SD'S POWER ELECTRONIC INDUSTRY ANALYSIS
YEAR ENDING MARCH 2018

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

  1. 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.
 

 
SD Awards
SD's UPS AWARDS
SD's UPS Awards 2018
Survey Highlights
How They Faired
SD's Power Electronic Industry Analysis,
Year Ending March 2018
SD's Top 10
Power Electronic Companies
SD's Top 5
Online UPS Manufacturers
SD's Top 3
Line-Interactive UPS Manufacturers
SD's Top
Home UPS/CVT/Inverter Company
Special Awards
SD's UPS SURVEY
SD's UPS Users' Choice Awards 2018
Companies to Watch
SD Users' Satisfaction Rating
SD's SOLAR AWARDS
SD's Solar Market Analysis 2018
SD's top 5, SPV Panel Manufacturers of the Year 2018
SD's top 5, SPCU Manufacturers of the Year 2018
SD's top 5, Hybrid-Grid Sharing Solar Power Solution Provider of the Year 2018
SD's top 5, Off-Grid Sharing Solar Power Solution Provider of the Year 2018
SD's A++ Green Star Rating 2018

 Softdisk House, 39, A Block, Near MPSRTC Depot,
Bhadbada Road, Jawahar Chowk. Bhopal - 462003
Phone : 91-755-5223781, 3012899, Fax : 91-755-5223781, E-Mail : contact@softdiskindia.com