STEADY GROWTH The year 2017-2018 was
a growth oriented year for the UPS industry. Some comp-anies grew while
others failed to do so. Maintaining nearly the same growth as last year.
The industry netted revenues to the tune of INR
5930.87 crore. This is exclusively the end-user sales figure. However
the over all industry revenue was estimated at INR 6230.00 crore approx.
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 316
companies responding to our survey, giving us the information we sought
in great detail, knowing fully well how much the company has man-ufactured
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 few years, we did all of it again to
give continuity to the process.
Out of 316 companies responding only 179 companies were awarded with SD
Ratings.
However most of companies are facing it with ease to match quarter to
quarter sales of 17-18 in 18-19. We are sure the figure which we have
arrived at i.e. the actual end-user sales revenue of INR 6500.87 crore
mark will definitely be crossed with ease, in the current fiscal in
2018-2019.
(Our Midyear projection in June 2018)
Growth wise it has been a mixed year with some of the majors growing
while others dipping.
Revenue-wise : This year 2017-18, the industry grew by 8.96% &
revenues grew up to 5930.87 crores, a clear indicator that around 6%
growth in past years is over and even fiscal (2018-2019) the growth will
be over 7.0% to 9.0% for sure. Particularly very good, considering the
industry is getting itself to tune with GST.
Volume-wise : Industry grew by 19.7% over previous year in
volume terms. This clearly indicates shrinking margins in cases of
orders obtained thru tenders and sales to SI's.
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 &
currently facing Indian Rupee slide and a strong dollar value.
Of the total revenue of 5930.87 crores, Online UPSs accounted for 88%
while Offline / Line interactive UPSs accounted for nearly 2%, while
other products including servos & change of batteries not under
maintenance accounting for the rest. We have not included the Home UPS
sales figure in this analysis . Sale of SPCUs has definitely picked up.
Of the total revenue organized sector accounted for nearly 79% while
21% came through semi organized and unorganized sector.
SD FINDINGS
Softdisk went about finding the state of the industry and also how
deep they were actually effected by GST. The first quarter of the
financial year 2017-18 were better than last year. Projects have been
few but the demands continue, There was a bit of lul in he second
quarter due GST implementations issues. in the current fiscal no major
projects came up during that period. The overall effect is putting
expansion plans on hold. However things improved in third quarter.
Growth for big IT, ITES & TELCOM 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 to 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 of over 10%. The same is continuing in this year.
Softdisk believes that more and more people are moving towards Solar.
Some have even manufactured and installed Grid Sharing 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,
Vertiv Liebert, Numeric, Hitachi, Consul, AVO, Eaton, CyberPower & Other
major players BPE, Socomec, Power One, Techser & Hykon & the rest.
Talking of market share Vertiv Emerson has the highest market share
of 15.20% followed closely by APC SCHNEIDER 14.32% Numeric 13.23%
followed by Hitachi 9.71% , Consul 8.57%, AVO 4.50%, Eaton 3.59 & so on
as shown in graph above. While other major players account for rest.
SD ESTIMATES
Softdisk had predicted in June 2017 that the total industry
revenue will touch INR 6000 crore mark by March, 2018. We talked to
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
undergoing GST implementation Impact. As on date we feel that nearing
5930.87 crore mark for end-user sales and 6230 crore mark including
secondary sales was quiet a close prediction. Softdisk remains committed
to transparent reporting, in-depth analysis and always throwing up
forecast & estimates which you can Rely Upon.
We have Faith, You Rely on
us, We Rely on facts..
According
to Mr. N K Agrawal of Delhi based Microtek in 2016-17 market has
witnessed slow down was a lot buoyant in 2017-18. This financial year
the economy world over is moving under the shadow of fear of major
recession in US trade war with China, depreciation of Chinese currency &
falling rupee has made the market slowdown further, 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 all though very low, he
laments. We have to give some time to the Govt at the center ringing in
changes by way of GST etc to bring back the economy back on track, he
adds. (Here it is worth mentioning that Softdisk figure does not include
the revenue generated by Inverters, which too is effected by the slow
down. )
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 4500 to 5000 Crore in the current fiscal
this year. We had a tough time in last two fiscal, however things
improved in later part of last fiscal. This current year has been very
good, The expansion plans put on hold by most of the big names in IT,
ITES companies have started. 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 earlier put on hold have
started giving orders. Governments buying has also gone up as many a
governments projects have been put on hold have restarted.
Fluctuation in rupee price not only raised import bills but also lead
to volatility affecting their businesses. Due to increase in raw
material cost, depreciating value of Indian Rupee, 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.
Cyber
Power follows the concept of economy of scale ensuring right product and
right quality. The company has a has a capacity of manufacturing UPS up
to 4800 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
- Latest equipments and fully automated test stations to perform
full range of parametric tests. Environment chamber to perform
UPS burn- in test at elevated temperature, Variable voltage and
frequency source for testing UPS as per practical site conditions
and simulating worst case utility conditions Pure resistive as well
as variable power factor load to perform UPS on 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, Cyber 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.
According
to Mr. Rajaram Ramamoorthy of Bangalore based E&C, having a stable
government at the centre will aid in better confidence for foreign
companies to invest in India. India has been an attractive destination
for long for several foreign companies, but the major problem has been
the red tape in conducting business as the laws of the land have been
inherently quite ambiguous even for Indian Companies and entrepreneurs.
But with the introduction of GST, things have been simplified.GST
subsumed various taxes like Excise, CST, VAT, Service Tax etc.. and it
is good that we have only one tax - GST. It is a year and after the
initial hiccups, there seems to be some order. While business is done
based on GST, the product / services prices have gone up and there seems
to be no coming back on the increased prices of some commodities /
Services. In a way, GST has helped some businesses to increase their
basic prices.
While the GST law provides for the passing on the benefits of the
reduced taxes to the consumer, there can be no check on the margins that
every business can have on their products / services as that is a
business call.
The introduction of the Mixed Supply and Composite Supply has led to
a lot of doubts in the way that Products like UPS, which have a battery
component in it being interpreted as per the new definitions of Mixed &
Composite Supply. Since there is a tax difference between the UPS
Product and Battery (when sold alone), there could be a big tax impact
in case the interpretation is done wrongly as a Mixed Supply instead of
the Composite Supply. There is a widespread opinion in the minds of the
manufacturers, that what case laws based on legal judgements has been
applied in the excise regime is applicable in the GST regime as well.
Another thinking is also that there is no difference between a
manufacturer and a trader. Since the system is in its early stages,
there are too many doubts and risks involved when it comes to liability,
as the responsibility of levying the right percentage of GST lies with
the seller.
Since Department Assessments of GST has not started, and the GST law has
references to serious provisions under criminal law, it is very
pertinent for the department to take a very informed decision and not
harass the assesses based on their interpretations. Time has to be given
to the industry to get aligned with the settled interpretation of law.
It will be interesting to see how many cases and counter cases will be
filed once assessments are done and demands are made on assessees.
Already a number of businesses are facing severe cash flow problems and
with Banks also tightening their screws on their new working capital
norms, it appears that there are tougher times for MSMEs who are working
with limited resources.
Mr.
Narayan Sabhahit Managing Director, Techser Power Systems Pvt. Ltd,
Bangalore, believes that the financial year 2017-18 was a great year due
to high due to opening up of trade post GST. in the market and fierce
competition for top-line pie. Techser during the later part of the year
consciously decided to avoid any 'cut-throat' competition paradigm. We
diligently decided that it is better to work on healthy orders rather
that 'vanity orders' which could only boost top-line but adversely
affecting bottom-line. The year also has been a year of consolidation
with respect to our restructuring manufacturing and services offerings.
We tried to strengthen our work force wherever required so that we can
bounce back as the market became steadier. Some of the major forecasted
orders previous year did not materialize as there were unprecedented
delays in decision process. They spilled over to this financial year.
This reflected on our top-line during last year sales and boosted our
first quarter sales in 2017-18.
Hopefully we will be able to realize those trends in the current
fiscal. Our Indigenous drive is showing results both in new market and
service domain. We have launched Tech Glare product successfully and
geared up production. 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. These are the areas
where continuity of power is very essential, since these companies are
facing the Global Challenges. Advent of GST has been very good but there
are certain implemental flaws.
While
Mr. Cristo George, MD of Thrissur, Kerela based Hykon India Pvt. Ltd.
believes that GST has been a big boost to the industry. After
Implementation of GST was a great relief for Hykon. The playing ground
became more flatter for all the companies. For Kerala UPS companies, GST
was a game changer. Before GST we were paying state Govt VAT 14.5% and
Central Excise duty 12.5% , ie - 27% total. This was a major hurdle when
competing with other state UPS companies and they were billing directly
to customers. Now GST made it 18% which is same all over the country.
The movement of goods after GST became easier and there is no need for a
godown in other states for billing purpose. So centralized warehouse is
sufficient for billing to anywhere in India. This has eased the
difficulties we were facing earlier. Before GST, taking UPS systems to
factory for servicing was a tedious process because of Central excise
formalities. With the implementation of GST the service center can be
located at factory which makes storage of components and administration
more easier Before GST collecting C-forms were a big headache. After GST
implementation, this was solved. Total Production cost also came down.
Many paper work were reduced which helped the Industry to have a better
bottom line.
BIS certification is a welcome initiative by the government. This
will ensure that all goods are safe to be used by the end users. However
lack of testing centers / facilities coupled with vast inventory vide
importing by thousand of Indian vendors will make it extremely difficult
for importer to get a BIS certificate timely. However he does not think
so that BIS certification will throw out small players. Yes, may be fly
by night operators will be thrown out. I feel even if small time
manufacturer, if they have a good system with satisfactory procedures,
BIS certificate will be a blessing and eventually the BIS can be a big
tool to improve the small/medium manufacturer.
Shri
Rabindra Agrawal of Kolkata based Switching AVO Electro Power Ltd., also
believes that there is lot of good that has been brought in by GST
however tax rates for large backup systems are still point of concern.
The introduction of the Mixed Supply and Composite Supply has led to a
lot of doubts in the way that Products like UPS, which have a battery
component in it being interpreted as per the new definitions of Mixed &
Composite Supply. Since there is a tax difference between the UPS
Product and Battery (when sold alone), there could be a big tax impact
in case the interpretation is done wrongly as a Mixed Supply instead of
the Composite Supply. There is a widespread opinion in the minds of the
manufacturers, that what case laws based on legal judgements has been
applied in the excise regime is applicable in the GST regime as well. He
also 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
legs. 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 the 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 OEMs and go direct to the same customers that UPS
OEMs 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.
The UPS being a technical solution which provides a lifeline for
today's business requirements and financial transactions should not be
treated as a commodity sale. But rather, as a technical offer which
provides "Power Continuity Solutions" and must be given its due respect.
Softdisk believes that UPS manufacturers
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 and the customers will realize this only 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. Y B Suresh of TPC Smaller 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.
Earlier banks used to be priority customers but now with reverse
auction we are out of it. 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.
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.
Mr.
I B Rao & Mr. M R Rajesh of Power One Micro Systems Pvt. Ltd. welcomed
the implementation of GST 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 world 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 &
Government 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. We have
taken a wise decision not to take up orders were we have to cut down on
margins this allowed to expand our product basket to SPCUs, and complete
solar power installation where we are very successful to a great extent
and the results are showing.
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.
According
to Mr. Sriram Ramkrishnan CEO of Consul Neowatt Power Solutions Pvt.
Ltd. believes that Now that the 1st year anniversary has passed after
GST implementation started, we do not see any major issues with GSTN.
While there were a number of challenges for a few months after GST
started when GSTN was not open for filings for many days in a month,
those issues appear to be behind us now. Also since the government is
currently not requiring the filing of GSTR-2 (monthly details of
purchases), the complications of matching supplier invoices has still
not become an issue which can cause a variety of challenges to GSTN.
Currently we are filing only GSTR-1 (Monthly sales) and GSTR-3 (monthly
return with the summarised details of sales, purchases, during the month
along with the amount of GST liability).
The government should simplify the GST to a fewer number of slabs and
the UPS should to at a 12% slab from current 18% GST slab. This
reduction in GST rate for UPS is well justified as today UPS is a
necessity for uninterrupted business operation and is a critical product
required for increasing productivity of Indian businesses and for
efficient operations of government priorities like Smart Cities,
Airports, Metros, Railways and Hospitals. This will reduce unnecessary
burden on customers whose services or output is charged at lower GST
slab than 18% and also for customers in segments like Hospitals who
cannot take an input credit on their capital purchases like UPS. Further
UPS and Battery should also be at the same GST slab as the battery is
integral for the UPS to serve its intended purpose of providing
uninterrupted power to the connected loads. Currently battery is under
the 28% slab and UPS is under 18% slab. This has caused certain
challenges when some customers purchase UPS with backup (i.e inclusive
of batteries) @18% slab while other customers want to purchase UPS
without backup @18% slab and batteries separately @28% slab.
The margin pressure is real in a mature market with a number of UPS
suppliers competing fiercely for market share. I see this as a challenge
which we have to face and this should drive innovation and efficiency to
benefit the customer. Ultimately, UPS suppliers who can meet market
price levels without compromising quality will win market share. This
has been our mantra and we have focused our R&D to develop UPS products
that meets customer requirements on price, performance and quality. But
I will add that the price levels we see in many government tenders mean
that the successful UPS vendor will have to live with very low margins
or even incur a loss for the sake of top line. In this context, we
decided to not participate in PSU BFSI business about two years back
because we realized that we were unable to meet the price levels we saw
in these tenders. In this context, government can look to classify
vendors in 3 categories based on their capabilities - technical ,
financial & service strengths. Depending on the project size and scope,
participation can be restricted to vendors who meet the minimum
criteria. This will help ensure we can avoid unrealistic pricing seen
today in government tenders and also allow all UPS vendors to get a
share of the available government business without compromising on
margins or quality.
According
to Mr. Shankar C Nagali of Managing Director of Cosmic Micro Systems,
India's GDP growth despite slowdown is currently hovering around 7
percent mark which gives us an indication of the industrial expansion
that is already started happening under this regime. The rigidity of the
Indian economy was reflected during global meltdown. GST implementation
has eased out taxation difficulties to great extent.
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:
With customers moving towards Desktops and smart phones, Increase
Server sales will resulting in increased demand for UPS, which is not
happening at the required pace right now.
Increase penetration in C & D class cities has been is the reason for
the growth in the UPS market. 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.
According
to Amitansu Satpathy, MD, Best Power Equipments India Pvt Ltd., today
Indian power conditioning market is getting more sensitive and mature
where they are concerned on space saving energy consumption & efficient
quality service 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 he says we view the present market
scenario as an opportunity to strengthen our company's presence in
various 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. We have taken a wise decision not
to take up orders were we have to cut down on margins this has lead to
increased profitability where we are successful to a great extent and
the results are showing. This new GSTN system of taxation though is very
useful but still commenting before complete implementation, GST Audit
etc will be pre-mature, however movement of goods to various part of the
country has been eased a lot, he laments.
According
to Mr. Vinod Kumar of Arvi Systems & Controls Pvt. Ltd., Bangalore
believes Govt.'s GST taxation at this point is a mixed bag, there are
goodies as well as lot of clarity needed. Counting on goodies he says
now GST made it 18% which is same all over the country. The movement of
goods after GST became easier and there is no need for a godown in other
states for billing purpose. So centralized warehouse is sufficient for
billing to anywhere in India. This has eased the difficulties we were
facing earlier. Before GST, taking UPS systems to factory for servicing
was a tedious process because of Central excise formalities. With the
implementation of GST the service center can be located at factory which
makes storage of components and administration more easier Before GST
collecting C-forms were a big headaches. After GST implementation, this
was solved. Total Production cost also came down. Many paper work were
reduced which helped the Industry to have a better bottom line.
On the inconvenient part Servers are not supporting the volume and
hence they are slow. The Govt should accept this and improve the
infrastructure. Filing of GST returns are not business centric. They are
bureaucracy centric. Repeated entry of date in various form makes it is
lot of over work. GSTR-3B should be sufficient and GSTN backend should
be able to extract all other forms from the same. The information has to
be easy for any business to enter their details and the backend of the
GST system should extract the data that the Government / bureaucrats
need. Service Tax which was at 15% has become 18% GST, which is a bigger
burden. Customers are refusing to pay this higher tax and hence the
basic price of the service is taking a hit.Service Invoices are due to
pay GST at the time of billing and Customers seldom pay the invoices on
time. Hence there is a larger working capital required to be compliant
with the system. Increased tax and a corresponding increase in working
capital leads to higher interest costs. Its just completed first year,
with people will get used to the system and Govt. co-operate in making
GSTN businesses friendly.
Mr.
Palash Nandy has 29 years of rich experience in Sales, Marketing and
Strategic Planning at Legrand, Who joined the Legrand group in 1990 as a
Sales Trainee in Kolkata. Subsequently he has many positions in Sales
and Marketing in India. His last assignment before Numeric was at the
Group HQ in France as Group VP Strategic Planning. Effective July 2016
he has taken over as CCO of Numeric which is a group brand of Legrand.
According to him Softdisk is the oldest and largest circulated magazine
and it gives a wide range of information from latest product news to
in-depth articles on power electronic industry and its reviews &
forecasts. The publication has been conducting surveys in the various
segments of Power, Solar & IT Industry and coming up with SD Awards.
These surveys provide an in-depth analysis of the some segments of the
Industry and users utilize it as one of their decision making tools and
also as a guide of the Industry.
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 & a half
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 will only decrease their profits and
ultimately lead to their collapse. So UPS business is not rosy and
bright but has still not lost its potential.
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