2. Executive summary
Devices: Generators or Genset, battery‐based Inverters and Uninterrupted Power Supply (UPS)
Introduction End‐user segments: Commercial (generators, inverters, UPS) and Residential (inverters and UPS)
Wide range of products manufactured domestically
India developing as an exporter of generators and inverters
India developing as an exporter of generators and inverters
Domestic Exports
Categories
Market Size (2008) CAGR (2008‐12) Value (2007) CAGR (2004‐07)
Generator
G INR 57.5 bn
INR 57 5 b 15% INR 2.8 bn
INR 2 8 b 35%
UPS INR 25 bn 19% N.A. N.A
Inverter INR 23 bn 15% INR 14.9 bn 146%
Drivers &
Drivers & Drivers Challenges
Challenges Chronic power deficit; widening supply‐demand gap Increasing cost of raw materials
Demand from telecom sector Competition from unorganised sector
Growth in desktop user base Lack of consumer awareness
Large unorganized sector across all three product segments
Competition Generators: Few leading organized players; unorganized sector comprise of OEAs
– In portable segment, Honda Siel and Birla Power are leaders while in the stationary segment Kirloskar,
Cummins, Greaves Cotton, and Mahindra Powerol are some of the major players
UPS: APC Numeric Power Microtek and Emerson account for 54% of low‐capacity UPS
UPS: APC, Numeric Power, Microtek, and Emerson account for 54% of low capacity UPS
Inverters: Su‐Kam, Microtek, Luminous, Genus are leading companies
POWER BACKUP MARKET – INDIA.PPT 2
4. Power backup devices comprise generators, UPS and inverters
Device Description End‐use Size (2008)
Industrial and large residential
Combination of an electrical generator
Generator /
Generator / complexes while portable gen
complexes while portable gen‐
and engine, which run on fuels like diesel
f INR 57 bn
Gen‐set sets are used by smaller
or gasoline, to generate back up power
establishments like shops
Battery‐based device providing PC users like SME & SOHO
immediate power backup in case of setups, shops, home users,
UPS power failure. Typically used for IT BPOs, retail chains, server
INR 25 bn
equipment. rooms etc.
Electric or electro‐mechanical device SME & SOHO setups, shops,
Inverter converting DC (direct current) from
converting DC (direct current) from home users, BPOs, retail chains,
home users, BPOs, retail chains, INR 23 bn
INR 23 bn
batteries to AC (alternating current). hospitals etc.
Generators are the largest product segment in India.
Generators are the largest product segment in India
POWER BACKUP MARKET – INDIA.PPT 4
5. Market segmentation: End‐user based
Power backups
Home Commercial
Small UPS
UPS Generators Inverters
(below 5 KVA)
Medium Mid‐end
Portable generators Portable
(5‐30 KVA) (2.5 KV and 3.5 KVA)
Inverter Large High‐end
Stationary
(600–1400 VA) (30 KVA and above) (above 5 KVA)
POWER BACKUP MARKET – INDIA.PPT 5
6. Market segmentation: Product based
Power Backups
Generators UPS Inverters
Portable Small Low‐end
Stationary
y
(0.5‐6KVA)
(0 5 6KVA) <5 KVA
<5 KVA (600‐1,400 VA)
(600 1 400 VA)
Medium Mid‐end
3‐15 KVA
(5‐30 KVA) 2.5 KV and 3.5 KVA
Large High‐end
15‐125 KVA
>30 KVA >5 KVA
>125 KVA
Battery‐based backup
y p
POWER BACKUP MARKET – INDIA.PPT 6
8. Stationary generators, which are largely used in industrial and
large commercial locations, are driving generator sales
Generator market overview Market size & growth
•Market size (2008): INR 57.5 bn INR bn
•Expected growth rate : 15% p.a up to 2012
Expected growth rate : 15% p.a up to 2012 120
+15% 100.6
•Generator sales are declining as inverters gain 100
preference since the latter are: 80
57.5
More efficient & cost effective 60
Pollution free
Pollution‐free 40
Easy to operate and do not require fuel 20
0
2008 2012
Product sub segments
Product sub‐segments Segment share
Segment share
•Stationary: Primarily run on diesel Portable
<125 KVA used in large residential & commercial 10%
complexes, hotels, hospitals
>125 KVA used in large core sector industries
>125 KVA used in large core sector industries,
process industries
•Portable (0.5‐6KVA) run on:
Petrol
90%
Diesel
Kerosene Stationary
POWER BACKUP MARKET – INDIA.PPT 8
9. UPS market is the fast growing power back‐up market with
demand for huge volumes
UPS market overview Market size & growth
•Estimated market size in 2008: INR 25 bn INR bn Volume Unit mn
•Estimated market volume in 2008: Value
120 12
+19%
UPS below 5 kVA: 2.3 mn units 100 10
Overall market: 4.6 mn units 80 8
•Sub‐5 KVA segment is the largest because of its 60 50.1 6
popularity in SME and SOHOs
popularity in SME and SOHOs 40 25.0
25 0 4
•Growth rate in value is slower than volume 20 2
suggesting a reduction in end‐user prices: 0 0
2008 2012
By value :19% p.a
By volume:25% p.a
Segment share
Segment share
•Additionally, input costs are increasing due to Large (>30 KVA)
rise in battery prices, thereby putting margins
under pressure 25%
50% Small (<5 KVA)
Medium (5-30 KVA)
25%
POWER BACKUP MARKET – INDIA.PPT 9
10. Inverter market serving households, shops and commercial
establishments is growing at 15% p.a
Inverter market overview Market size & growth
•The market for inverters includes households, INR bn Volume Unit mn
shops, commercial establishments, other 120
Value
12
institutions 100 10
•Inverter market size (2008): INR 23 bn 80 8
•Growth rate: 15% p.a 60 +15% 6
40.2
•Square wave inverters command 85% of the
•Square wave inverters command 85% of the 40 4
23.0
market 20 2
0 0
2008 2012
Pricing of segments
Pricing of segments Segment share
Segment share
INR
Lower Estimate
Low-end High-end
2,250 10,500 Upper Estimate 1400VA
(600-1,400 VA)
Mid-end 15%
5% 15%
Mid-end
22,000 26,000 800VA 50%
(2.5-3.5 KV)
35%
80% 600VA
High-end Low-end
Above 46,000
(>5KV)
POWER BACKUP MARKET – INDIA.PPT 10
11. Quality manufacturing capability is making India an export hub
for generators and inverters
Thriving export market Export Data – Generators & Inverters
•Leading Indian manufacturers produce quality
Generators
and innovative products on par with
Inverters
international standards ‐69%
•High quality and performance of products is INR bn
establishing India as a manufacturing base to 14.9
15 +146%
cater to local demand as well as an export hub
p
•Exports have grown considerably since 2004,
especially for inverters 10
•However, global economic conditions in 2008
+35%
hit the export market in India
hit the export market in India 6.5
Significant decline in inverter exports 5.5
5 4.6
Generator exports, however, nearly doubled +96%
2.6 2.8
•Companies are investing in domestic 1.6
1.1 1.0
11 10 1.3
manufacturing capacity e.g.
Cummins invested INR 200 mn, in a new export‐ 0
2004 2005 2006 2007 2008
oriented unit with capacity to produce 50,000
open and closed generator sets annually
POWER BACKUP MARKET – INDIA.PPT 11
13. Challenges
Rising input costs – battery; packaging
Competition from unorganised sector
Drivers
Power shortages and demand supply
Power shortages and demand supply Lack of consumer awareness
gap in India
Demand from telecom operators
Demand for UPS for desktops
Demand for UPS for desktops
POWER BACKUP MARKET – INDIA.PPT 13
14. India has largely been a power deficit country forcing enterprises
and consumers to rely on power backup devices
Huge power deficit Demand supply gap ~ 17%
•India’s power deficit is about 10%, with a peak Energy (BU) Average Energy Demand
deficit of 17% leading to chronic power 800 Generation
shortage
600
•Most areas – urban and rural suffer from
varying degrees of power shortage 400
Sudden power cuts often lasting for hours or days
Sudden power cuts often lasting for hours or days 200
Scheduled load shedding
0
•Despite the massive investment in power VI VII VIII IX X
projects by government and private sector,
demand is forecast to outstrip supply
demand is forecast to outstrip supply Future Demand Supply Scenario
Future Demand‐Supply Scenario
•Backup power will be crucial to support: Peak 315
255
Large manufacturing base and growing industrial Base 197
output 120 147
101
B i
Business continuity in small enterprises, offices
i i i ll i ffi 173 197
71 75 107 112
and commercial establishments such as retail
Demand Supply Demand Supply Demand Supply
2007 2012 2017
As in the past, continuing shortage is the fundamental long‐term driver for backup
As in the past continuing shortage is the fundamental long‐term driver for backup
power market in India.
POWER BACKUP MARKET – INDIA.PPT 14
15. Telecom operators and desktop user base are some of the key
target segments for inverters and UPS
Demand from telecom operators New tower additions
Indus Towers
•The rapidly growing telecom sector is one of
RTIL
the largest customer segments Dec 08
Dec‐08 172,000 GTL
•Generators and invertors are used at towers 5% BSNL
8% 5%
and network management facilities with the 9%
Bharti Infratel
New 192,000 52% Others
latter gaining preference
21%
•Significant network expansion with new towers
•Significant network expansion with new towers
will drive demand for backup power Mar‐10 364,000
Indus Towers (owned by Bharti, Idea, and
Vodafone), and Reliance will lead expansion
Demand for UPS from desktop sales
Demand for UPS from desktop sales Desktop sales in India
Desktop sales in India
•Growth in desktop sales is a driver for UPS mn units
Total
%
sales in homes and offices Home share
6 5.5 5.5 40
•Growing share of home desktops creates an 4.6
5
sizeable target market for sub‐5KVA UPS
sizeable target market for sub 5KVA UPS 3.6 30
4
•Desktop sales, however, appear to be 3
3.0
20
stagnating as notebook sales growth outstrips
2
that of desktops 10
1
Since 2003‐04 desktops grew by 16% p a vs
Since 2003 04, desktops grew by 16% p.a. vs.
116% for notebooks 0 0
2003‐04 2004‐05 2005‐06 2006‐07 2007‐08
POWER BACKUP MARKET – INDIA.PPT 15
16. Rising input costs, primarily lead and resultant battery prices, is a
concern are for inverter and UPS manufacturers
Increasing cost of battery and packaging LME Lead Prices ‐ Historical
•Increase in battery prices is a major challenge
since lead‐acid batteries are used in UPS and
inverters
•Lead constitutes almost 70% of the cost of a Battery prices
battery raised by 5‐10%
thrice in 2007
•Dependent on imports which accounts for 40‐
Dependent on imports, which accounts for 40
50% of domestic lead demand
•Lead prices quadrupled between 2004 and
2007
•Although prices have come down to 2006
Al h h i h d 2006
levels, volatility still exists and will continue to
be a concern area
•In addition, increase in packaging costs is also
pressuring input costs
POWER BACKUP MARKET – INDIA.PPT 16
17. The unorganized sector remain a challenge to the branded
players owing to the lack of consumer awareness
Competition from unorganised sector Impact
•India has a huge presence of unorganized manufacturers across the genset,
Inability to raise
inverter, and UPS product segments prices or charge
prices or charge
•These players primarily compete on price by providing cheaper alternatives to premium for
branded products better products
•Organized manufacturers are therefore under pressure to maintain or reduce their
prices to effectively compete
prices to effectively compete
•However, quality and after‐sales service is a major issue with these products, which
in turn leads to dissatisfied customers and a loss of trust in the industry as a whole
Lack of consumer awareness
•Consumer knowledge and selection criteria for power backup products is poor
Consumer
•Consumers tend to overlook important technical details such as resistive loads, type education is
of lubrication, safety features, and other parameters necessary to
•This not only leads to people buying the wrong product for their needs but also in
Thi t l l d t l b i th d t f th i d b t l i grow home
grow home
segment
operation and maintenance issues
•Overall, it has an impact on consumer perception on quality of local products
POWER BACKUP MARKET – INDIA.PPT 17
19. Unorganized sector comprising of assemblers dominates the
market with few, large players in the organized sector
Generator competition Portable Genset Sales (Organized)
• Fierce competition from unorganized players, which No. of Units Sold Birla
compete on price, and Chinese imports 2006 6,635 Honda Siel
59,219
,
• In stationary generator segment:
12,612*
Leaders: Kirloskar, Cummins, Mahindra Powerol and 2007
59,150
Greaves Cotton
Others: Atlas Copco, Caterpillar, Wartsila 2008 5,797
62,227
• Few organized players in portable gensets
Few organized players in portable gensets
Honda Siel and Birla Power are market leaders More than 90% of organized market is accounted for Honda
Siel Power and Birla Power combined
Greaves Cotton entered the market in 2008 instead of * 18‐month period ending 30 September 2007
supplying through assemblers
• Unorganized segment comprises Original Equipment Stationary Generators (Organized)
Assemblers (OEAs) Units Sold (sales in INR mn)
Have exclusive understanding for sourcing engines from Company
manufacturers like Cummins, Kirloskar etc. 2007 2008
Buy engines and alternators for assembly and sale to Kirloskar 9204 (2037.25) 10482 (2257.22)
customers
Cummins
C i 7455 (1176 17)
(1176.17) 8878 (1617 52)
(1617.52)
Major OEAs are dominate their respective regions:
– Mumbai: Powerica Mahindra Powerol 8781 (1751.90) 16295 (2147.48)
– Delhi: Jakson, Sudhir and Bhaskar Greaves Cotton N.A. 1023* (N.A.)
– Chennai: Power Electrics
– Bangalore: DPK
* Production figures; sales data unavailable
POWER BACKUP MARKET – INDIA.PPT 19
20. Unorganized sector has a large share in the market although
leading brands are competing on basis of quality and service
UPS competition Organized vs. Unorganized
•UPS production in India comprises more than
300 suppliers
•Large unorganized sector
Competes primarily on price Organized 55.4% 44.6% Unorganized
Predominant at the lower‐end of product spectrum
•Organized players focus on selling:
•Organized players focus on selling:
Performance
Reliability
After‐sales service Market Share‐ Organized (<5KVA)
APC
18%
Others
38%
18% Numeric
4% 10%
5% 8%
Powercom
P Microtek
Mi t k
Wep Emerson
POWER BACKUP MARKET – INDIA.PPT 20
21. Dominated by the unorganized sector but four leading
companies competing on brand equity, quality, and service
Inverter competition Organized vs. Unorganized
•Entry of small local manufacturers and cheap
Chinese products is fuelling competition
•However, branded players are gaining market
share quickly by: Organized 40% 60% Unorganized
Offering better after‐sales services
Constantly upgrading their products
technologically
•Other major players who entered this market
are:
Revenues of major players
D Link under brand name ‘Digi Power’
D‐Link Digi‐Power
Texonic instruments under brand name ICE Revenue (INR bn)
APC India Su-Kam 4.3
Microtek
Mi t k 3.0
30
Luminous 2.5
Genus 0.4
04
POWER BACKUP MARKET – INDIA.PPT 21
23. Key developments
Date Key developments
10‐Feb‐09 Consumer durable major Videocon announced its foray into the power backup equipment space
with the launch of a range of devices, and expects to clock revenues of INR 10 bn by 2011
8‐Jan‐09 Luminous power technologies has launched a range of eco‐friendly inverters and batteries in Tamil
Nadu. The new range of inverters can run air conditioners, refrigerators, microwaves, LCD TVs,
coolers, water pumps, washing machine and all other heavy ‐duty home appliances
1‐Dec‐08 Birla power solutions is in the process of expanding its product portfolio and has set a turnover
target of INR 5 b b 2011 2012 Th company i making i
t t f bn by 2011‐2012. The is ki investments i th i
t t in the inverter b i
t business, hi h
high
kv diesel gensets and farm equipment. It is planning to increase production capacity at its
Dehradun unit for home UPS and inverters from 3,000 units to 5,000 units from last quarter of
2008‐2009
25‐Sept‐08
25 Sept 08 Greaves cotton is planning to setup a new plant at an investment of INR 150 mn it will also
mn,
manufacture portable gensets (900 VA to 2800 VA) apart from petrol/kerosene pumpsets (1 hp to 5
hp)
15‐Sept‐08 Mahindra powerol has launched its B100 bio‐diesel generator sets. The generator set uses
electronic controller which ensures start and stop in diesel mode and switches to bio‐ diesel mode
bio
when the generator set is running.
POWER BACKUP MARKET – INDIA.PPT 23
24. Private equity investments have taken place in the industry but
are focused on leading, organized players with branded products
Private Equity firm Deal description
CLSA Capital Partners Funding of INR 1 bn in Delhi‐based inverter and battery maker Luminous power
technologies
Reliance Capital Sponsored a INR 10 bn private equity fund to power equipment company Su‐Kam (they
f (
make power inverters, UPS and batteries)
Goldman Sachs and General Invested INR 3.75 bn for 10‐ 15% stake in Gurgaon‐based genset manufacturer Sudhir
Electric Gensets
Standard Chartered Private Invested a total of approx INR 2.5 bn for a 11% stake in Powerica, one of the largest
Equity makers of gensets in India
POWER BACKUP MARKET – INDIA.PPT 24
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POWER BACKUP MARKET – INDIA.PPT 25