OVER THE 3K MARK !

The year 2007-2008 saw the industry netting revenues to the tune of 3054 crores INR. This is exclusively the end-user sales figure. However the over all industry revenue was estimated at 3474 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. With nearly 740 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 been done only twice before, we did all of it again to give continuity to the process.

We are sure the figure which we have arrived at i.e. the actual end-user sales revenue of UPS has definitely crossed 3000 crores INR.

Growth wise it has been a very good year for most of the majors.

Revenue wise : Industry grew by 27 % over one percent more then last fiscal of 2006-2007.

Volume wise : Industry grew by 44% over previous year. This clearly indicates shrinking margins.

One must be clear in mind that this is a very good performance considering the stiff competition and the squeezed margins and especially the lead prices which has gone sky high last year.

Of the total revenue of 3474 crores, Online UPSs accounted for 84% while Offline / Line interactive UPSs accounted for nearly 12% while other products including Servos & CVT accounting for the rest.

Elent controls the CVT market with nearly 60% of the CVT market share. Of the total revenue organized sector accounted for nearly 60% while 25% came through semi organized sector while 15% share still remains with the unorganized fly by night operators.

SD ESTIMATES

Softdisk went about asking that its prediction that the total industry revenue will touch INR 5000 crore mark by March, 2010 trying to know what the Industry leaders thought. Many had little or no doubt to what Softdisk has predicted earlier even though this response was at time when the Global Economies were facing the worst ever economic crises, and Indian market was also shaken by it. According to Mr. Vivek Jain of Delhi based Microtek International Pvt. Ltd., economic meltdown will not be having any major impact on this segment, as the UPS segment is connected with the IT/PC/SOHO MARKET, those users buying PC will definitely buy UPS for protection of their system, branded player in this area will be benefited, and as the rupee has depreciated massively, thereby hitting the trader community, which has been importing cheap product from China, their market share will shrink and the real manufacturer will be able to further increase their market share.

Mr. Deepak Sharma , Country Manager, UPS for Delta Energy system Pvt. Ltd. echoed the sentiments according to him India is big market with huge potential in terms of growth segregated in organized and unorganised sector. Therefore, We agree to this number and infact the figures could be larger. However, we can definitely expect global meltdown and the slowing down of the world economics to have an impact on this, he laments.

He is highly optimistic of Delta’s performance in the coming years, we are well poised for a larger pie of this market in terms of introducing finer products, expanding our geographical reach by introducing new branches, technology innovations, investments in R&D, improved service support, aggressive approach towards market, and last but not the least networking with partners. Besides our aggressive business plans, we are committed to serve the environment and bring about greener technologies, he laments.

Mr. R Chellapan of Numeric Power Systems Ltd., Chennai feels, Softdisk has more scientific way of evaluating the market for its volume and quality then any other agency and the overall UPS sales by 2010 might cross 5000 Crore mark, subject to IT recovery. NUMERIC, which has been the leader in the UPS industry, has taken larger initiatives with most modern manufacturing infrastructure to address the mass production requirements and geographically expanded to over 220 locations as of now.

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.

Well Govt. of India, recent singing of Nuclear Deal with the US, more importantly India getting NSG Waiver at Vienna after long deliberations and oppositions from certain countries is a welcome sign as it has opened gates for Nuclear Power Plants, 27 of them stated to be coming up by 2020.

With many new avenues opening up in bio-medics, telecom, 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. All this augers well for the Indian UPS Industry as Power Quality & Continuity will be the most sought after thing in years to come. So not withholding the resent economic meltdown, the ray of hope for the Power Electronic Industry in the country remains unperturbed.

According to Mr. Sandeep Nair of Emerson Network Power (India) Pvt. Ltd., Thane, Today Indian power conditioning market is getting more sensitive and mature to the evolving needs of the businesses. With India assuming a key role in the Asian economy, businesses have become attuned to the fact that they need to be robust in terms of infrastructure to attract and retain investors. Hence, Business Critical Continuity is being viewed strategically and upcoming businesses are realizing the importance of factoring and aligning it as key component in the overall business model.

In India, the five cities of Mumbai, New Delhi, Chennai, Kolkata and Bangalore have been the largest markets for power products. However, there has been a shift towards B & C Class cities such as Pune, Chandigarh, Lucknow, Hyderabad, Jaipur to name a few. These locations are fast becoming global hubs in terms of R&D, ITES & BPO, Retail, and Manufacturing and given the criticality of operations undertaken in these sectors, there is an increasing need for comprehensive network uptime solutions, Besides, given the upward spiral in terms of PC penetration in these cities, these cities have been showing a marked growth. He laments.

Mr. Pradeep Pimpley Director & Chief Operating Officer of DB Power Electronics Pvt. Ltd., Pune, elaborated on this issue, according to him When we speak about market, we have an enterprise market segment in mind. Most of the top notch UPS companies like Emerson, APC, Socomec, Eaton Powerware, PCI to some extent, are mostly serve this business segment. Earlier when Numeric when associated with Socomec or MGE, was also a part of this market segment, apart from its presence in Banking and Finance segment for lower ratings UPSs. As per our understanding, the market segment revenue (excluding precision A/C, Electrical distribution, etc.) for UPS Systems is close to INR 3000 Cr. Looking at the present market scenario, the revenue collection from this segment shall be within INR 3500 Cr.

Economic slow down has adversely affected IT and IT infrastructure segment. The expansion plans are put on hold by most of the big names in IT, ITES. Even the aggressive companies in IT infrastructure segment are no exception. Their more emphasis on best utilization on existing IT facilities and also human resource. Even the Data Centers projects in telecom segment with few exceptions are either postponed or put on temporary hold. In last six months the demand for high power UPSs above 200KVA has gone down considerably. The situations now is wait and watch and do the things which are of most urgent in nature. If the similar situation continues for next two quarters of 2009, then, the situation in year 2010 will be more tuff. This market will not show growth not more than 10% of the previous year.

Adding further With reference to DB Power, we view the present market scenario as an opportunity to strengthen our presence in Industrial market segment. As you are aware, that, other than Emerson, DB Power is the only company in India, having its strong presence in Industrial market, besides IT and other market segments. 35% of our revenue is from Industrial segment. The economic recession has not so far affected, Energy, Power, Oil & Gas Segment. We expect more business from these segments and continue to maintain our growth. Apart from this, some business revenue is also expected from specialized products what we manufacture for niche market. This shall also contribute to our growth plan.

Now, since DB has become part of Chloride Group Company, in years to come, DB – Chloride shall make its presence felt in the global market also. We are getting good response for customized DB products in neighboring countries as well as in Middle East. He laments.

Mr. Narayan Sabhahit Managing Director, Techser Power Systems Pvt. Ltd, Bangalore, believes that The average market in enterprise segment (in which we operate) is expected to grow at the rate of 15 -20%. The data center market is expected to see a growth of 20 – 25% as compared to last year. However, the remaining IT market growth is expected to the tune of 10 - 12%. Last few years 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, but since melt down, things have been tough, it will correct itself in a quarter or two, he lament. He further adds, 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. This is a good sign to a certain extent Government is also keen in making efforts towards enduring availability of Power. What we see today may not be looking very rosy form the Govt., but I am sure with nuclear deal and Nuclear reactors coming up there will big orders from companies like ECIL, BHEL, BEL and the likes. “We at Techser are fully geared to latch on opportunities when it presents. As always, Quality of the product & support package will remain paramount to us.”, he laments.

Speaking on the overall scenario of the industry Mr. Sabhahit 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.

Mr. Ramdin Sangha of WeP Peripherals Ltd. Bangalore, has a different view. We expect a more modest UPS market growth than we have seen in the recent past due to current market sentiments and expectations of this trend to last till middle of 2009, especially on the enterprise segment. Power is a fundamental requirement in a variety of industries and interestingly, we have seen power business maturing into niche segments & applications recently. It is too early to call and we hope the total industry revenue meets the INR 5000 crore mark by March 2010.

Mr. R K Bansal of New Delhi based Uniline Energy Systems Pvt. Ltd., New Delhi 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 over the last year. 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 in the current financial is expected, however after two good quarters things have slowed down off late clearly showing the impact of economic crises, the world is facing. However we can hope India with strong fundamentals will be able to tide over the crises. What we are calling as meltdown is basically market correction, and from past experiences whenever market corrects itself, it usually over corrects and once the recession stops, it tend to climb up to correct levels. We see an increase of 10-15% in sales taking into consideration the recent recession in the market in JFM quarter. The world cannot ignore an emerging economy like India and hope fully things will settle down for the better. “On our part Uniline is fully prepared with Modular UPS Systems and Three phase UPS Systems with touch screen operations, all set to garner the larger pie of the increasing UPS market.”, he lament.

According to Mr. I B Rao & Mr. M R Rajesh of Powerone Micro Systems, Bangalore, India’s GDP growth is currently hovering around 8% mark which gives us an indication of the industrial expansion that is already happening at a rapid pace. The buoyancy of the Indian economy is reflected in the growth of the UPS category. This growth rate in an economy that is already the world’s fourth largest in real terms (Purchasing Power Parity) is expected to grow the fastest amongst the four engines of world growth, BRIC (Brazil, Russia, India, China).

The key factors for India’s growth in the UPS market are:

  • Increase in PC & server sales resulting in increased demand for UPS.

  • Increased penetration in B, C & D class cities has been another reason for the category growth.

  • Growth in the economy has led to the growth and increase in IT spends of verticals like IT, ITES, manufacturing, BFSI and Government. There by leading to the increased demand for the UPS systems in these verticals.

  • Increased awareness for quality of power has also boosted the demand for UPS systems. UPS provides protection against voltage fluctuations and low voltage.

Talking on fluctuating prices of base material of the UPS Systems, Mr. R Chellappan of Numeric & Deepak Sharma of Eaton both believe that price hike in base material is past its peek, while the cause of concern has shifted to adverse foreign exchange rates. Mr. Chellappan believes this Financial year will educate us about recovering a disaster apart from managing the competition.

Sandeep Nair of Emerson says “In the past few months the net materials cost of all the products have gone up and we are taking all cost cutting measures to control the pricing and offer great value to customers.” We are doing reverse engineering and research to check all the possibilities to reduce cost without compromising on quality, he laments.

Tejas Sheth of Asia Powercom, Mumbai is of a different view, he believes that price volatility in UPS industry was very rear. Currently also raw material prices have varied quiet a bit but the final product prices have really not varied much. Most of the time it is UPS manufacture who has taken the hit. Its only when battery prices go up final product price goes up. In the beginning it was very difficult but over the last 3 quarters end customer is educated by all vendors. Now end customer understands & accept the price change as & when. Though it is not that easy.

According to Ramesh S, Managing Director of Powertronix Pvt. Ltd., Bangalore. ”The metal price fluctuation is definitely disturbing the business. Every time the change in the price takes place, it takes 2 to 3 months to settle down our business from the disturbance. But now Powertronix has already came out with some of the Transformer less UPS Technologies, which solves the problem to some extent to keep us independent from this impact. Off-course right now the lead price is impacting our sales about which we are unable to do any thing.

According to Mr. Ramdin Sangha of WeP Peripherals, there is no other alternative than to explore alternate technology. This can be in the area of battery & transformers. We also need to revisit feature-value equations for customers to try and optimize wherever possible. There is by no means a quick fix solution but we are making concrete & definite plans to ensure that the value we provide to customers remain optimized.

ON GOVT. TAXATION POLICY & EXPENTANCY

Mr. Sumanth Kumar of Bangalore based Powernet Solutions Pvt. Ltd. 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 high ethics in his business.

According to Mr. N P Krishnan of Chennai based Consul consolidated Pvt. Ltd., there is no support coming up from the Govt. side to the power backup industry, Quality power is the basic facility the government should offer to the industries. When the government is failing to provide, then the power conditioner’s industry has an opportunity.

So government should consider the subsidy for the UPS customer. Tax structures are still uneven. Cumbersome entry forms and Octroi still exists in some states, and should go.

We expect the new Govt. to do some work on this front, he laments.

According to Mr. Anil Munjal, Vice President, Marketing of PCI Limited, New Delhi : “The government is quite conscious of the power scenario in the country, yet it seems that all the new addition to the installed capacity do not gives us the comfort of continuous power even by the year 2012. Despite this grave situation, there are no special incentives or support for the UPS installation except in a very limited way. Considering the importance of UPS Systems in a growing economy and keeping in view the power scenario what it is, the Govt. should certainly exempt all UPS Systems from import duties and excise duties.”

After all, what will an importer or manufacturer do with UPS Systems or batteries except to use them for ensuring continuous good power quality and help to generate more affordable and help cut cost for our manufacturing and services and thus make them somewhat more competitive globally, he adds.

Softdisk believes that being a negligible contributor to the GDP, Power Electronic Industry does not receive enough attention from the Govt., we believe the Govt. should realize the importance of Power Continuity as it is the life line of major GDP contributors.

According to Mr. Arun Ghosh of Kolkata based HiTA Technology, “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.

However Tejas Sheth of Asia Powercom believes, that it is the survival of the fittest. In Inverter industry it is only Indian manufacturing which is ruling as they have put in the infrastructure. But in UPS not many companies have put in infrastructure & hence we see major portion being imported. Its just due to their manufacturing capability they are able to become economical. India can also do the same stuff which we see with Inverter manufacturer. But currently yes, it is Chinese manufacturing which is dominating the market.

According to Mr. Subodh Tagare, Director Marketing of Bangalore based APC, the Chinese manufactures have set up world class manufacturing facilities and also have kept labour costs low.

Their expertise in large-scale quality manufacturing and high productivity is reflected in some of their products.

However, the Chinese manufacturers do not seem comfortable with products made using flexible manufacturing systems, complex industrial engineering, dependent multiple vendors or products requiring customization. In addition to this their products may not be of reliable quality.

In order to face this challenge, Indian companies have to follow the principles of globalization - sourcing parts from wherever it is price-effective. Moreover thought has to be directed at eliminating waste, improving co-ordination with vendors, reducing the down time of machines, full capacity utilization and better bargaining with buyers and vendors.

According to Mr. S A Joshi, Executive Director, Aplab Ltd. Thane, UPS is a growing market and is fed to large extent by imported UPSs in small ratings of 1-10 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.

Similarly, Mr. Deepak Sharma of Eaton Power Quality is very clear in his views according to him globalization, like outsourcing, is here to stay. Today, businesses can source goods from around the world, produce their product wherever it makes economic sense, and sell it anywhere. International trade is forecasted to grow at twice the rate of the world gross domestic product (GDP). The economic impacts of globalization are enormous.

Rather than fight globalization and market forces, it is prudent to adapt oneself to changing circumstances, focus on low cost, high quality products backed up with a good service network, to take advantage of the market reality.

Softdisk believes that finally it all boils down to service, companies with better service infrastructure will always survive. We have seen even the companies offering Chinese product doing well as they are at the top when it comes to services.

FOREIGN COLLABORATIONS

Taking of collaborations most of the company in top 20 list 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? Numeric breaking relations with Socomec, it is another company which can be excluded from this list, however there international presence makes it connect to many a foreign companies.

IDEAL UPS & FUTURE TECHNOLOGY

Talking of future technology & Ideal UPS Mr. Anil Munjal of PCI believes that the worldwide power requirement of UPS Systems are normally between 1MW up to 40 MW for clean power requirement by Data Centers or process Industry. In India, this is relatively low since the largest of the Data Centers are still near about 2MW power requirement on an average where there is demand for high power, these high power application can easily be met with Pillar battery less UPS Systems. Technology as a differentiator as for online UPS Systems will be irrelevant as manufacturer rush to perch themselves on the ground of technology. IFBT has become a major technology in product offering. Increasing technological party will focus UPS manufacturers to stress on functionality in equal.

Shankar C Nagali of Bangalore based Cosmic Power Solutions Pvt. Ltd. believes, 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.

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.

According to Mr. Pradeep Pimpley, DB in collaboration with Chloride has come up with high efficiency DC modules which works on the principal of rotating energy storage. The individual modules are available in different power ratings with adjustable DC Voltages to suite UPS specifications. For increasing the back-up time, the modules needs to be paralleled and there is no theoretical restriction on number of modules which can be paralleled. In practice Chloride uses these modules with a paralleling of 8 Nos., which is sufficient to meet requirements of high power data centers. These are the excellent solutions for large power requirements (1000KVA & above). The beauty of this solution is that it can also be used in parallel with existing battery bank or new battery bank to reduce extra stress on batteries. This solution shall eliminate requirement of large battery banks, space, battery related maintenance, battery related safety issues like fire hazard, etc. The estimated life of these DC modules is 15-20 years. The maintenance is practically NIL, and the operating cost over life is reasonably low, he laments.

Softdisk has seen it all over the past 17 years, more often then not some of the companies use a lot of word jugglery in there promos, it must be the same thing which some one else must be offering without making lot of noise and at a better price. It is one area where customers need to be watchful.

Some current technology trends are:

  • Green technology

  • High efficiency machines reducing operating expenses

  • Less harmonics from UPS resulting in low pollution of utility

  • Highest power to footprint ratio which will lower real estate costs

If the economic down slide continues, it will be difficult times for the industry, however Softdisk believes it is just an over-correction & Power Continuity being critical for all sectors, things will normalize by next quarter.

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