MIXED YEAR
The year 2012-2013 was a
mixed year for the UPS industry. Some companies grew while others failed
to do so. The industry netted revenues to the tune of INR 4653 crores.
This is exclusively the end-user sales figure. However the over all
industry revenue was estimated at INR 4853 crores. 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 354 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 We have been doing only since last four
years, we did all of it again to give continuity to the process.
Out of 354 companies responding only 181 companies were
awarded with SD Ratings.
However most of companies are facing it difficult to
match quarter to quarter sales of 11-12 in 12-13. We are sure the figure
which we have arrived at i.e. the actual end-user sales revenue of has
definitely crossed INR 4653.00 crore mark .
Growth wise it has not been a mixed year with some of
the majors growing while others dipping.
Revenue-wise : This year 2012-13, the industry grew by
5.15% & revenues grew up to 4653 crores, a dip of over 6.6% over the
last fiscal of 2011-2012. When it has grown by 7.34%.
Volume-wise : Industry grew by 18% over previous year
in volume terms. This clearly indicates shrinking margins. Drops in
revenues while increase in volume.
One must be clear in mind that this is a very good
performance considering the stiff competition and the squeezed margins in
view of hammering the companies got during the global economic meltdown
& falling Indian Rupee.
Of the total revenue of 4653 crores, Online UPSs
accounted for 93% while Offline / Line interactive UPSs accounted for
nearly 5% while other products including Servos accounting for the rest.
We have not included the Home UPS sales figure in this.
Of the total revenue organized sector accounted for
nearly 65% while 27% came through semi organized sector while 18% share
still remains with the unorganized fly by night operators.
SD FINDINGS
Softdisk went about finding the state of the industry
and also how deep they were actually effected by recession, The first two
quarters of the financial year 2013-14 were just ok. Probably pumped by
Govt. buying. However 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 (up-to 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
12-14%. The same is continuing in this year. Softdisk believes that more
and more people are moving towards Solar. Solar PCUs units are the new
mantra for the UPS Companies, some have even manufactured and installed
Solar UPS, with hybrid charge facility (Photovoltaic & Mains).
With consolidation being the mantra for Industry. One
can say the entire Online UPS market can be divided into following
APC-Schneider, Emerson (Chloride & DB), Eaton, Numeric selling its UPS
Business Unit to Novateur, Reillo PCI, Socomec, Delta & Uniline, Other
Major players (Hi-Rel, Consul, Power One, Tritronics, Techser & Hykon)
& the rest. Talking of market share Emerson has the highest market
share of 25.5% followed closely by APC Schneider 22.5, Numeric 21%, Eaton
6%, Riello PCI 3% while other major players account for 12%.
SD ESTIMATES
Softdisk had predicted in July 2012 that the total
industry revenue will cross INR 5000 crore mark by March, 2013. We talked
ti Industry Captains 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 trying to
come out of worst ever economic crises, and Indian market was also shaken
by it. As on date we feel that nearing 4850 crore mark for end-user sales
and 5100 crore mark including secondary sales is quite possible. Although
few may disagree to the secondary figures, but being optimistic has always
been the Softdisk attitude.
To the SD’s question 2012-13 Market was slow, But
first two quarters are showing steady progress nothing flashy, is the weak
rupee against the US$ impacting?
According to Mr. N K Agrawal of Delhi based Microtek in
2012-13 market had been not very buoyant, This financial year the economy
world over is moving under the shadow of fear of major recession in US and
Europe, because of this the things have slowed down, it will not impact
Indian markets but spillover effect is showing its sign the falling rupee
is one such sign. In-spite of all this we still feel that the UPS Segment
will show a growth in this year also, he laments. (Here it is worth
mentioning that Softdisk figure does not include the revenue generated by
Inverters)
While Mr. Cristo George, MD of Thrissur, Kerela based
Hykon India Pvt. Ltd. believes that after experiencing severe declines
following the global recession in 2009, this is a repeat. As most of the
components of UPS are importing, the cost of UPS will go up due to the
increased Dollar rates. It is also good for Indian UPS manufacturers as
the cost of finished UPS from China will be increased further. So time has
reached for the Indian manufacturers to mass produce the UPS below 5KVA
instead of depending on the China Import.
We are doing exceptionally well in SME (20 to 60 kVA)
segment. Uninterruptible Power Supplies grew twice as fast in the second
half of 2012-13 compared with the first half of that year. The market
continues to recover swiftly from the economic downturn with revenues in
3rd quarter of 2012-13 being 10.8% higher than the same period in 2011.
Even the JFM quarter of 2013 was good, he laments. We know our strengths
and don't over reach and as such we are not effected that much by the
falling rupee.
Mr. R K Bansal Managing Director Uniline Energy Systems
Pvt. Ltd. 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 APC, Eaton, Numeric etc to some extent mostly
serve this business segment. Our strength lies in Govt. sector & PSUs.
As per our understanding, the market segment revenue (excluding precision
A/C, Electrical distribution, etc.) for UPS Systems is close to INR 4500
Cr. Looking at the present market scenario, the revenue collection from
this segment shall be within INR 5000 to 5100 Crore in the current fiscal
this year. We have already crossed INR 100 Crore in revenue and are
gunning for 200 Crore in the next two years.
Even after a year of slump, 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. There is more
emphasis on best utilization of 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. However we see a
shift now, In last six months the demand for high power UPSs above 200KVA
has gone up considerably. The situations now is wait and watch and do the
things as they unfold. As of Uniline the economic recession has not
affected. We expect more business from these segments and continue to
maintain our growth. Apart from this, some business revenue is also
expected from specialized Solar products what we manufacture for niche
market.
Fluctuation in rupee price not only raise imports bill
but also lead to volatility affecting their businesses. Due to increase in
raw material cost, depreciating value of Indian Rupee, increase of excise
duty from government side the overall input cost has increased.
Considering the above facts, companies have increased their product
pricing. Local vendors cannot be matched up with multinationals as they
are not up to the mark in terms of international standards, quality etc.
Delta follows the concept of economy of scale ensuring right product and
right quality. Delta also has its local manufacturing unit at Rudrapur and
Gurgaon. Delta Power Solution’s manufacturing plant at Rudrapur, India
(first Green manufacturing facility in India) has a capacity of
manufacturing UPS up to 4000 kVA along with battery banks, harmonics
filters, accessories and allied products to provide an end to end power
backup solution. UPS assembly line is equipped with
1. Latest equipments and fully automated test
stations to perform full range of parametric test for ratings up to 500
kVA (largest rating as single module)
2. Environment chamber to perform UPS burn- in test
at elevated temperature,
3. Variable voltage and frequency source for
testing UPS as per practical site conditions and simulating worst case
utility conditions
4. Pure resistive as well as variable power factor
load to perform UPS full load test for practically all conditions and get
rid of any infancy failure in UPS
In addition to providing technologically superior,
quality products that meets the global standards, Delta Power Solutions
local manufacturing at helps meet another dimension of business needs
today - On time and short delivery times. Current day business needs
require that projects are completed on time as projects overruns lead to
an unprecedented opportunity loss in Telecom, IT setups, Data Centers,
Medical establishments and Industry at large.
Mr. Narayan Sabhahit Managing Director, Techser Power
Systems Pvt. Ltd, Bangalore, believes that last year for many companies
which were restructuring against backdrop economic revival, it was a year
of consolidation. Slowly market is realizing that it is not just the
buying cost but long term support what is required especially in India as
people expect product-life to be atleast double compared to advanced
countries. 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 in the
rural areas. 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, 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. A Balan of Numeric UPS feels that Softdisk has more
scientific way of evaluating the market for its volume and quality then
any other agency and the overall UPS sales by 2013 might touch 5000 Cr
mark subject to IT recovery. He believes that first two quarters of
2012-13 have been OK, not that bad as projected by many. He feels that for
manufactures it is not that much of a problem, it is the week India Rupee
against US$ which is cause of concern of importers.
Legrand which acquired NUMERIC brand a 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 259 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 for
this having power continuity & quality are paramount.
On the question of Reverse Auction, Mr. A Balan was
critical : The entire industry must boycott reverse auction without any
exception. Reverse auction makes everyone to cut the others leg and their
own as well since there is pressure in the minds of the participants.
Reverse auction should be avoided as these terms enable open and
non-ethical competition wherein vendors are not rated on their financial,
technical, service capability and product reliability and are allowed to
participate with only price as the criteria. This resulted in many tenders
being scrapped and vendors who quote unrealistic rates in reverse auction
were enabled to supply and destroy the market and the industry itself.
He further adds : After all we are supplying and
installing a POWER CONDITIONING product, A CAPITAL EQUIPMENT and not a box
pushing activity. In the absence of a detailed technical selling based on
performance, reverse auction becomes a simple number game for everyone.
This will lead to killing the very industry practice itself simply and the
customers will realize this after few years later. If this is for computer
stationery (or) purchase of tube lights etc then the reverse auction is Ok
as most competitive bidder will sell more.
According to Mr. Rajaram Rammoorthy of Electronics
& Controls, Reverse Auctions have become order of the day which is
being followed by many major banks. The only way customers can be spoken
out of is by explaining the demerits of Reverse Auction and making them
understand. (1) In some tenders, customer is procuring at prices which are
higher than what they would otherwise procure in closed tenders. (2)
Customers are getting supplies which are compromised in terms of
specifications which they are unaware. On the Supplier’s side, (a) the
reverse auctions are just too time consuming, sometimes the process takes
almost a full day, (b) too much dependence on network/internet
connectivity and infrastructure issues (c) Customers themselves setting
unrealistic starting bid prices. Customers have to understand that they
should not buy at very low prices at the cost of suppliers for their own
long term benefit and realize the value for money. As mentioned, Customer
education is key and customers should be open to listening to suppliers,
which they will seldom do. Possibility is for the UPS associations to make
an honest attempt to embark on a sustained plan to educate the Customers.
Though staying away from reverse auctions is an option, a more viable
option is to stick to prices which are viable and sustainable in the long
run.
Mr. Sushil Virmani of Eaton asks Can we find a way out
for UPS Manufacturers staying away from such auctions? Can Customers be
explained the demerits of reverse auction and gain they will have in
normal tendering process. As earlier, I feel that Reverse auction is not
suitable for customized solutions, which is what UPS selling has now
become. We believe that buying UPS starts from conducting a Power audit,
determining specific loads, and then proposing a solution which includes
proprietary software and patented technologies.
In reverse auction the customer compromises on features
of the UPS he is going to purchase, who so ever sells, it the customer who
will loose. A reverse auction bundles apples with oranges, notwithstanding
if it’s appropriate for the buyer or not.
Mr. N P Krishnan, Director Marketing of Consul
Consolidated Pvt. Ltd. Believes that in Reverse auction there is an urge
to become L-1 even if it is at the cost of going down on Bill of
Materials. So all of us must be alert and not bring down prices, just for
the top line. We must mature to the level of ensuring that we don’t cut
each other’s throat. He further adds that the market has been customer
driven and price plays a decisive role in most cases. Can we find a way
out for UPS Manufacturers staying away from such auctions? Can Customers
be explained the de-merits of reverse auction and gain they will have in
normal tendering process. Yes, this is a must. The UPS and battery
suppliers should boycott reverse auctions. The battery suppliers must not
undercut the UPS OEs and go direct to the same customers that UPS OEs
helped develop for the battery suppliers. The UPS industry needs a
complete make-over. All manufacturers must get together and have a common
voice on this.
Softdisk believes that All
said and done, simple way out for UPS companies to avoid getting squeezed
by customers is to boycott all reverse auction.
The Market & Price pressure :
According to Mr. I B Rao & Mr. M R Rajesh of Power
One Micro 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. Adding further they say we view the present
market scenario as an opportunity to strengthen our 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 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. 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 to
revert back at some point of time.
According to Mr. Y B Suresh Small players are finding
it difficult to access to new customer and volume based order because of
the big players are coming out with very competitive price and products
ranges. So, Small player should focus on providing effective service
support to retain their existing and grow in their reference market and
focus on providing complete solution to customers and focus much on
related products requirement in existing customer base. Further to put
more burden we have Reverse Auction Monster. Reverse action is threat not
only to specific industry but it is a common problem faced by all
industries. Unless people in their own industry understands the
seriousness of the problem in its due course and with unity they have to
fight against this otherwise a solution cannot be found.
We are focusing on diversified market segment like
solar PCUs and closely working with few OEM buyers in that segment and
working on new design to reduce cost of production and support small time
OEM buyers. According to Mr. Shankar C Nagali of Managing Director of
Cosmic Micro Systems, India’s GDP growth despite slowdown is currently
hovering around 4-6 percent 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 UPS category 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 vertical like IT, ITES, manufacturing, BFSI and
Government. There by leading to the increased demand for the UPS systems
in these vertical.
Increased awareness for quality of power has also
boosted the demand for UPS systems. UPS provides protection against
voltage fluctuations and low voltage.
Let’s understand UPS as vital link in the process
chain, not as an end product. It should the part of the solution not the
part or source of the problem. The only way to match Chinese prices is
being a Chinese; by supplying opportunity based solutions, which is not
what Indian environment needs. But if we are talking about reliable,
economical, value for money products I think many Indian manufacturers
have almost achieved it except for lower capacities where there are huge
volumes.
NORMS OF THIRD PARTY MAINTENANCE
According to Mr. Rajaram Rammoorthy Third Party
Maintenance is a concept that Customers have patronized for their own ease
of getting support through a single supplier. It is difficult to get
consensus among UPS manufacturers as many of them are hard pressed for
revenues and not lose opportunities. Even if one supplier takes the
service support of several brands, it is cumbersome to subcontract and get
the services done given the numerous brands the customer may have bought
over a period of time. Customers have to be educated that maintenance
through original supplier will be beneficial to them in the long run and
realize the maximum return on their investment. Alternately, the unity in
the industry should be very high to not take other brands for maintenance,
which is a dream.
Rabindra Agarwal of Switching AVO, Kolkatta believes
that it is common knowledge that, though UPS being a proven technological
concept, differs in its construction based on manufacturer. Components for
spares sometimes become inaccessible leading to servicing difficulties
resulting in replacement of a UPS with another equivalent product. This
method proves costly for the maintenance vendor and the customer loses the
original asset quality which is not clearly visible during the life of the
maintenance contract. This is a perceived loss to the customer. UPS OEMs
on the other hand lose their valuable service revenue which was hitherto
their assured income, which is now being threatened. This unhealthy
practice is being practiced by most UPS OEMs, and as a matter of
safeguarding their own interests and incomes. Refraining others from
taking maintenance of other makes is difficult to implement, as there are
numerous unorganized players. Customers should also verify the claims of a
third party service company about their capability to service other makes
as the absence of that could lead to a huge loss to them in the form of
degraded product / performance and damage the operational efficiency of
their organization leading to fresh purchase.
However Mr. Sumanth Kumar of Powernet has a different
opinion, if the original manufacturer is providing proper service at
proper price, customer may not look for a third person to get the support.
One can think by common sense it is easy for original manufacturer to
provide better service at better price than the third person. So if we try
to make the manufacturer to reject the offer will lead to a monopoly for
the manufacturer and disadvantage to the customer, no one will refuse on a
written format and same time he may charge the customer heavily or take a
ride on customer. So keeping our customers with us is mainly depends on
the original supplier, so we should consider it as more responsibility
than a birth right. Always working with responsibility will take you long
journey than working with rights. Mr. Sumanth Kumar of Powernet Solutions
Pvt. Ltd. Adds “all manufactures have to unite on this, Specifically for
capacities above 5 kVA/10 kVA and to adhere to this in the interest of the
client and the suppliers. Generally as a manufacturer we maintain spares
for the next 8 years from the date supply.”
Mr. N P Krishnan of Consul also agreed, he believes
otherwise fly by night operators would flourish.
Softdisk believes that UPS Manufacturers should come up
with SAY No To TPM, unless the company that had sold the machine refuses
to maintain the machine. This should be binding on all Manufacturers. This
practice if persuaded with not only make Servicing an assured income and
bring revenue to the company on the other hand customer will have longer
life for its system as similar & not substitutes parts will be used to
replace the faulty component.
ON THE TAXATION FRONT
Divergent view were expressed by on taxation front.
Where one segment believes that UPS imports should be exempted for taxes
the segment talks of protecting the interest of Indian UPS Manufactures.
According to Mr. I B Rao of Powerone Micro Systems Pvt.
Ltd., Bangalore believes Govt. should 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 Customs Duties, excise duties etc. Although “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 2013. 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” , he laments.
Legrand intends to accelerate the growth of its brand
by sustained investment, launch of new products, and focus on growing the
market backed by the pan India sales and service network. According to Mr.
Marc Werle, CEO (UPS OPERATIONS) Legrand, we are also backing up the same
with dedicated global R&D team to support the launch of the state of
the art UPS for the Indian market in the coming months. The challenge
being faced by most manufacturers has been the weakening of the Indian
Rupee against the US Dollar which is the concern for importers and the
policies of the Government recently to accelerate investment in Retail and
Industrial verticals will certainly support the industry and its growth.
With the existing power situation not improving the UPS industry can
witness a positive growth in the coming months ahead.
Softdisk magazine does a thorough analysis of the UPS
industry and provides detailed information on the various players, rating
& ranking them on their various important parameters than any other
agency. We thank Softdisk for their dedicated efforts from 1993 to bring
up the Indian UPS Industry to a status of recognition from where it was in
the early 90's.
According to Mr. Nikhil Pathak VP, India & SAARC,
Schneider Electric, We derive 36% of our business from emerging economies,
and India is our focus market for BRIC in end-to-end power solutions
offering, which caters to enterprise, SMBs and SOHO, data centre segments.
In the last four years, our group has built around 50 data centres in
India and we have proved to offer 30% less energy consuming data centres
with our racks, UPS and cooling solutions. Our growth story is robust in
Indian market.
Mr. Balan of Numeric UPS suggests to have a common
taxation structure for UPS System across India so that the same rate of
tax is followed across India. This is beneficial to the customer and to
the Government. Different tax rates makes the product unnecessarily
costlier to the enduser (customer) as the one who is paying the taxes.
Vinod Kumar of ARVI is in the process of setting up of
100% EOU for exporting Online UPS and solar solutions. ARVI will be
launching solar solution of irrigational purpose very soon, which has a
huge potential apart from enhancing its market share in niche products
specially designed for medical and industrial sectors for critical
applications. He also believes that Immediate implementation of GST on the
tax front is absolutely essential.
CONCLUSION :
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.
Softdisk has seen it all over the past two decades, 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.
Softdisk believes that if Manufacturers mad rush for
sale at any cost continues, one cannot expect a growth of 25-30% as it
used to be but settle for 6-8% growth, at-least for next two years, unless
some thing miraculous happens. So UPS business is not rosy and bright but
has still not lost its potential. |