The power backup market in India, unlike in the West, is a macroscopic market. There are national, regional and local players, both in the branded and unbranded segments. However, it is clearly the UPS that holds a major share in the power solutions market—the UPS segment alone is worth approximately Rs 25 billion. It is difficult to put a number to the fragmented inverter segment, considering the presence of a large number of local, unorganised players. Other constituents, like cooling, are bundled with the power backup and management solutions offered by vendors.
The year 2009-2010 saw the industry netting revenues to the tune of Rs 36 billion. According to a Frost & Sullivan report, the top brands hold 60 per cent share of the market, while local brands have 40 per cent share. The home inverter (1-3 kVA) segment, including batteries, has a sizeable share of the overall backup market.
Monday, February 21, 2011: Growth of India’s power backup market
In 2010, the overall industry revenue was estimated at Rs 39 billion. Revenue wise, the industry grew by 11 per cent—an increase of over 5 per cent on the previous fiscal year of 2008-2009. Volume wise, the industry grew by 20 per cent over the previous year. Of the total revenue of Rs 39 billion, online UPS accounted for 89 per cent while offline/line interactive UPS accounted for nearly 11 per cent.
“We expect this growth to continue for one or two years. The Indian education institutions infrastructure growth will provide the qualitative manpower for IT enabled industries. The investment in industrial segment also grows year on year, showing signs of accelerating growth in this segment,” opines Jerome Rodriguez, managing director, Socomec UPS India Pvt Ltd.
According to Frost & Sullivan, the power backup market in India is addressing a 17 per cent power deficit. The cumulative cost of nationwide power outages is a staggering Rs 1300, billion.
“Power continuity and power quality are the main ingredients for a successful urbanised society. The growing need of e-commerce, the evolution of data centres and the ever increasing number of servers have all increased the need for a well addressed power electronics industry. The Indian UPS segment itself is estimated to grow by 16 per cent in 2010-11 (this is based on the performance of the first two quarters of the current fiscal year),” points out Surinder Mehta, CMD, Riello PCI India Pvt Ltd.
With India’s economy set to grow at a brisk pace, and with the continued power deficit situation, demand for alternate or backup power sources in the form of generator sets, power inverters and UPS solutions, has witnessed a quantum leap in the last 12 months. “Encouraged by this buoyant growth, Delta has several new exciting models for various applications lined up for this year, including the Amplon RT and Agilon VX series. Amplon RT has been specifically designed to protect mission critical IT systems, telecommunications, Voice over Internet Protocol (VoIP) devices, network equipment and light industrial applications against costly damage from power failures and disturbances. Recognising specific needs, the Delta VX UPS series offers the best value for money with its high availability UPS systems that prevent damage and data losses in the SOHO sector,” informs Deepak Sharma, director, sales, UPS business, Delta Group India.
Predicted growth over the next five years
The future of the power backup market seems quite promising, as it finds application in varied industries, compelling the trend to remain positive over the next five years, opines Sree Kumar, director, sales and marketing, Convergence Power Systems Pvt Ltd.
The Indian UPS market is expected to witness a CAGR of 13.4 per cent up to 2014, driven by steady demand from various sectors. The power backup sector is crucial for business continuity in the corporate world. This highlights the tremendous opportunity the market offers for UPS manufacturers to expand, particularly those who address the commercial and industrial segments.
The growth of the inverter market has been steady through 2010 and is likely to grow at a rate of 10-15 per cent. This sector promises healthy growth in the coming years as the market is diversifying with the introduction of solar related products. “Alternatives like solar and wind energy can address the challenge of power unavailability in semi-urban, rural and remote areas. Renewable energy will not only cut down operational expenditure by 15- 20 per cent but also address other problems that arise due to the power crisis. The subsidy provided by the government for solar power providers will offer major benefits to key market players,” says Kunwer Sachdev, managing director, Su-Kam Power Systems Pvt Ltd.
B Venkat Rao, country manager, medium and large UPS Systems, Emerson Network Power in India, believes that in the next five years, the customers’ focus will rapidly shift to end-to-end solutions encompassing power backup solutions, and gradual stability in demand from non-core sectors will determine its growth.
Manoj Jain, vice president, Microtek International P Ltd, however, feels that the power situation in India would not change much and the growth pattern would be the same as it was in the past. “While production would increase, demand would be more than supply,” he says.
With India assuming a key role in Asia, businesses have become attuned to the fact that they need a robust infrastructure to attract and retain investors. For this, power continuity and quality are paramount. With the Government of India signing the nuclear deal with the US, and with India getting the NSG waiver, the gates have opened for setting up nuclear power plants, and this gives a clear idea that the UPS industry will see a big leap. “With the increasing power deficit and a 17 per cent shortfall in power generated, the power backup sector is crucial for the business continuity of Indian corporations. We strongly believe that the Indian UPS industry would touch nearly Rs 50 billion by 2012-13,” explains Surinder Mehta.
Individual player’s growth over the last five years
With the promising and substantial growth of the power backup market in India, all major companies have reaped benefits. While Emerson’s power business has consistently recorded double digit growth over the years, Microtek grew five times in the last five years, and Convergence grew about three times.
While PCI’s business grew by 19.4 per cent over the last five years, Luminous grew from Rs 1.8 billion to Rs 10 billion by 2009-10. Su-kam has grown by 30-40 per cent. “We are focusing on expansion in the solar, battery and LED segments. We are also focusing on increasing our current production capacity as well as extending our existing product lines,” says Kunwer Sachdev. Su-Kam has created a pocket friendly 100 VA inverter, affordable for lower income groups at one end, and has refined the 500 kVA inverter, offering power backup solutions for bigger needs. It has developed specialised solutions for sectors like telecom, retail, healthcare and hospitality.
Socomec UPS India started operations in 2006, achieving Rs 0.05 billion in the first year. It is now targeting Rs 1 billion for this calendar year, for the UPS division alone.
Power accounts for 40 per cent of the operating expenses of a data centre and the cost of this power has doubled in the last couple of years. Data centres being one of the major sectors Delta caters to, its growth has also doubled. Delta expects even greater demand in the years to come, and hence substantial growth for the company.
The considerable growth of the players in this sector clearly indicates the tremendous business potential this sector holds. “Our ever increasing population, worsening power scenario and untapped semi-urban and rural markets, along with the new, customised as well as niche industrial applications, will make sure that this sector remains lucrative for a very long time,” opines Rakesh Malhotra founder and CEO, Luminous Power Technologies Pvt Ltd.
The power backup sector has not only grown, but has also diversified considerably into alternative energy solutions such as solar power. “Solar energy solutions will be the key focus in the future. We are working towards expanding our solar product portfolio,” informs Kunwer Sachdev.
It seems that with a huge growth expected in the ITeS and industrial sectors, the UPS industry will continue to grow at a steady pace. Also, rural India is yet to grow to its full potential, which will add to the expected growth, positively. Other areas where India will stand to grow are the hospitality industry and education. This, also, will give a positive signal to the UPS industry’s development. “Due to the technological developments and more awareness, customers are very critical about the available power and are also equally serious about the protection of their expensive electronic products,” says Deepak Sharma.
Venkat Rao believes that business critical continuity is already an unavoidable requirement for organisations, irrespective of the size of their IT infrastructure. Hence, to tap its burgeoning potential, vendors will turn to upselling and focus on speed of execution. Sree Kumar also believes that this industry cannot reach a dead end, as UPS and inverters need to be replaced over a period of time.
This scenario, therefore, offers enough business potential for many more players to enter the domain.
Factors driving growth
Buyers, manufacturers, distributors, government agencies, designers, etc, are all responsible for shaping the overall growth of the power electronics industry. Over the years, India has been constantly facing power deficit. The government has identified the power sector as a key to achieving its goals of high and sustainable economic growth, which would accelerate poverty alleviation. In order to support economic growth and meet the ever growing demand, there is a need to increase primary power supply by 1-4 times, and power generation capacity by 5-6 times. The Indian government is taking action to bridge the gap between demand and supply, but the demand for power is growing much faster than the government’s ability to increase capacity. “This power shortage is resulting in consumers bearing frequent power cuts. As a result of the power deficit, there is a constant need for power backup solutions, and this growing need for energy has led to the tapping of alternative energy sources such as solar energy,” says Kunwer Sachdev.
“The positive growth of the Indian economy and the erratic power condition in the country have both significantly contributed to the growth of the power backup sector,” says Sree Kumar. Adding to this, Manoj Jain says, “Consumers’ concern for more comfort is also a driving force for the growth of this sector. Besides, power is now supplied to remote areas where, earlier, there was no power to even charge the battery. As a result, more power backup devices are being used in rural areas.”
“The year 2010 proved to be very lucrative for the power backup industry. The overall market pie increased and a widespread shift from the unorganised to the organised sector was quite evident. New markets were tapped in tier II and III cities. Advances in battery technology and production, especially the tubular versions, have resulted in increased efficiency of power products and have helped penetrate the market even further,” says Rakesh Malhotra. “Other major reasons were technological innovation and the streamlining of processes (manufacturing, R&D, distribution, marketing, sales, after sales services, etc), especially in the case of Luminous, which has been one of the major contributors to the growth of this sector,” he adds.
Deepak Sharma sees the boom in data centres, ITeS, entertainment, banking, healthcare, and telecom as a major driving factor for the growth of this sector. Industries like process and industrial automation, IT, SMBs and many others have contributed to this growth.
Surinder Mehta believes that as manufacturers are mushrooming in tier II and III cities, UPS penetration is now taking place in cities and towns outside the top 20 metros. “With many avenues opening up in bio-medics, telecom, process automation and in almost every sphere of life, this also indicates that the future is very bright for the power backup industry.”
Venkat Rao sees a heightened sensitivity towards productivity as one of the biggest drivers. “Its fallout is being sensed directly in higher industry benchmarks in terms of uptime, IT deployment, and automation. The rapidly increasing data centre density in India and an evolved IT ecosystem is also consistently fuelling the power backup market—a factor that will play a much bigger role in the next few years as technologies like virtualisation and the cloud penetrate the Indian economy.”
According to Jerome Rodriguez, the major driving factors of this industry are high focus on customer service; high technology products with greater reliability to meet the industry requirements; high end project execution capability, etc.
There are several other factors that are driving growth. With about 17 per cent shortfall the between demand and supply in power generation, the power backup sector is crucial for business continuity of Indian companies. All signs augur well for the Indian UPS and inverter industry, as power quality and continuity will be the most sought after features in the years to come.
Verticals that will drive growth
The government, e-governance, infrastructure, education, power, and the gas and oil exploration verticals are investing in mission critical physical infrastructure. UPS Solutions are mostly in great demand in the IT, BPO, industrial production, BFSI (ATMs) and government verticals. Traction from IT/ITeS has been a bit sluggish over the last year, and telecom investments, too, came to a virtual standstill with consolidation becoming the norm. Currently, the SOHO segment also holds immense business potential.
While those in the industry acknowledge the growth of this sector, no specific data exists to understand this market better. But the growth of the power backup market in the past year, and the promising potential it holds, are clear indications for the existing players to expand and an opportunity for new players to enter the Indian power electronics sector.
Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine