certainly a more realistic answer.

Suresh Srinivasan, Managing Director,
Auro Power Systems, Chennai.

Softdisk which interacts regularly with almost all leading UPS companies on regular basis at various levels, has seen it all for them selves.

ON GOVT. TAXATION POLICY

Mr. Suresh Srinivasan of Chennai based Auro Power Systems was very empathetic when he says “GOI introduced VAT to create a uniform taxation, currently 4% but we find some state Govt.’s not ready to implement. This is ridiculous. He further adds “Duty free imports should be avoided as it would totally kill the domestic industry. At least a minimum duty should be levied on imports of all sorts as it would help survive and sustain the domestic industry.” He further adds there should be a single point tax and any number of resale should just attract a minimum of 1% as resale tax, strong words from a man who advocates and practices end-user education as a deterrent to mushrooming small time UPS manufacturers who do not hesitate in compromising on quality and service while eying the price conscious customer.

Mr. Anil Gupta, Managing Director of Microtek International Pvt. Ltd., New Delhi

Similar view were echoed by Mr. Anil Gupta, Managing Director of Microtek International Pvt. Ltd. , there is no support coming up from the Govt. side to the power backup industry, since the import duty on finished products is being eliminated while the part and the components are still not fully exempted from levy of import duty. This inverted tariff structure is acting as a negative element in the much needed industry in the present scenario. It is therefore desirable that the duty on raw material is maintained at lower rate then the finished end product for the development and growth of domestic sector, laments Mr. Gupta.

Softdisk believes that irrespective of type of the commodity there has to be preference given to manufacturers and all customers will enjoy this from the local industries. If there are some entry barriers (at least a min of 5-10%) for all products then customers decide what they want to spend for. In-spite of all the promises, the Government has still not regularized, this happens sooner the better.

CRITICAL PROBLEMS

Intensive introspection has brought to the fore a number of problems that have plagued this industry over the years, but which had been glossed over during the generally prevailing euphoria prior to the slowdown. Most of the industry’s troubles originate in the lack of standards for the product and hence have resulted in host of UPS companies ending up with tie-ups. The Organized player suffers most at the hands of un-organized player. It has been observed that in last 3-4 years, the competition level has gone down. Not because of market pressure, but due to unprofessional approach by UPS vendors themselves. People tend to commit or agree for the things which are not technically feasible. This has created unwanted price pressure on the reputed brands. This needs to be avoided.

To explain it more, take a case of warranty on Sealed Maintenance Free VRLA Batteries (12V). The battery manufacturers specifies battery life in number of charged and discharged cycles, which is some where to 200 – 250. In Indian power conditions, most of the time this will be finished within maximum two years. The battery manufacturers gives one year warranty on battery. The battery is consumable item and still the UPS manufacturers are agreeing for three years warranty, just to grab the business or please the customer. This needs to be corrected. There are many issues related with UPS business which are common for all UPS vendors.

We feel that, the leading UPS vendors should come together and start dialogues to discuss common issues.

After Sales Service

Another key area, of UPS industry which needs focus is the after sales service. Numeric along with Eaton’s Power Quality were the first power electronics company to introduce a web based UPS monitoring system, so their customer don’t even bother to call them. They can just contact online and log a call - thereafter the entire process is automated. So if a call is not attended on time it gets escalated. Call management and call escalation process work very well, this provides their customers superior value for their money. Numeric became the first Indian UPS manufacturer to introduce a toll-free customer care number. A service now practiced by many a leading brands.

Mr. Dalip Sharma, Managing Director Delta Energy Systems Pvt. Ltd.

The Future

Adverse business conditions in the last year had resulted in an increase in price sensitivity. This resulted in the SOHO and home user markets moving to products that were not necessarily feature-rich or built for sustained reliability. The enterprise solutions market however has realized that a “cheaper” UPS is not necessarily a cost-effective solution.

According to Mr. Dalip Sharma, Managing Director Delta Energy Systems Pvt. Ltd. today most corporate are willing to pay a premium for a truly reliable product rather than take the risk of suffering outrages by compromising on quality. “It is pretty much like paying somewhat more for an insurance policy where you are sure that you are truly covered in the event of a mishap.” lament Mr. Dalip. According to him industry is shifting toward smaller more efficient design coupled with competitive prices. What was also noticed was a migration of users to variants of the line interactive technology in the enterprise solutions area as well. This was driven by the fact that the initial investments are lower. However users realized that given the brutal power conditions that exist in India, only true double conversion technology is good enough.

The government, both at the central and state level, driven by the increased use of IT, has been a major buyer for UPS products. This trend is expected to continue in the next few years. Some of the other segments that have seen increase in UPS spending are banking and insurance, telecom and process automation. As the networked economy grows in India, the dependence on reliable uptime solutions will grow correspondingly. Increasingly, SME segments are also becoming IT-savvy and network-dependent. These trends are resulting in a higher dependence on UPS and power protection solutions.

No wonder, the future is really rosy for Power Electronic Industry in India.

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