FLAT YEAR
The year 2014-2015 was a flat year for the UPS industry. Some
companies
grew while others failed to do so.
The industry netted revenues to the tune of INR 4818.20 crore. This is
exclusively the end-user sales figure. However the over all industry
revenue was estimated at INR 4968 crore. 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 331 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 six years, we did all of it again to give continuity to the
process.
Out of 331 companies responding only 184 companies were awarded
with SD
Ratings.
However most of companies are facing it difficult to match quarter to
quarter sales of 14-15 in 15-16. We are sure the figure which we
have
arrived at i.e. the actual end-user sales revenue of has definitely
crossed INR 5140.00 crore mark .
Growth wise it has been a mixed year with some of the majors
growing
while others dipping.
Revenue-wise : This year 2014-15, the industry grew by 3.66%
& revenues
grew up to 4818 crores, a dip from 6.53% over the last fiscal of
2013-2014. A dip of 2.8% in growth in revenue terms.
Volume-wise : Industry grew by 15.6% over previous year in volume
terms.
This clearly indicates shrinking margins. Drops in revenues while
increase in volume.
One must be clear in mind that this is a very good performance
considering the stiff competition and the squeezed margins in view of
hammering the companies got during the global economic meltdown
&
falling Indian Rupee.
Of the total revenue of 4818 crores, Online UPSs accounted for
91% while
Offline / Line interactive UPSs accounted for nearly 3% while other
products including Servos & change of batteries accounting for
the rest.
We have not included the Home UPS sales figure in this analysis .
Of the total revenue organized sector accounted for nearly 78%
while 22%
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 recession, The first two quarters of the
financial year 2015-16 were not that good. Projects have been badly
hit,
atleast until August 2015 in the current fiscal no major projects came
up baring a few. Banks also restricted their purchases it is only in
August that the things started moving. The overall effect is putting
expansion plans on hold. They have given more stress on best
utilization
of their existing facility and infrastructure. Almost flat growth for
big IT. The telecom segment even during recessionary trend continued
its
positive trend for tower infrastructure. This has kept mid segment
market for UPS going well (up-to 200KVA). A small power data center
with
power requirement of 20, 60, 200KVA rating are also going as per
plans.
The Industrial market segment covering Power, Energy,
Manufacturing,
Steel, Cement, Oil & Gas, always experienced steady and normal
growth of
10-12%. The same is continuing in this year. Softdisk believes that
more
and more people are moving towards Solar. Solar PCUs units are the
new
mantra for the UPS Companies, some have even manufactured and
installed
Grid Tied Solar UPS, with hybrid charge facility (Photovoltaic &
Mains). With consolidation being the mantra for Industry. One can say the
entire
Online UPS market can be divided into following APC-Schneider,
Emerson,
Eaton, Numeric, Consul, Uniline, Delta, Hitachi, Other Major players
Switching AVO, Socomec, Power One, Techser & Hykon &
the rest. Talking
of market share Emerson has the highest market share of 20.0%
followed
closely by APC Schneider 18.0, Numeric 17%, Consul 6%, Eaton 4%,
Delta
3% while other major players account for rest.
SD ESTIMATES
Softdisk had predicted in August 2014 that the total industry revenue
will cross INR 5500 crore mark by March, 2015. 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 shaken
by
it. As on date we feel that nearing 5200 crore mark for end-user sales
and 5500 crore mark including secondary sales is quite possible if the
Indian Industry especially the Modi Govt. keeps up its poll promises
Although few may disagree with our figures, but being optimistic has
always been the Softdisk attitude. BJP win in & Uttar Pradesh
elections
will set the ball rolling for sustained growth.
According to Mr. N K Agrawal of Delhi based Microtek in 2014-15
market
has been slowed down a lot buoyant. This financial year the economy
world over is moving under the shadow of fear of major recession in
US
and Europe, also the Chinese depreciation of their currency 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 new govt at the center 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 3000 Cr.
Looking at the present market scenario, the revenue collection from
this
segment shall be within INR 3500 to 4000 Crore in the current fiscal
this year. We had a tough time this year with revenue falling by over
30% all though many company done well but general tendency is of
slump.
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. Governments buyings has also gone down as many a
governments projects have been put on hold.
Fluctuation in rupee price not only raise import billsl but also lead to
volatility affecting their businesses. Due to increase in raw material
cost, depreciating value of Indian Rupee, increase of excise duty from
government side the overall input cost has increased. Considering the
above facts, companies have increased their product pricing. Local
vendors cannot be matched up with multinationals as they are not up
to
the mark in terms of international standards, quality etc.
Delta follows the concept of economy of scale ensuring right product
and
right quality. Delta also has its local manufacturing unit at Rudrapur
and Gurgaon. Delta Power Solution’s manufacturing plant at Rudrapur,
India (first Green manufacturing facility in India) has a capacity of
manufacturing UPS up to 4000 kVA along with battery banks,
harmonics
filters, accessories and allied products to provide an end to end power
backup solution. UPS assembly line is equipped with
- Latest equipments and fully automated test stations to
perform full
range of parametric test for ratings up to 500 kVA (largest rating as
single module)
- 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
full load test for practically all conditions and get rid of any infancy
failure in UPS
In addition to providing technologically superior, quality
products that
meets the global standards, Delta Power Solutions local manufacturing
at
helps meet another dimension of business needs today - On time and
short
delivery times. Current day business needs require that projects are
completed on time as projects overruns lead to an unprecedented
opportunity loss in Telecom, IT setups, Data Centers, Medical
establishments and Industry at large. Your take on the 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. In this regard introduction of BIS
registration for up to 5 k.Va of UPS’s being made Mandatory is
welcome
sign. The Objective in particular is correct that products meet certain
safety standards. However, the formulation of the process could have
been better. They should have been more specific. I feel that the
important line of products that need to be certified for Safety are the
equipments used for homes. They are mainly off the shelf products
which
conform to a certain configuration.
ONLINE UPS are used for specific commercial purposes in a
supervised
environment compared to a home UPS / Inverter. Hence they are not
standard off-the-shelf products in the Indian context. Every customer
has a different specification requirement and hence it also qualifies as
a custom product / solution. Under such circumstances, the product
that
is built may have a different DC Bus, Charging requirements, Input /
Output Sockets, Display requirements, Redundancy requirements etc.
It is
not practical to get every configuration to be tested and certified
considering the high certification and registration costs. Hence, based
on the above premise, the Online UPS should not have been included
in
the mandatory certification / registration requirement, or the
guidelines should have been made with certain exceptions. Having
said
the above, it should not be construed that products can be made and
supplied of poor quality. It is certainly a big task for most
manufacturers and costs time and money to get certified and
registered
for meeting the mandatory requirement. As such, the awareness and
understanding is missing among several UPS manufacturers and
several
smaller players are not aware of such requirements. In addition, the
home users’ awareness that only BIS certified / registered products
should be bought is also low. The business of small players and
"fly by
night" competition will continue to be the same in the
unorganized
segment, which has been a good market for the small players. BIS
registration is not going to have any impact on the price of products
as
long as price is the major deciding factor of a customer making the
purchase. This will not change in the foreseeable future.The
challenges
for the organized players in the organized segment is expected to
remain
the same - price, supply and service.
Mr. Narayan Sabhahit Managing Director, Techser Power Systems Pvt.
Ltd,
Bangalore, believes that the financial year 2014-15 was a challenging
year due to high volatility 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
the market become steadier. Some of the major forecasted orders did
not
materialize as there were unprecedented delays in decision process.
They
spilled over to this financial year. This badly reflected on our
top-line during last year. Hopefully we will be able to realize those
orders this year. 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.
On the question of Reverse Auction:
While Mr. Cristo George, MD & Dr. Santosh Koshy of Thrissur,
Kerela
based Hykon India Pvt. Ltd. believes that after experiencing severe
declines following the global recession in 2009, this is a repeat. As
most of the components of UPS are importing, the cost of UPS will go
up
due to the increased Dollar rates. It is good in one sense for Indian
UPS manufacturers as the cost of finished UPS from China will be
increased further. So time has reached for the Indian manufacturers
to
mass produce the UPS below 5kVA instead of depending on the China
Import. But at the same time reverse auction is killing all &
sundry.
The only way customers can be spoken out of is by explaining the
demerits of Reverse Auction and making them understand. (1) In
some
tenders, customer is procuring at prices which are higher than what
they
would otherwise procure in closed tenders. (2) Customers are getting
supplies which are compromised in terms of specifications which they
are
unaware. On the Supplier’s side, (a) the reverse auctions are just too
time consuming, sometimes the process takes almost a full day, (b)
too
much dependence on network/internet connectivity and infrastructure
issues (c) Customers themselves setting unrealistic starting bid
prices.
BIS certification is a welcome initiative by the government.
This will
ensure that all goods are safe to be used by the the end users.
However
lack of testing centres / 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.
Mr. K V
Nachippan, Marketing Manager, Numeric UPS opines that Softdisk
has a scientific approach towards market analysis, for its volume and
revenue of the UPS Market (UPS + Batteries and service sales). By
2015-16, UPS sales may touch the 5200 Crore mark subject to
considerable
recovery in IT business segment. He believes although the first
two quarters of 2014-15 have not been
promising, the weakening of the rupee with cost escalation of raw
materials has caused the stagnant market growth.
Legrand
which acquired NUMERIC UPS, a leader in the UPS industry has
taken large initiatives towards a more modern manufacturing
infrastructure, to address the mass production and support
requirements.
Numeric has geographically expanded to over 262 service locations
with
950 dealers as of now. With India assuming a key role in Asia,
businesses have become attuned to the fact that they need robust
power
continuity support infrastructure to attract and retain investors.
Having mentioned a Robust system, the BIS Compulsory Registration
Scheme
for Safety is a healthy initiative to provide safety and quality for UPS
particularly for Line interactive range. The entire industry should
join together to cooperate towards a healthy
price bid and avoid reverse auction which creates an unfair evaluation,
especially reverse auction of After Sales Services. Most reverse
auctions are based only on price without considering financial,
technical, service capability and product reliability of the
organization should not be encouraged. Further, such a practice will
only reduce and weaken the already stagnant market. 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 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.
Shri
Rabindra Agrawal of Kpkatta based Switching AVO Electro Power 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 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 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.
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 & reverse auction. 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.
The Market & Price pressure :
According to Mr. I B Rao & Mr. M R Rajesh of Power One
Micro Systems
Pvt. Ltd. today Indian power conditioning market is getting more
sensitive and mature to the evolving needs of the businesses. With
India
assuming a key role in the Asian economy, businesses have become
attuned
to the fact that they need to be robust in terms of infrastructure to
attract and retain investors. Hence, Business Critical Continuity is
being viewed strategically and upcoming businesses are realizing the
importance of factoring and aligning it as key component in the overall
business model. Adding further they say we view the present market
scenario as an opportunity to strengthen our company’s presence in
Industrial market segment.
Extremely low prices are
unsustainable if quality/service levels are to
be maintained. Price erosion beyond a point hurts all stake holders –
manufacturers, channel partners, customers, etc. If it continues
beyond
a point it will lead to disastrous consequences for vendors. We have
taken a wise decision not to take up orders were we have to cut down
on
margins this has lead to try our luck in area like SPCU, where we are
successful to a great extent and the results are showing.
According to Mr. Shankar C Nagali of Managing Director of Cosmic Micro
Systems, India’s GDP growth despite slowdown is currently hovering
around 4 percent mark which gives us an indication of the industrial
expansion that is already started happening under the new regime.
The
rigidity of the Indian economy was reflected during global meltdown.
As UPS category rate in an economy that is already the
world’s fourth
largest in real terms (Purchasing Power Parity) is expected to grow the
faster then any other country barring China. The key factors for
India’s
growth in the UPS market are would be:
With customers moving towards Desktops ans 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.
Let’s understand UPS as vital link in the process chain, not
as an end
product. It should be the part of the solution not the part or source of
the problem.
If we are talking about reliable, economical,
value for money products I
think many Indian manufacturers have almost achieved it except for
lower
capacities where there are huge volumes. Easy way out to match
Chinese
prices is being a Chinese; by supplying opportunity based solutions,
which is not what Indian environment needs.
NORMS
OF THIRD PARTY MAINTENANCE Mr. N P Krishnan, Director Marketing of
Consul Neowatt Power Solutions
Pvt. Ltd. believes that it is common knowledge that, though UPS being
a
proven technological concept, differs in its construction based on
manufacturer. Components for spares sometimes become inaccessible
leading to servicing difficulties resulting in replacement of a UPS with
another equivalent product. This method proves costly for the
maintenance vendor and the customer loses the original asset quality
which is not clearly visible during the life of the maintenance
contract. This is a perceived loss to the customer. UPS OEMs on the
other hand lose their valuable service revenue which was hitherto their
assured income, which is now being threatened. This unhealthy
practice
is being practiced by most UPS OEMs, and as a matter of safeguarding
their own interests and incomes. Refraining others from taking
maintenance of other makes is difficult to implement, as there are
numerous unorganized players. Customers should also verify the
claims of
a third party service company about their capability to service other
makes as the absence of that could lead to a huge loss to them in the
form of degraded product / performance and damage the operational
efficiency of their organization leading to fresh purchase.
Rajaram of the E & C here according to him 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 adopting this and the concept is
catching up. This is mainly because of poor understanding and
trivializing the important issue. Most organizations are becoming too
sensitive to costs and are taking hasty decisions to award support to
third parties.
Refraining third parties from taking
maintenance of other OEM makes is
difficult to implement as there are numerous unorganized players.
There
are also cases where several OEMs are not providing after sales
support
and customers are left high and dry. Again, this is because the
customers are resorting to purchase from OEMs based on purely price
that
are not geared up for support.
Softdisk believe that buying
UPS starts from conducting a Power audit,
determining specific loads, and then proposing a solution which
includes
proprietary software and patented technologies. In reverse auction the
customer compromises on features of the UPS he is going to purchase,
who
so ever sells, it the customer who will loose. A reverse auction bundles
apples with oranges, notwithstanding if it’s appropriate for the buyer
or not. All the more important is the service center audit. Somebody
sitting in Hazipur procures a UPS from Coimbatore based vendor thru
reverse auction, when the machine fails what is the response time of
Coimbatore based company, we believe downtime will be something
between
48 to 72 hours, horrible from banking institutions point of view, all
this simply because of L1.
ON THE TAXATION
FRONT Divergent view were expressed 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.
Vinod Kumar of Arvi Systems & Controls Pvt. Ltd., Bangalore
believes
Govt. should considering the importance of UPS systems in a growing
economy and keeping in view the power Scenario what it is, the Govt.
should certainly exempt all UPS systems from import duties, Customs
Duties, excise duties etc. Although "The government is quite
conscious
of the power scenario in the country, yet it seems that all the new
addition to the installed capacity do not gives us the comfort of
continuous power even by the year 2020. 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.
Vinod Kumar of ARVI has
setup a 100% EOU for exporting Online UPS and
solar solutions. ARVI has also commissioned solar solution for
irrigation purposes, 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.
Mr. I B Rao of Powerone Micro Systems Pvt. Ltd.
Bangalore, UPS suggests
to have a common taxation structure for UPS System across India so
that
the same rate of tax is followed across India. This is beneficial to the
customer and to the Government. Different tax rates makes the
product
unnecessarily costlier to the end-user (customer) as the one who is
paying the taxes. With the government opening up markets for FDI
and
making the environment more conducive for foreign players to conduct
business in India, with price war among the players consolidation for
achieving economies of scale will happen. Price being the foremost
parameter for purchase, technology is taking a backseat as far as
purchases are made. Implementation of GST is a must.
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.
Lorenzo Riboni, 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 vertical 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.
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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