STEADY  GROWTH

The year 2018-2019 was a  growth oriented year for the UPS industry. Some companies grew while others failed to do so. Maintaining nearly the same growth as last year.

The industry netted revenues to the tune of INR 6730.54 crore. This is exclusively the end-user sales figure. However the over all industry revenue was stimated at INR 6980.54 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 304 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 304 companies responding only 146 companies were awarded with SD Ratings. 

However most of companies are facing it with difficult to match quarter to quarter sales of 18-19 in 19-20. We are sure the figure which we have arrived at i.e. the actual end-user sales  revenue of  INR 6730.54 crore mark will definitely be crossed with ease,   in the current fiscal in 2019-2020. 

(Our Midyear projection in June 2019)

Growth wise it has been a  mixed year with some of the majors growing while others dipping.

Revenue-wise : This year 2018-19, the industry grew by 5.36% & revenues grew up to 5930.87 crores, a clear indicator of a slow down over past years. The GDP currently at 5% is set back, however spew of measures indicated by finance ministry and infusion  of 70000 crore in a banking systems Particularly very good,  considering the industry may now get funds and investment in infrastructure will boost sales.

Volume-wise : Industry grew by 16.70% 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 94% 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. Most SME level UPS manufacturers are moving towards SPCUs. 

Of the total revenue organized sector accounted for nearly 81% while 19% 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 2019-20 was tragic as compared to last year. Projects have been few but the demands continue, There was a bit of lul in he second quarter due GDP & fund flow issues. In the current fiscal no major projects came up during that period.  The overall effect is putting expansion plans on hold. However things will improve in third quarter with government   taking lots of measures and investing a lot of infrastructure. 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.  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. Consul being  acquired by Fuji Japan, one can say the entire Online UPS market can be divided into following APC-Schneider, Vertiv-Liebert, Legrand-Numeric, Hitachi-Hirel, Fuji-Consul, AVO, Eaton, CyberPower, BPE & Other major players BPE, Socomec, Power One, Techser, Uniline & Hykon & the rest.  

Talking of market share Vertiv Emerson has the highest market share of 12.00% followed closely by APC SCHNEIDER 11.00% Numeric 10.00%  followed by Hitachi 7.00% , Consul 7.00%, AVO 3.00%, Eaton 2.00  & so on as shown in graph above.  While other major players account for rest. 

SD ESTIMATES

Softdisk had predicted in June 2018 that the total industry revenue will touch INR 6600 crore mark by March, 2019 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 6730.54 crore  mark  for end-user sales and 6980.54 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 2018-19 market have remained steady. The overall market for UPS and SPCUs is still a growing market. Despite being the power situation improving, still demand for power backup solutions is growing. Specially for Solar PCUs the market is expanding exponentially, as the prices of Solar Panels have dropped a Lot and the units are now becoming more affordable. The government is also promoting renewable solar energy and providing subsidy also at various places. The consumers are also becoming more aware and they understand that by one time investment on solar PCUs, in the long run they are going to save lot of money in electricity bills.  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.

GST has impacted the economy  initially, but with time the effect is eliminating. In today's global business environment the acquisitions and takeovers will keep happening depending on the requirement and aspirations of acquirer company.

(Here it is worth mentioning that Softdisk figure does not include the revenue generated by Inverters, which too is effected by the slow down.) 

According to Mr. Arun Ghosh of Cyber Power, MD, Cyber Power,  The Indian UPS market is highly competitive, fragmented and fast growing, with both multinational and Indian suppliers competing for space. The demand for UPS system going up has significantly led to a drop-in price. There are many upcoming products and market is flooding with variety of products for different applications.

Not to deny the fact that India faces an acute power shortage even today. The scares of frequent Power cuts have compelled homes, organizations and industries to depend more and more on power back-up devices. UPS has become a need-base product today and people have started buying UPS and Inverters anticipating power cuts as nothing before. Inadequate power generation, issues with land acquisition for new power plants, fuel shortage, and high transmission and distribution losses are some of the contributors to this situation. The computerization initiatives taken by the Central and state governments besides the public sector undertakings, are among the major factors driving the UPS market. The SME segment is also showing a growth trend and will fuel the demand for UPS systems in the coming years. 

CyberPower has an award-winning engineering team that meticulously designs and engineers every product to provide outstanding performance, as well as surpass international safety and environmental standards. Company owned factories produce each product to exact specifications for complete customer satisfaction. 

In response to the growing demand for Green IT products, CyberPower is dedicated to the development of efficient GreenPower UPS Energy-Saving Technology. As an industry-leading UPS manufacturer, CyberPower has not only made it dream-come-true for businesses and individuals implementing Green IT principles but adopted green practices throughout the operation, including the full compliance to the Restriction on Hazardous Substances (RoHS), accordance with Waste Electrical and Electronic Equipment (WEEE) protocols, certification of ENERGY STAR, receiving ISO 14001 Environmental Management Systems and IECQ QC 080000 HSPM Hazardous Substance Process Management Standards and other ongoing "Greening" of all packaging practices and materials to ensure the maximum contribution to the environment. 

Contrasting views were expressed by Mr. Rajaram, MD Electronics & Controls Pvt. Ltd., Bangalore according to him the overall market has been down since the last 18 months. There is no buoyancy in the market and customers have started taking it slow. There is no liquidity and the payment cycles are long drawn. The consolidation in the Banking Industry has an impact on the purchase of UPS products as there are surplus UPS due to consolidation of Bank branches & closure of ATMs. Government purchase through GEM has led to many prominent UPS players exit the Government business due to unsustainable prices & process adopted by the Government and is being flooded by less prominent or regional / smaller dealers. This leaving the genuine government buyer high and dry. 

GST has been a good reform and that has removed the operational bottlenecks -Road Permits, Form C, multiple taxes etc. However, the rollout has had its share of issues and there has been a significant slow down in the business as considerable amount of time has been taken by all organizations to implement the changes. The reduced business in the immediate several months has led to losses for some of the businesses. Smaller suppliers in the bottom of the supply chain has suffered the most as they had to spend quite some of their resources to come online. The tax slabs have been very high at 18% and 28% for most of the capital goods. There is quite some confusion on the rates of GST for UPS for which an application to review the GST is pending with the council. 

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  Vertiv, 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 5000 to 5500 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.  Earlier doing business in India was difficult,  major problem being 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. 

Mr. Narayan Sabhahit Managing Director, Techser Power Systems Pvt. Ltd, Bangalore,  believes that the financial year 2018-19 was a stead , not much growth was witnessed but companies were able to met their previous revenues. 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 2018-19. 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. 

According to Mr. Christo George of Hykon India Limited. Thrissur The UPS market is not growing as expected. The banks and many other institutions had stopped purchasing UPS as they moved to laptops from Desk tops. Also the small UPS segment which used to go mainly to home segments will vanish soon as there also Laptops are taking over. The industrial UPS market will go up as many equipment in industries now need UPS. But the current year as there is a slowdown in Industry, the requirement of UPS also came down. 

Solar UPS segment will grow as that segment is growing fast. In SPCUs India companies only most SME's are manufacturing off-grid PCUs. There is a good growth for SPCUs in home segments. That will affect the growth of inverter segment as it become Solar Home UPS.

GST is good for the industries as the taxation becomes a standard throughout the country. 

GST is good for the industries as the taxation becomes a standard throughout the country. But taking separate registration in each state takes away the Ease-of- doing business. Another hurdle is getting back the refund of GST. As it's taking long time, it affect the working capital and fund flow. The Business model for UPS is changing and many companies have to switch over to other areas like Solar Electric Charging stations and Lithium Ion battery packs. So more acquisitions will happen in the coming years.

Lithium batteries is a Disruptive Technology which will disrupt the conventional Lead acid batteries. The cost of Li-Ion batteries are coming down and it will be at par with the LA in the next two years. Against the common belief Lithium ion batteries are not having any poisonous or hazardous materials or contents like in LA batteries. So there is no need for any concerns in recycling like in the case of LA batteries. 95% of the Li Ion batteries contents are -Aluminum & Copper which can be easily recycled. 2-3% of Lithium also is recyclable.

Make in India Campaign will give a boost to the manufacturing set ups in India. One advantage in future is that the cost of production in China will be going up. Once the scale of operations of Indian companies go up, Indian companies can compete with Chinese Companies.

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. There is enough scope in the market for or everyone to grow. 

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. That is the reason that most of the small and medium range UPS manufacturers are now moving towards SPCUs and in even commissioning small sized Off Grid, Hybrid and Grid tie Solar Power Plants. 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. which they don't do in the fear of getting blacklisted. 

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 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 2nd 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.  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, With the growing business complexities and GST law evolving in India, it is essential to understand the implications of GST on the Mergers and Acquisition transactions in India. GST, it was widely feared, would cause inflation to rise, as with many countries that launched a single tax regime. That hasn't happened in India. The recent spike in consumer inflation has been due to high food and fuel prices, unrelated to GST. Past few years, there had been a lot of changes made in the Indian Economy. But we also need to change the way we look at our economy. There are a lot of things we don't measure well. GST is a game-changing reform for the Indian Economy, as it will bring the net appropriate price of the goods and services.

From the viewpoint of the consumer, they would now have paid more tax for most of the goods and services they consume. Most everyday consumables now draw the same or a slightly higher rate of tax. Furthermore, the GST implementation has a cost of compliance attached to it. It seems that this cost of compliance will be prohibitive and high for the small-scale manufacturers and traders, who have also protested the same. They may end up pricing their goods at higher rates.

As many taxes and multiple cesses were subsumed into GST, aligning India with global regimes. Central taxes such as excise duty, services tax, countervailing duty and state taxes including value added tax, Octroi and purchase tax were all rolled into one. The new regime provided for free flow of tax credits and did away with cascading due to tax on tax, boosting company financials and resulting in reduced prices for consumers. It also ensured a single law for the whole country with uniform procedures and rules, which reduces compliance burden and business complexity. The government sacrificed revenues, but improved compliance should cover any gap. 

According to Mr. Vinod  of Arvi Systems and controls, India's GDP growth despite slowdown is currently hovering around 6 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 for industrial & larger applications and Government putting in lot of fund for infrastructure growth.
• Increase Server sales will result in increased demand for UPS, which is not happening at the required pace right now but is certain to happen with the latest financial infusion and Govt. declaring 75000 lakh crores for infrastructure development.
• Increase penetration in C & D class cities has been 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. 

Mr. Krishnamoorthy , MD Powernet Solutions Pvt. Ltd.  says innovation is the key to success of any manufacturer, It cannot be run of the mill specially in this era of fierce competition and squeezing margins,  Along with regular UPS and SPCUs. 

We have started manufacturing Lift UPS with logic boards, so that no life is truck in between floors. We have become OEMs to many a established brands in a short span of time and are expected to do much better in coming years. 

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 careful 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. Best Power Equipments are one of  most innovative and cost effective UPS manufacturers in the country. There Modular UPSs are rated to be one of the best in the country. 

Since the acquisition of Numeric by Legrand, Numeric handed over the brand with a turn over of 651 crores, It has been vacillating between 625 crore  to 645 crore. This is fist time since acquisition Numeric has shown a big jump to 682 crores under the leadership of  Mr. Palash Nandy  According to him Softdisk Magazine acts a s a glue to the industry, 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 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.