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. Buoyant by previous to previous years performance many even
predicted the industry revenue to touch 6000 mark by March 2013. As on
date we feel that crossing 4500 crore mark barrier for end-user sales and
5000 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 2011-12 Market was upbeat, But
first two quarters are showing steady progress nothing flashy, why ?
According to Mr. N K Agrawal of Delhi based Microtek
International Pvt. Ltd., There is a Great Market potential as these
products UPS and Inverters have become an essential part of every
household, and as the middle class is growing rapidly in India the
consumption of these products is also growing at the same pace. We do see
sales of these products not only meeting but exceeding by a large number
the Softdisk prediction of UPS industry revenues reaching INR 5000 Crore
by 2013. (Here it is worth mentioning that Softdisk figure does not
include the revenue generated by Inverters).
Mr. Aggrawal feel agrees that in 2011-12 market had
been very buoyant, This financial area 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. In-spite of all this we still feel
that the UPS Segment will show a growth in this year also, he laments.
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, the UPS market turned around in
2010 with revenues higher than in 2009. But the market has experienced ups
and downs over the past year. The consumer PC market more bent towards
larger notebook adoption makes the intake restricted only to the desktop
users who mostly settle for 0.5KVA to 1KVA power back devices.
We are doing exceptionally well in 20 to 60 kVA
segment. Uninterruptible Power Supplies grew twice as fast in the second
half of 2011 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 being 10.8% higher than the same period in 2011.
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, PCI 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.
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.
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. We saw many M&A during the past years and French one was
really the big deal of the year! The average market in enterprise segment
(in which we operate) is expected to grow at the rate of 18-20%. 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%. Last few years the growth rate in the market has been
encouraging (Leave apart the slowdown period) and UPS shipments taking a
cue from the PC market have also witnessed a very significant growth. 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.
Speaking on the recessive trend in the first two
quarter, Mr. Suhas Joshi Director (MCIS) Delta says that current economic
situation is turbulent and to some extent Indian market is also affected
because of the impact on European market which is showing a dip. But
government, education, ITes market is growing. Earlier the market was
growing at 15-20% growth rate. Now it is growing about 8-10%.
Organizations have entered a new era characterized by rapid, dramatic and
turbulent changes. The accelerated pace of change has transformed the way
a work is performed by employees in diverse organizations. The most common
business strategy adopted by almost every organization is to think
globally but act locally as it helps to deal with the challenges of doing
business in the globalized economy. Delta Power Solutions has also adopted
methodology on similar lines laments Mr. Joshi.
Mr. A Balan of Numeric Brand, now owned by Novateur
Electrical and Digital Systems Pvt. Ltd. feels, 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, the reverse auction process is not a favourable option for
the customer as well as the UPS Manufacturers. (1) No. of participants are
not known. (2) Genuineness of the participants are not known (sometimes
customer plays proxy to put pressure on the other suppliers), names of
companies participating in the tenders are not known. Etc., The reverse
auction is a forced and rapid price reduction tactics. In the desire for
more business volumes, unreasonable bids are made leading to commercial
unviability of supply. The starting prices of some suppliers are very low
often below the cost of raw materials. In a recent reverse bid, it was
observed that the starting bid was 15% lower than the average cost of
input and as a consequence, only three bids were made between two out of
three suppliers and the auction itself was over in 60 minutes without any
extensions. It may initially give a feeling of good prices to the
customer. But the heat will be felt by the manufacturer during execution.
It is also a possibility that the customer is affected by this process.
Will all companies cooperate by staying away? Despite
signing resolutions during the UMDA Conference in March 2012, several
companies are yet to send in their individual decisions to stay away from
reverse auctions. Since there are a few companies participating in such
reverse auctions, I suggest that all companies agree by signing a
declaration, either under the auspices of “Association of UPS
Manufacturers (AUM)”, or “UMDA”, which can be sent to such customers
to communicate the decision. That would be ideal. However, one needs to be
firm on the decision in case of threats from such customers to blacklist.
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. Anoop Nanda 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
softwares and patented technologies. 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.
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.
In India, the five cities of Mumbai, New Delhi,
Chennai, Kolkata and Bangalore have been the largest markets for power
products. However, there has been a shift towards B & C Class cities
such as Pune, Chandigarh, Lucknow, Hyderabad, Jaipur to name a few. These
locations are fast becoming global hubs in terms of R&D, ITES &
BPO, Retail, and Manufacturing and given the criticality of operations
undertaken in these sectors, there is an increasing need for comprehensive
network uptime solutions, Besides, given the upward spiral in terms of PC
penetration in these cities, these cities have been showing a marked
growth, they laments. 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 past year the net materials cost
of all the products gone up and we are taking all cost cutting measures to
control the pricing and offer great value to customers.” We are doing
reverse engineering and research to check all the possibilities to reduce
cost without compromising on quality, he laments. He further adds when we
fixed expenses to keep the cash flow going, some people started quoting
very low. But surely they can not repeat and sustain but certainly some of
listed companies could do it for long time. That is to play a different
game to keep the share price high. Even they have 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.
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 6-8 persent mark which gives us an
indication of the industrial expansion that is already happening at a
rapid pace. The rigidity of the Indian economy was reflected during
global meltdown. As such in the growth of the UPS category. This growth
rate in an economy that is already the world’s fourth largest in real
terms (Purchasing Power Parity) is expected to grow the faster then
ansales 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 y
other country barring China.
The key factors for India’s growth in the UPS market
are would be Increase in PC & server voltage fluctuations and low
voltage.
NORMS OF THIRD PARTY MAINTENANCE
According to Mr. Rajaram Rammoorthy Third Party
Servicing / Maintenance is a concept that is emerging since the last few
years. Big Customers adopt this concept to ensure single point of contact
for maintenance to ensure that they concentrate on their core competency.
It is a good option, as long all UPS are serviceable by anybody. Several
big service companies are jumping into this bandwagon and the concept is
catching up. As long as the products are generic, have interchangeable
parts and are easy to service by an inexperienced technician, this concept
cannot be curbed. Proprietary design and manufacture, robust product and
good service support & policy will ensure that the customer will not
risk with third party outsourcing.
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.
Santosh Thomas Koshy of Hykon 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.
However Mr. Y B Suresh 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. Anil Munjal of Riello PCI Ltd.
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 2012. Despite this grave situation,
there are no special incentives or support for the UPS installation except
in a very limited way. Considering the importance of UPS Systems in a
growing economy and keeping in view the power scenario what is it, the
Govt. should certainly exempt all UPS Systems from import duties and
excise duties” , he laments.
Mr. Balan of Novateur 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.
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. Shrinivas Chebbi 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 about 15-20 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.
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 10-12% 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 fragrance.
