The Down Turn
The year 2008-2009 saw the industry netting revenues to
the tune of 3267 crores INR. This is exclusively the end-user sales
figure. However the over all industry revenue was estimated at 3518 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 715
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 thrice 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 has definitely crossed 3200 crores
INR.
Growth wise it has not been a good year for most of the
majors with a few exceptions.
Revenue wise : Industry grew by 7 % a drop of over
20% over the last fiscal of 2007-2008.
Volume wise : Industry grew by 18% 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 in
view of the global economic meltdown.
Of the total revenue of 3518 crores, Online UPSs
accounted for 87% while Offline / Line interactive UPSs accounted for
nearly 12% while other products including Servos accounting for the rest.
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 INVESTIGATES
Softdisk
went about investigating weather there was actually an impact of
recession, if so how they tackled the situation arising out of it.
According to Mr. Pradeep Pimpley, Executive Director DB Power Electronics
Pvt. Ltd., the real impact of Global Economic Slow Down has been felt in
the second half of financial year 2008-09. The first half of last year was
not too bad, since, the order book was based upon the enquiries for the
previous year. The major segment effected due to this is IT and ITES. The
reason is obvious. Most of the IT Companies are either from US or has
major US clients. The effect on IT segment is also varied depending upon
the type of Software development work they carry out for their customer
segment. ITES companies like Call centers are badly hit. The
overall effect is putting expansion plans on hold. They have given more
stress on best utilization of their existing facility and infrastructure.
Almost flat growth for big IT companies. However, the growth continued to
some extent in telecom segment. The large telecom data center business
though slowed down in pace, however, exhibiting positive trends. The
telecom segment even during recessionary trend continued its positive
trend for tower infrastructure. This has kept mid segment market for UPS
going well (upto 200KVA). A small power data center with power requirement
of 20, 60, 200KVA rating are also going as per plans. The Industrial
market segment covering Power, Energy, Manufacturing, Steel, Cement, Oil
& Gas, always experienced steady and normal growth of 10-12%. The same
is continuing in this year. AS DB Power Electronics is equally strong in
Industrial and IT Segment. We were never in Government Tender business or
in the business where the UPS ratings is less than 10KVA, where mostly the
requirement are from banking segment i.e. branches, ATM centers, etc. We
have concentrated more on our strengths i.e. product range from 40 -
300KVA, re-worked our prices by taking our vendors in confidence,
organized our sales and service operation and given more stress in
enhancing customer relationship, laments Mr. Pimpley while Mr. Manoj Jain
of Microtek International was of the view that meltdown has no 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. He adds the recessive trend has not affected certain
segments, which are not luxury items, UPS and INVERTERS are not luxury
items and are very affordable, so we didn’t felt any impact of
recession. As such this gave us opportunity to be more aggressive with our
strong brand push.
On
the other hand Mr. Rajaram Rammoorthy Managing Director of Electronics
& Comntrols Power System Pvt. Ltd., feels the slowdown has given an
opportunity for all companies to review themselves and take adequate
precautions to remain profitable if the trend continues for a longer
period of time. Generally, employee costs and other overheads were
reviewed to make them more efficient, he laments. He further adds Low
prices are being quoted by players who have high volumes who also give
them support. This gives a feeling to customers that others are quoting
with high margins. To compete with the competition, everybody is trying to
quote low prices which will not be sustainable in the long run.
Mr.
Narayan Sabhahit Managing Director of Techser Power Solutions Pvt. Ltd.,
says although many companies were affected due to recession, Techser did
not feel it to large extent except pressure on Margins. Our strategy was
simple hold on to existing customers and do not take unhealthy hit on
Margins. Since we work largely on BFIC segment, we in fact posted a growth
in our turnover compared to previous year. He further adds, largely
recession had a disastrous effect in Real estate, Automobile and IT/ITES
segment. Therefore irrespective of being a small or big, whoever depended
on these worst hit segments felt the slowdown. Of course the larger
players will have cushion of other segments and comparatively cope with
pressure better.
Mr. Tejas Seth of Managing Director, Asia Powercom
believes that rosy days are over, we have to learn to live with less.
Similarly Mr. Ramesh S, Managing Director, Powertronics says the recessive
trends have definitely disturbed our sleep. But also helped us understand
our potentials. It helped us to review our old customers, increased the
post sale revenues. At the same time we also took a look on the
diversification in products and also the engineering services. As a
product we have added solar Inverters, Solar charge controller, Solar UPS
etc.We have started the Electrical cabling, wiring activities, solar
solution consultancy etc,. Other way the recession has also made us to
focus on the system standardisation, Expenses management efficiently.
Accoring
to Mr. Gaurav Burman, Director Transaction Business, APC - In the slow
down market scenario, it is extremely important for both the vendor and
the channel to hear customers’ voice and draw out a systematic roadmap
for managing customer relationships. Most customers in the SME-large
enterprise were trying to curtail or postpone spends in the economic
downturn. This makes it increasingly important to build customer
relationship and ensure satisfied customers by making both the pre and
post sales experience enriching., he laments.
He adds, We also took some initiatives to support our
partners and help them tide over the recession months (1) To alleviate the
burden on our distributors and partners, we consciously took steps to ease
out the inventory levels. Partners were also given the option to refresh
inventory every 15 days (2) There was higher emphasis on generating
end-customer pull through impactful promotional campaigns. (3) We also
focused on customer segments that were relatively more insulated from the
recessive trends eg. Home, SMB, Government.
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.
Driven by the guiding concepts of "dare to
change" and "dedication to innovation", every business
group at Delta has set aggressive growth targets. Our sound financial
background and healthy cash flow serve as another competitive advantage in
this difficult global economy. We plan to stay firmly in our areas of core
competences. Delta is a company that consistently monitors market trends
and takes on challenges to change and innovate. The economic downturn
brought to our attention the need to expedite our speed of change and new
product development. Delta is running at full speed to meet customer
expectations and we are dedicated to taking the company to the next level
of success. Delta is a strong multinational company, with lot of depth and
strong base. Delta managed to grow in spite of the slowdown in the economy
primarily because it could offer its customers a wider product range
backed by excellent service support, and technical expertise to offer the
right fit solutions.
Moving
on to the question of Low Quotes
Mr. R Chellapan of Numeric Power Systems Ltd. feels, Softdisk has more
scientific way of evaluating the market for its volume and quality then
any other agency and would be more then aware of who is quoting low and
how. According to him this has been the trend always. There is a serious
shortcoming observed from the market that some of the UPS companies have
started manipulating the Battery Amp Hour capacity by changing the labels
like 100 Ah to 120 / 130 Ah knowing well such practice will tarnish the
reputation of the entire industry. However they are short-lived ones and
Industry will get corrected in the long run. Such companies are able to
survive in situations where customers do not test the real battery
capacity including WEIGHT of the battery as per catalogue plus UPSs
complete performance at Full Load back-up time. He further adds The market
crisis has hit IT growth / IT spending in certain verticals (like
Automobile / IT / Textiles / Corporate considerably). Numeric managed this
situation by distributing the Risk & Business Coverage a bit wider and
managed to retain the market share.
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, 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. Already India has signed Uranium purchase agreements
with three four countries which enable existing nuclear plants to work at
full capacity by 2012.
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 the Power Electronic Industry in the country remains
unperturbed.
According
to Mr. R K Bansal of Uniline Energy Systems Pvt. Ltd. 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.
According
to Mr. I B Rao & Mr. M R Rajesh 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
more than 10% maximum than the previous year.
Adding further they say we view the present market
scenario as an opportunity to strengthen his company’s presence in
Industrial market segment. Extremely low prices are unsustainable if
quality/ service levels are to be maintained. Price erosion beyond a point
hurts all stake holders – manufacturers, channel partners, customers,
etc. If it continues beyond a point it will lead to disastrous
consequences for vendors.
Mr.
Ramesh S Managing Director, Powertronix Ltd., Bangalore, believes that “In
the past past year the net materials cost of all the products 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. He further adds when we fixed expenses to keep the
cash flow going, some people started quoting very low. But surely they can
not repeat and sustain but certainly some of listed companies could do it
for long time. That is to play a different game to keep the share price
high. Even they have revert back at some point of time.
Tejas
Sheth of Asia Powercom is of a different view, he believes that price
volatility has hit the mid sized players more then their un-organized
peers. We maintain offices at various location which increases our
overhead, smaller/local player does not have to care about all these
things and is not hurt to any extent. He further adds as far as recession
is concerned worst is over, the growth rate will not be rosy in future any
more & one has to be ready to face the stiff competition. We have seen
even bigger player foraying into unknown territories as far as the product
diversification is concerned.
Softdisk believes that prior to last year earlier few
years the growth rate in the market was 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 going has been tough, it
will correct itself in a quarter or two. Further the UPS penetration is
now taking place in cities and towns outside the top 20 cities.
According
to Mr Sumant Kumar of Powernet solutions Pvt. Ltd. Slowdown phase has
shown us the worst though things may all that bright in the near future
but certainly today the development process in every vertical is
witnessing a 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 Powernet 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 not withstanding the slowdown.
According to Mr. Arun Ghosh India’s GDP growth
despite slowdown is currently hovering around 6% mark which gives us an
indication of the industrial expansion that is already happening at a
rapid pace. The rigidity of the Indian economy was reflected during global
meltdown. As such 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 faster then any other
country barring China. The key factors for India’s growth in the UPS
market are would be:
-
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 will lead 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 shift to adverse foreign exchange rates. Mr. Chellappan
believes this Financial year will educate us about recovering a disaster
apart from managing the competition.
According
to Mr. Deepak Sharma of Eaton Power Quality the UPS industry will see a
steady demand in future. Many companies had stalled expansion and
investment plans and had started extending the life of their existing
equipments. These companies are now re-evaluating their plans, providing
valuable opportunities for the power quality industry. We think that
India's power management industry is going to grow at a rate of 15-20%
CAGR - current period excluded.
Mr.
N P Krishnan of Chennai based Consul Consolidated Pvt. Ltd. believes that
the market has been customer driven and price plays a decisive role in
most cases. With volatile lead prices leading to fluctuating battery
prices it will be difficult to sustain low prices. Customer demands have
become unrealistic which are difficult to meet at prevailing prices and
payment terms – asking for 3-5 years warranty / life of batteries which
battery manufacturers do not provide. AMC rates are also very low which
will lead to poor sustainability. In addition, the UPS is losing its
respect and stature as a product. The UPS industry needs a makeover.
According Ramesh S, Managing Director of Powertronix
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 to some extent to keep us independent from this
impact. Off-course right now the lead price is impacting our sales which
we are unable to do any thing about this.
Mr.
Shankar C Nagali of Bangalore based Cosmic Power Systems Pvt. Ltd. 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 now 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 Mr. Ramdin Sangha of WeP Peripherals,the
market is segmented in terms of users who are either cost driven, value
driven or technology driven. End users who are only cost driven may take
the advance of certain players quoting extremely low prices. But by &
large customers today are looking forward to a comprehensive value added
solutions and do not mind paying for better technology also, in case it
helps environmentally, social causes. In such scenarios the capability of
the vendor to offer high technology, complete product range will govern
the prices for the customized solution and it may not be the only
denominator for selection process. Delta firmly believes that even during
difficult economic situation a good solution will command the right price.
ALTERNATIVE ENERGY SOLUTIONS
"Mr. R Chellappan of Numeric Power Systems
believes that there is no other alternative than to explore alternate
technology. This can be in the area of Solar. “We have developed a Solar
Hybrid UPS, which is doing exceedingly well.”, we are the first and only
UPS manufacturer which has a fully Solar Powered fabrication plant in
Chennai, he proudly laments. Our total installed capacity in Solar may
well exceed 500 KWp. To further the growth of our Green Energy projects we
have created a wholly owned subsidiary named Numeric Solar Pvt. Ltd. More
recently we have installed 10KWp Solar Project with a 2 way inverter using
MPPT Technology in Kenya and another 8 KW plant in Japan. He is quick to
add 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 one has to take concrete & definite plans to ensure that the value
we provide to customers remain optimized."
Mr. Pardeep Pimpley Executive Director DB Power
Electronics Pvt Ltd., says “Very few are aware about DB's contribution
to renewable energy segment, since, we have never boosted or advertised on
our competency in this field. We have installed 100KW Grid Interactive
Solar PCU in collaboration with Central Electronics Ltd (CEL) Government
of India, way back in 1996, when this concept was unheard of.
We remained silent for few years, since there was not
much development seen in the market. Since year 2003, we have again paid
our attention and developed complete product range from 1-250KW single PCU,
which is the highest of its kind for indigenous development. Other than
DB, who claim to be in this field are mostly importing Solar PCU's from
different countries like Australia, Germany, etc. Over a period of time
with partnership of Tata BP Solar, we have installed more than 5.5 Mega
Watt Solar Power with different ratings. We also make Wind and Solar
hybrid systems. Around 200KW power is being generated in Thailand. We are
very much active in this field and we are waiting for the right
opportunity for future development in the field of Renewable energy.”
The Research & Development is the biggest asset of DB Power
Electronics, Pune.
Mr. Deepak Sharma of Eaton Power Quality says “We are
already catering to the wind segment and are looking at the opportunities
that alternative energy sources like solar power offer. We plan to launch
our photovoltaic inverter in India and are looking for channel partners
who will distribute the solar powered product.” We especially aim at
catering to the needs of the rural India. He laments.
According to Mr. Deepak Sharma Country Head of Delta
Energy Systems, Delta is a multinational company and our mission is to
provide Innovative, Clean Energy efficient solutions. Delta has the
competency to offer alternate energy solutions like Solar, Wind integrated
with UPS to offer environment friendly solutions to our customer who are
value & technology driven.
Asia Powercom, Powertronix Systems Ltd., Microtek
International have all joined the Solar bandwagon.
ON GOVT. TAXATION POLICY & THE
CHINISE DOMINANCE
According
to Mr. Anil Munjal of PCI Limited “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 is it, 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.
Mr.
Venkat Rajaraman, CEO of Su-Kam Power Systems Ltd. believes that today UPS
is 100% dominated by Chinese, but in inverter Chinese are as week as they
are strong in UPS, Home UPS is taking the market of Line Interactive UPS,
and there is no presence of Chinese Home ups or inverter in the country.
We are trying to change the game for UPS also, he adds.
According
to Mr. Vinod Kumar R V of Bangalore based Arvi Systems & Controls Pvt.
Ltd. 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.
Chinese products have influenced the market with low
pricing and sadly some have fallen prey to their low quality and less
reliable solutions. However the industry has to realize that the true
strength and good quality is possible only by reposing confidence &
belief in indigenously designed and manufactured products and encouraging
them for giving reliable & quality product, to extend timely service
and spares support to customers on long term basis, rather than going for
low priced, not proven & time tested product of china for reliability
& quality for Indian conditions.
He also believes that Government has to take steps to
standardize the specifications for UPS as per the minimum requirement
conforming to Indian power conditions. Give more encouragement to
indigenous manufacturers of UPS in public and government an industry so
that they can provide better service and spares support compared to the
imported products.
According to Tejas Sheth believes that it is the
Survival of the fittest. In Inverter industry it is only Indian
manufacturing who 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 market.
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.
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 a high 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 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. 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. Rajan Chadda &
Rajeev Chatrath, who have entered into a strategic tie-up with Luminous.
Numeric breaking relations with Socomec, it is another company which can
be excluded from this list, however there international presence makes it
connect many a foreign companies.
Softdisk has seen it all over the past 18 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. From the customer point view, we have a
complete chart prepared, what to do while purchsing a UPS.
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 however
one should one cannot expect a growth of 25-30% as it used to be but
settle for 12-15% growth, atleast for next two years, unless some thing
miraculous happens. So UPS business is no rosy and bright but has still
not lost its scent.
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