BLOSSOMING UPS INDUSTRY

The year 2006-2007 saw the industry netting revenues to the tune of 2300 crores INR. This is exclusively the end-user sales figure. However the over all industry revenue was estimated at 2735 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. Since last two years we have been painstakingly collecting this additional information so that we can come to the exact end-user sales figure.

Many a companies do shy away from telling us that they have got the product outsourced from another manufacturer. With nearly 710 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 never been done in the history of Power Electronic Industry, before. We are sure the figure which we have arrived at i.e. the actual end-user sales revenue of 2300 crores INR is very much close to the exact size of the industry.

Growth wise it has been a very good year for all majors.

Revenue wise : Industry grew by 26 % up from 18.37% in 2005-2006. A growth of nearly 8.0% over previous years growth.

Volume wise : Industry grew by 41% over previous year.

This is a clear indicator of shrinking margins. One must be clear in mind that this is a very good performance considering the stiff competition and the squeezed margins the companies are facing.

Of the total revenue of 2300 crores, Online UPSs accounted for 86% while Offline / Line interactive UPSs accounted for nearly 13% while other products including CVT accounting for less then 1%, CVT crashed to a all time low. Elent controls the CVT market with nearly 60% of the CVT market share. Of the total revenue organized sector accounted for nearly 60% while 25% came through semi organized sector while 15% share still remains with the unorganized fly by night operators.

BRIGHT PROPECTS

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.

Mr. Pradeep Pimpley of DB Power Electronics Pvt. Ltd. believes that the average market in enterprise segment (in which we operate) is expected to grow at the rate of 12-15%. The data center market is expected to see a growth of 20 25% as compared to last year. However, the remaining IT market growth is expected to the tune of 10 - 12%. Good growth is expected in Industrial segment where we have established our credentials, he lament. He further adds, the UPS penetration is now taking place in cities and towns outside the top 20 cities. According to him “Today the development process in every vertical is witnessing a speedy growth.

Interpretation of word ‘development’ in its correct form, has been taken seriously by the concerned agencies / authorities. The Infrastructure development required to address the challenges of 21st century is being put in to place. This is a good sign to a certain extent Government is also keen in making efforts towards Power sector reforms, building roads, IT, Telecom and other infrastructure.” Indian IT and ITEs industry, the darling of Indian Business, today is placed in a special category by the International community.

Many industry stalwarts feel the situation will further improve in the times to come. Mr. Narayan Sabhahit Managing Director, Techser Power Systems Ltd, Bangalore, feels that the growth rate in the market has been encouraging and UPS shipments taking a cue from the PC market have also witnessed a very significant growth. “With UPS industry thriving in interesting times with growth in industries such as IT/ITeS, Telecom, Banking, Insurance and manufacturing. What is relevant is that all of these have their typical power conditioning needs and an all round growth, right from entry level products to high-end UPS can be predicted. 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. Especially in IT, Infrastructure, Small and Medium enterprises, Engineering and Automation, Hospitality, Banking etc.

According to Mr. R K Bansal of New Delhi based Uniline Energy Systems Pvt. Ltd., upcoming businesses realize the importance of factoring network uptime in as a key component in the overall business model. Apart from understanding the critical load requirements, businesses are beginning to pay special attention to the environment in which the application will run and are thus increasing the demand for power quality audits.

Today, vendors have power solutions specifically designed to meet the needs of an Internet data centre with several enhanced features. Efficiency and reliability most often depend on the type of unit, the load and the environment. The higher a unit’s efficiency, the lower the operating cost. The type of load being protected is an important consideration too. It is to address all this we have entered in to a technical tie-up with M/s Digital Data Systems, Europe. “With their technical know how for assembling higher capacity UPS systems, we will be able to deliver customer satisfaction to the hilt”, he laments. Mr. Bansal believes that believes that the IT industry is in a boom stage and is growing in double figures, however the power electronic industry is growing at even faster pace, many new avenues are opening up in bio-medics, tele-communications, 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.

According to Mr. Pankaj Sharma Managing Director, APC MGE (ISB), India’s GDP growth at 6-8% gives us an indication of the industrial expansion that is already happening at a rapid pace. The buoyancy of the Indian economy is reflected in the growth of the UPS category. This growth rate in an economy that is already the world’s fourth largest in real terms (Purchasing Power Parity) is expected to grow the fastest amongst the four engines of world growth, BRIC (Brazil, Russia, India, China).

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

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

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

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

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

According to Mr. I B Rao & Mr. Rajesh of Powerone Microsystems, Bangalore, while the UPS market is still very scattered and dis-organized at the lower end, the higher end of the market has commendable organized players. In India, the five cities of Mumbai, New Delhi, Chennai, Kolkata and Bangalore have been the largest markets for PCs and UPS. 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. Verticals that are fuelling the demand for UPS are Telecom, IT, ITES, Industrial, BFSI, processing and critical medical applications. One industry that is often underestimated but today accounts for a large portion of IT spending and therefore critical infrastructure is the government.

NEW TRENDS IN UPSs.

According to Mr. R Chellappan of Chennai based Numeric Power Systems Ltd : The high-end UPS segment is a value-driven business. Today the driver for the high-end UPS segment is the cost of downtime due to the non-availability of critical systems. Manufacturers and service providers are looking to reduce operating costs and raise productivity. In the early days, companies just concentrated on increasing efficiencies but now the focus has shifted to reducing downtime and energy savings. As most Indian organisations, especially in the software services and BPO sector, have to abide by strict SLAs (Service Level Agreements), there is strong demand from this segment for UPS solutions. As these facilities cannot be down even for maintenance purposes, it requires a completely different structure of power solution, which encompasses the concepts of multi-level redundancies, right from the grid to the load point (including distribution) and not just for the UPS. Technology-savvy customers insist on solutions based on true online technology for their critical applications in this space, as they would not like their load to be exposed to even frequency fluctuations at any point of time. Neutral isolation also becomes essential in such facilities to avoid any noise or disturbances entering the network. “Numeric Product are well tuned to address all these and that is one of the prime reasons why we have been able to retain and repeat major orders”, he laments.

With the advent of SOCOMEC NUMERIC JV, we are now moving fast, grabbing high end mission critical installations. With the battery cost growing by the day, we have come up with the Flywheel Technology, which is still in a nascent stage in India, however it has been successfully commissioned and working in Europe. Back in India, we in process of getting some installations, This will allow us to time test the technology in local conditions. Once the Economics of Flywheel are understood, it will go a long way in eliminating the need for batteries especially at places where quick start gensets are available.

According to Mr. Sandeep Nair, Managing Director, Emerson Network Power (India) Pvt. Ltd. In case of large installations, a customer is more worried about the quality rather than the pricing. Across the world, Emerson is known for its high quality work, quickest turn around time and best after sales support. Today, Emerson has moved from being a UPS and Precision AC manufacturer to a “Global Leader in enabling Business Critical Continuity Solutions.” Emerson’s solutions cater to an array of large enterprises spanning across Datacenters, Telecom Shelters, BPOs, Industrial Process Control Rooms, Food Processing Industries, Broadcast Facilities, Building Services Control Rooms, Surveillance and Monitoring Centers, Medical Equipment Installations, Government, Banks and Financial Institutions and Retail Malls. Through its extensive network of Business Partners and Channel Partners, Emerson has successfully penetrated the B & C class cities in India to cater to the fast-growing SME segment.

In August 2005, Emerson Network Power entered the SOHO UPS segment, with the launch of two UPS models, the 600VA and the 1000VA under the ITON range. With the acquisition of Knurr AG of Munich, Germany, the global leader in Rack and Enclosure Technologies for IT and Telecom vertical, Emerson Network Power India has become the only player in India to offer cooling solutions at the room, rack or chip level. These solutions are available in the Indian market from March 2006.

In February 2006, Emerson acquired global leaders in rack solutions- Knurr AG. Knurr’s broad platform of rack systems has integrated with Emerson's cooling and power management technologies, helping customers solve problems in new and existing installations and giving data center managers more flexibility in facility design. Emerson has always been on forefront of innovation we come across as the most trusted advisor to the client, he adds.

ON GOVT. TAXATION POLICY

Mr. Suresh Srinivasan of Chennai based Auro Power Systems was very empathetic when he says “GOI introduced VAT to create a uniform taxation, currently 4% but we find some state Govt.’s not ready to implement. This is ridiculous.

At least a minimum duty should be levied on imports of all sorts as it would help survive and sustain the domestic industry.” He further adds there should be a single point tax and any number of resale should just attract a minimum of 1% as resale tax, strong words from a man who advocates and practices end-user education as a deterrent to mushrooming small time UPS manufacturers who do not hesitate in compromising on quality and service while eying the price conscious customer.

According to Mr. Anil Gupta, Managing Director of Microtek International Pvt. Ltd., there is no support coming up from the Govt. side to the power backup industry, since the import duty on finished products is being eliminated while the part and the components are still not fully exempted from levy of import duty. This inverted tariff structure is acting as a negative element in the much needed industry in the present scenario. Govt. should take some remedial step to protect Indian manufacturers, it is therefore desirable that the duty on raw material is maintained at lower rate then the finished end product for the development and growth of domestic sector, laments Mr. Gupta.

Ramesh S, MD Powertronix, Bangalore who is also the General Secretary of UMDA feels the Quality power is the basic facility the government should offer to the industries. When the government is failing to provide, then the power conditioner’s industry has an opportunity. So government should consider the subsidy for the UPS customer. Instead the tax structure and Excise duty etc. Secondly, this product is affordable to manufacture by small scale industry. If this can be restricted through permit to manufacture by SMALL SCALE INDUSTRIES only, Which can create many Indian Entrepreneurs. The Government should invest on the R&D to develop a product and the technologies to be offered to Indian Entrepreneurs. So that Indian industries can compete with the MNC’s.

While many a companies take a stand for Govt support for improving the situation of Indian UPS manufacturers. Mr. Arun Ghosh, Managing Director, Hita Technologies Pvt. Ltd. Has different take altogether. Frankly we are behind China as far as manufacturing is concern, he laments. It will take long term consolidated approach for us to match their standard and efficiency. With our vast potential market, we should concentrate Indianisation of the products to cater to our local market rather than try to compete with China as an equivalent leading World Standard manufacturing base. It is definitely not means that we are lacking knowledge and skills but in order to succeed as a True manufacturing nation, we have to adopt realistic approach for improving the basic Infrastructure for conducive environment to become a successful manufacturing Hub. Govt. need to play the vital role of improving the basic Infrastructure, easing the norms, introducing easy and quick approval procedures, encouraging the entrepreneurs with incentives and proper raw materials supply chain management, he adds.

THE CHINESE DOMINANCE

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. “We feel there is a trend in the market where slowly manufacturing activities are shifting to sourcing because of low cost kits available for cheaper price but the threat is whether these kits are suitable for Indian power conditions requiring UPS to give higher back up time and extreme temperature fluctuations like high especially in summer. People are simply carried away by price tags rather than compatibility of these kits to our country.

According to Mr. N P Krishnan, Director Marketing of Consul Consolidated Pvt. Ltd., Chennai - Hindi Chini Bhai Bhai ! There is no going back on this relationship when it comes to outsourcing lower capacity UPS from China. This is a thing that has come to stay. Esp. upto 20 KVA, Indian manufacturers have no choice. This has to be done for the very survival. This has now become box selling. Above 20 KVA, and for transformer based UPS, China does not have much to offer. The bulky, Indian transformer based UPS are reliable and rugged. No doubt about that. However, the Govt. has to be a little more clear on their policy on how to treat the UPS in terms of listing of the UPS. There still seems a lot of confusion. Excised duty is still high, and should come down. He was obliviously talking about the harassment in Custom Clearance, every time proving that UPS will be used for Data Processing Application and not for any other purpose.

Here it is worth mentioning that Amitansu Satpathy of BPE (INDIA) Pvt. Ltd. says, one has to be ready to face these small hick-ups, after all you are in business. BPE is one of leading companies marketing Ablerex and Astrid brand of UPS Systems in India.

Today no company in India can claim they are actually manufacturing atleast in lower kVA ratings. If doing some cosmetic work and fixing some nuts & bolts amounts to manufacturing then that be it, he laments.

According to Mr. S A Joshi, Executive Director Aplab Ltd. UPS is a growing market and is fed to large extent by imported UPSs in small ratings of 1-10 kVA, mainly from China, Taiwan etc. because of the economics of that are suitable to most Indian companies. But he too agrees that they are not perfectly suitable to vagaries of Indian Power conditions. He further adds those importing UPS kits make cosmetic changes and sell it out as their brands, adds Mr. Joshi.

This is cost effective to those with smaller turnover and also those operating from tax free zones like Parwanoo. He adds at Aplab “Our concentration is on the Middle & Higher range of UPSs. We have a huge demand of these UPS Systems from BPOs & CALL CENTERs”, he laments.

According to Mr. Tejas Sheth of Asia Powercom Pvt. Ltd. the UPS market is now polarized to MNC/imported category and local make. The tilt is towards MNC/imported category. This is mainly due to the Latest technology, compactness, look etc. Even local manufacturers now have started importing to stay in the competition. In near future, only Imported reliable UPSs will be favored and rule the market like Computers where one can only find MNC / Imported brand.

Softdisk believes that although most of the manufacturers today are importing from China and Taiwan, but certain companies like Delta Energy Systems India Pvt. Ltd., an 100% subsidiary of Delta Group, world wide leaders in Power Electronic Equipments because of their better service support network.

According to Mr. Deepak Sharma, Country Head, UPS Division, Delta Energy Systems Pvt. Ltd. There’s a huge market potential lying untapped for quality power; as with the growing economy India is facing acute power shortage with a peak power shortage of over 13%.

There is also a visible increase in IT spends by the SMB segment and industry verticals such as BFSI, IT, Retail, education, Banking and government. There’s also usage shift towards the online ups from the line interactive ups systems especially in the SMB segment. The 1 to 10 KVA is selling like a hot cake in the SMB Segment. In the Mid Segment, 30 to 80 KVA, three phase systems are showing phenomenal growth. The greater trend is of IT infrastructure consolidation throughout all the industry verticals, which is majorly driving the High-end UPS demand.

In today’s scenario the Chinese produce has become almost redundant as today world’s 85% manufacturing is China based and all MNCs have their manufacturing plant in China in some way or the other. Also, Most Indian brands are buying the products from Chinese ODM/OEM.

FOREIGN COLLABORATIONS

Taking of collaborations there is not a single company in top 20 list which does not have a foreign collaboration. Either these foreign companies are directly present in India thru 100% subsidiary or thru JV, technical tie-ups or a distribution arrangement. Only exception to this list is Delhi based Tritronics India Pvt. Ltd., headed by Mr. Rajeev Chatrath, who preferred to duck this question when queried, why no tie-ups?

Talking of tie-ups, Consul’s Krishnan is very optimistic, “We are currently completed our Silver Jubilee Year and gunning for a turnover of 100 crores this year and at present we are on the right track and target.” The tie up with GE Digital Energy has given us many valuable entries and this will open more doors. “The overall scenario has never looked so good in the past and we are looking forward to a very good year.”, he laments. However, Mr. Ramesh-sankaran, Chariman, Consul went proverbial …. (Purasana Uttoto, Arsana Nambalama) clearing indicating that Manufacturing will be Consul’s Forte.

APC MGE are under Schnider now. This resulted in Numeric & Socomec joining hands together in a 50-50 joint venture, resulting in yet another formidable formation. Power One tied up with EPI, Uniline has a technical tie-up with Digital Data Systems of Europe. Techser has collaborated with Autometers who inturn have technical collaboration with Powertronix of Italy. Aplab has a technical tie-up with Ward of China for its rack mounted online UPS systems. Ablerex operates thru BPE, while Emerson, Eaton which recently acquired MGE OPS, Asia Powercom & Delta have direct presence thru 100 percent subsidiaries. DB has tied up with Chloride PLC London.

Speaking on these new alignments, Deepak Sharma, Country Manager, Eaton Electrical laments “I think these developments have greatly impacted those people who were actually involved in the alignment shifts. To an extent customers now feel more secure while doing business with those companies that are independently positioned to service their requirements. As far as MGE OPS acquisition by Eaton is concerned, you need to give it us as it is a complete take over and not just hand-shake or JV which can broken-off any day. So the customer still feel at easy with, he laments.

Although these collaboration are good from customer point of view who can now choose from a array of best of technology, but the companies already established in India are facing what can be termed as employee pouching.

Sumant Kumar of Bangalore based Powernet Solutions Pvt. Ltd. believes, today’s UPS units should be capable of supplying non-linear type loads without de-rating or degradation in total harmonic distortion (THD). This would require the computation of critical electrical loads, before selecting the UPS capacity, considering the power requirements of each piece of equipment to be protected. An ideal UPS system should take care of the output voltage and frequency regulation. Finally, a good UPS should also allow for 25 to 30 percent future expansion. In addition, the service capabilities of the UPS manufacturer also matter greatly in case of mission-critical applications.

Softdisk has seen it all over the past 16 years, more often then not some of the companies use a lot of word jugglery in there promos, it must be the same thing which some one else must be offering without making lot of noise and at a better price. It is one area where customers need to be watchful. Some of the recent innovative features that have been introduced in the UPS over the past year are load bus synchronization (multi-level redundancy), remote monitoring software (Web-based monitoring) and DSP-based UPS systems. User should take into account all these before making a purchase decision.

THE FUTURE

Adverse business conditions in the last year had resulted in an increase in price sensitivity. This resulted in the SOHO and home user markets moving to products that were not necessarily feature-rich or built for sustained reliability. The enterprise solutions market however has realized that a “cheaper” UPS is not necessarily a cost-effective solution.

The government, both at the central and state level, driven by the increased use of IT, has been a major buyer for UPS products. This trend is expected to continue in the next few years. Increasingly, SME segments are also becoming IT-savvy and network-dependent. These trends are resulting in a higher dependence on UPS and power protection solutions.

If the first half of 2007-08 is any indicator It is going to to be a party time for UPS companies in India.

Mr. PC, Kamalnath : This is must !

According to Mr Pradeep Pimpley Vice President, DB Power Electronics (P) Ltd. the quality and Uninterrupted power is a lifeline for IT business. The UPS industry is the major and very important contributor in the growth of IT business. However, the exemptions and facilities, which are available to Software and IT industries, are not extended to this very important hardware industry. The Octroi, Local Tax Exemption, VAT Exemptions, etc. should also be extended to the UPS industry. The major problem in India is to manage logistic operations. The octroi, entry tax and other local taxes create hurdles in material movement, and this also leads to increase in price to the end customer. In city like Pune, there are two Municipal Corporations. The material movement is tedious, if the vendor and manufacturers are located in two different Corporation limits. The entry tax is also one of the big hurdles. If the Government is really serious and wants to help not only Electronics Industry, but the overall industry as such, they must abolish the Octroi and entry tax. State Governments have to first take action, in this regard.

While according to Mr. K N Raja, MD, Consul consolidated Pvt. Ltd. UPSs are predominantly used in Computer applications. Basic Customs Duty for UPSs classified under Chapter 8504.4029 of Customs Tariff. Basic duty is exempted vide Notification No. 25/2005 SNo.4 if used for Computer/Telecom Applications. This duty may completely be waived for UPS irrespective of the nature of applications, they would be put to use in. The clause only for data processing applications unnecessarily causes confusion and leads to harassment.

Softdisk also believes these steps if taken by Govt. will lead to overall betterment of the Industry and request the Government to act in this direction.

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