PowerBackupMarket Power Backup Market India

February2009

Executivesummary
Introduction
Devices:GeneratorsorGenset,batterybasedInvertersandUninterruptedPowerSupply(UPS) Endusersegments:Commercial(generators,inverters,UPS)andResidential(invertersandUPS) Widerangeofproductsmanufactureddomestically India developing as an exporter of generators and inverters Indiadevelopingasanexporterofgeneratorsandinverters Categories Generator G UPS Inverter Domestic Size(2008) CAGR(200812) INR57.5bn INR 57 5 b 15% INR25bn 19% INR23bn 15% Exports Value(2007) CAGR(200407) INR2.8bn INR 2 8 b 35% N.A. N.A INR14.9bn 146%

Market

Drivers& Drivers & Challenges

Drivers
Chronicpowerdeficit;wideningsupplydemandgap Demandfromtelecomsector Growthindesktopuserbase

Challenges
Increasingcostofrawmaterials Competitionfromunorganisedsector Lackofconsumerawareness

Competition

Largeunorganizedsectoracrossallthreeproductsegments Generators:Fewleadingorganizedplayers;unorganizedsectorcompriseofOEAs
Inportablesegment,HondaSielandBirlaPowerareleaderswhileinthestationarysegmentKirloskar, Cummins,GreavesCotton,andMahindraPowerolaresomeofthemajorplayers

UPS: APC Numeric Power Microtek and Emerson account for 54% of lowcapacity UPS UPS:APC,NumericPower,Microtek,andEmersonaccountfor54%oflow capacityUPS Inverters:SuKam,Microtek,Luminous,Genusareleadingcompanies
2

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MarketOverview Segments Segments Drivers&Challenges Competition KeyDevelopments

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Powerbackupdevicescomprisegenerators,UPSandinverters
Device Generator/ Generator / Genset Description
Combinationofanelectricalgenerator andengine,whichrunonfuelslikediesel f orgasoline,togeneratebackuppower

Enduse
Industrialandlargeresidential complexeswhileportablegen complexes while portable gen setsareusedbysmaller establishmentslikeshops

Size(2008)

INR57bn

UPS

Batterybaseddeviceproviding immediatepowerbackupincaseof powerfailure.TypicallyusedforIT equipment.

PCuserslikeSME&SOHO setups,shops,homeusers, BPOs,retailchains,server roomsetc.

INR25bn

Inverter

Electricorelectromechanicaldevice convertingDC(directcurrent)from converting DC (direct current) from batteriestoAC(alternatingcurrent).

SME&SOHOsetups,shops, homeusers,BPOs,retailchains, home users, BPOs, retail chains, hospitalsetc.

INR23bn INR 23 bn

GeneratorsarethelargestproductsegmentinIndia. Generators are the largest product segment in India

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Marketsegmentation:Enduserbased
Powerbackups

Home

Commercial

SmallUPS (below5KVA)

UPS

Generators

Inverters

Portablegenerators

Medium (530KVA)

Portable

Midend (2.5KVand3.5KVA)

Inverter (6001400VA)

Large (30KVAandabove)

Stationary

Highend (above5KVA)

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Marketsegmentation:Productbased
PowerBackups
Generators
Portable (0.56KVA) (0 5 6KVA)

UPS
Small <5KVA <5 KVA Medium (530KVA) Large >30KVA

Inverters
Lowend (6001,400VA) (600 1 400 VA) Midend 2.5KVand3.5KVA Highend >5KVA

Stationary y

315KVA

15125KVA

>125KVA

Batterybasedbackup y p

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MarketOverview Segments Segments Drivers&Challenges Competition KeyDevelopments

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Stationarygenerators,whicharelargelyusedinindustrialand largecommerciallocations,aredrivinggeneratorsales
Generatormarketoverview
Marketsize(2008):INR57.5bn Expected growth rate : 15% p.a up to 2012 Expectedgrowthrate:15%p.aupto2012 Generatorsalesaredecliningasinvertersgain preferencesincethelatterare:
Moreefficient&costeffective Pollution free Pollutionfree Easytooperateanddonotrequirefuel

Marketsize&growth
INR bn
120 100 80 60 40 20 0 57.5

+15%

100.6

2008

2012

Productsub segments Product subsegments

Stationary:Primarilyrunondiesel
<125KVAusedinlargeresidential&commercial complexes,hotels,hospitals >125 KVA used in large core sector industries >125KVAusedinlargecoresectorindustries, processindustries

Segmentshare Segment share

Portable 10%

Portable (0.56KVA)runon:
Petrol Diesel Kerosene
90% Stationary

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UPSmarketisthefastgrowingpowerbackupmarketwith demandforhugevolumes
UPSmarketoverview
Estimatedmarketsizein2008:INR25bn Estimatedmarketvolumein2008:
UPSbelow5kVA:2.3mnunits Overallmarket:4.6mnunits

Marketsize&growth
INR bn
120 100 80 60 40 20 0 25.0 25 0 50.1

Volume Value +19%

Unit mn
12 10 8 6 4 2 0

Sub5KVAsegmentisthelargestbecauseofits popularityinSMEandSOHOs popularity in SME and SOHOs Growthrateinvalueisslowerthanvolume suggestingareductioninenduserprices:

Byvalue:19%p.a Byvolume:25%p.a

2008

2012

Segmentshare Segment share

Large (>30 KVA) 25% 50% Small (<5 KVA) Medium (5-30 KVA) 25%

Additionally,inputcostsareincreasingdueto riseinbatteryprices,therebyputtingmargins underpressure

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Invertermarketservinghouseholds,shopsandcommercial establishmentsisgrowingat15%p.a
Invertermarketoverview
Themarketforinvertersincludeshouseholds, shops,commercialestablishments,other institutions Invertermarketsize(2008):INR23bn Growthrate:15%p.a Squarewaveinverterscommand85%ofthe Square wave inverters command 85% of the market

Marketsize&growth
INR bn
120 100 80 60 40 20 0 23.0

Volume Value

Unit mn
12 10 8 6 4 2 0

+15%

40.2

2008

2012

Pricingofsegments Pricing of segments

INR Low-end 2,250 (600-1,400 VA) Mid-end (2.5-3.5 KV) High-end (>5KV) Lower Estimate 10,500 Upper Estimate

Segmentshare Segment share

High-end 15% Mid-end 5% 26,000 80% Above 46,000 800VA 50% 35% Low-end 600VA 1400VA 15%

22,000

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QualitymanufacturingcapabilityismakingIndiaanexporthub forgeneratorsandinverters
Thrivingexportmarket
LeadingIndianmanufacturersproducequality andinnovativeproductsonparwith internationalstandards Highqualityandperformanceofproductsis establishingIndiaasamanufacturingbaseto catertolocaldemandaswellasanexporthub p Exportshavegrownconsiderablysince2004, especiallyforinverters However,globaleconomicconditionsin2008 hittheexportmarketinIndia hit the export market in India
Significantdeclineininverterexports Generatorexports,however,nearlydoubled

ExportData Generators&Inverters
Generators Inverters INRbn
15

69%
14.9

+146%

10

+35%
6.5 5.5 5 2.6 1.1 1.0 11 10 0 1.3 1.6 2.8 4.6

+96%

Companiesareinvestingindomestic manufacturingcapacitye.g.
CumminsinvestedINR200mn,inanewexport orientedunitwithcapacitytoproduce50,000 openandclosedgeneratorsetsannually

2004

2005

2006

2007

2008

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MarketOverview Segments Segments Drivers&Challenges Competition KeyDevelopments

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Challenges
Risinginputcosts battery;packaging Competitionfromunorganisedsector Lackofconsumerawareness

Drivers
Powershortagesanddemandsupply Power shortages and demand supply gapinIndia Demandfromtelecomoperators DemandforUPSfordesktops Demand for UPS for desktops

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Indiahaslargelybeenapowerdeficitcountryforcingenterprises andconsumerstorelyonpowerbackupdevices
Hugepowerdeficit
Indiaspowerdeficitisabout10%,withapeak deficitof17%leadingtochronicpower shortage Mostareas urbanandruralsufferfrom varyingdegreesofpowershortage
Sudden power cuts often lasting for hours or days Suddenpowercutsoftenlastingforhoursordays Scheduledloadshedding

Demandsupplygap~17%
Energy (BU)
800 600 400 200 0

Average Energy Demand Generation

Despitethemassiveinvestmentinpower projectsbygovernmentandprivatesector, demandisforecasttooutstripsupply demand is forecast to outstrip supply Backuppowerwillbecrucialtosupport:

Largemanufacturingbaseandgrowingindustrial output B i Businesscontinuityinsmallenterprises,offices i i i ll i ffi andcommercialestablishmentssuchasretail

VI

VII

VIII

IX

FutureDemand SupplyScenario Future DemandSupply Scenario

Peak Base 120
71

315 255 197 101

75 107

147
112 173 197

Demand

2007

Supply

Demand

2012

Supply

Demand

2017

Supply

Asinthepast,continuingshortageisthefundamentallongtermdriverforbackup As in the past continuing shortage is the fundamental longterm driver for backup powermarketinIndia.
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Telecomoperatorsanddesktopuserbasearesomeofthekey targetsegmentsforinvertersandUPS
Demandfromtelecomoperators
Therapidlygrowingtelecomsectorisoneof thelargestcustomersegments Generatorsandinvertorsareusedattowers andnetworkmanagementfacilitieswiththe lattergainingpreference Significantnetworkexpansionwithnewtowers Significant network expansion with new towers willdrivedemandforbackuppower
IndusTowers(ownedbyBharti,Idea,and Vodafone),andReliancewillleadexpansion

Newtoweradditions
IndusTowers RTIL

Dec 08 Dec08

172,000 5% 8% 5% 9% 21%

GTL BSNL BhartiInfratel

New

192,000

52%

Others

Mar10

364,000

DemandforUPSfromdesktopsales Demand for UPS from desktop sales

GrowthindesktopsalesisadriverforUPS salesinhomesandoffices Growingshareofhomedesktopscreatesan sizeabletargetmarketforsub5KVAUPS sizeable target market for sub 5KVA UPS Desktopsales,however,appeartobe stagnatingasnotebooksalesgrowthoutstrips thatofdesktops
Since 200304 desktops grew by 16% p a vs Since2003 04,desktopsgrewby16%p.a.vs. 116%fornotebooks

DesktopsalesinIndia Desktop sales in India

mnunits
6 5 4 3 2 1 0 3.6 3.0

Total Homeshare
4.6 5.5 5.5

%
40 30 20 10 0

200304

200405

200506

200607

200708 15

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Risinginputcosts,primarilyleadandresultantbatteryprices,isa concernareforinverterandUPSmanufacturers
Increasingcostofbatteryandpackaging
Increaseinbatterypricesisamajorchallenge sinceleadacidbatteriesareusedinUPSand inverters Leadconstitutesalmost70%ofthecostofa battery Dependent on imports which accounts for 40 Dependentonimports,whichaccountsfor40 50%ofdomesticleaddemand Leadpricesquadrupledbetween2004and 2007 Althoughpriceshavecomedownto2006 Al h h i h d 2006 levels,volatilitystillexistsandwillcontinueto beaconcernarea Inaddition,increaseinpackagingcosts isalso pressuringinputcosts

LMELeadPrices Historical

Batteryprices raisedby510% thricein2007

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Theunorganizedsectorremainachallengetothebranded playersowingtothelackofconsumerawareness
Competitionfromunorganisedsector
Indiahasahugepresenceofunorganizedmanufacturersacrossthegenset, inverter,andUPSproductsegments Theseplayersprimarilycompeteonpricebyprovidingcheaperalternativesto brandedproducts Organizedmanufacturersarethereforeunderpressuretomaintainorreducetheir pricestoeffectivelycompete prices to effectively compete However,qualityandaftersalesserviceisamajorissuewiththeseproducts,which inturnleadstodissatisfiedcustomersandalossoftrustintheindustryasawhole

Impact
Inabilitytoraise pricesorcharge prices or charge premiumfor betterproducts

Lackofconsumerawareness
Consumerknowledgeandselectioncriteriaforpowerbackupproductsispoor Consumerstendtooverlookimportanttechnicaldetailssuchasresistiveloads,type oflubrication,safetyfeatures,andotherparameters Thisnotonlyleadstopeoplebuyingthewrongproductfortheirneedsbutalsoin Thi t l l d t l b i th d t f th i d b t l i operationandmaintenanceissues Overall,ithasanimpactonconsumerperceptiononqualityoflocalproducts
Consumer educationis necessaryto growhome grow home segment

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MarketOverview Segments Segments Drivers&Challenges Competition KeyDevelopments

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Unorganizedsectorcomprisingofassemblersdominatesthe marketwithfew,largeplayersintheorganizedsector
Generatorcompetition
Fiercecompetitionfromunorganizedplayers,which competeonprice,andChineseimports Instationarygeneratorsegment:
Leaders:Kirloskar,Cummins,MahindraPoweroland GreavesCotton Others:AtlasCopco,Caterpillar,Wartsila

PortableGensetSales(Organized)
No.ofUnitsSold 6,635 2006 2007 2008 12,612* 59,150
5,797

Birla 59,219 , HondaSiel

Few organized players in portable gensets Feworganizedplayersinportablegensets

HondaSielandBirlaPoweraremarketleaders GreavesCottonenteredthemarketin2008insteadof supplyingthroughassemblers
*18monthperiodending30September2007

62,227

Morethan90%oforganizedmarketisaccountedforHonda SielPower andBirlaPowercombined

UnorganizedsegmentcomprisesOriginalEquipment Assemblers(OEAs)
Haveexclusiveunderstandingforsourcingenginesfrom manufacturerslikeCummins,Kirloskaretc. Buyenginesandalternatorsforassemblyandsaleto customers MajorOEAsaredominatetheirrespectiveregions:
Mumbai:Powerica Delhi:Jakson,SudhirandBhaskar Chennai:PowerElectrics Bangalore:DPK

StationaryGenerators(Organized)
Company
Kirloskar Cummins C i MahindraPowerol GreavesCotton

UnitsSold(salesinINRmn) 2007
9204 (2037.25) 7455 (1176 17) (1176.17) 8781 (1751.90) N.A.

2008
10482 (2257.22) 8878 (1617 52) (1617.52) 16295 (2147.48) 1023*(N.A.)

*Productionfigures;salesdataunavailable

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Unorganizedsectorhasalargeshareinthemarketalthough leadingbrandsarecompetingonbasisofqualityandservice
UPScompetition
UPSproductioninIndiacomprisesmorethan 300suppliers Largeunorganizedsector
Competesprimarilyonprice Predominantatthelowerendofproductspectrum
Organized 55.4% 44.6% Unorganized

Organizedvs.Unorganized

Organizedplayersfocusonselling: Organized players focus on selling:

Performance Reliability Aftersalesservice

MarketShare Organized(<5KVA)
APC 18% Others 38%
18% Numeric

4% 10% 5% 8% Powercom P Microtek Mi t k Wep Emerson

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Dominatedbytheunorganizedsectorbutfourleading companiescompetingonbrandequity,quality,andservice
Invertercompetition
Entry of small local manufacturers and cheap Chinese products is fuelling competition However, branded players are gaining market share quickly by:
Offering better aftersales services upgrading their Constantly technologically products

Organizedvs.Unorganized

Organized 40%

60% Unorganized

Other major players who entered this market are:

D Link under brand name Digi Power DLink DigiPower Texonic instruments under brand name ICE APC India

Revenuesofmajorplayers
Revenue (INR bn) Su-Kam Microtek Mi t k Luminous Genus
0.4 04 2.5 3.0 30 4.3

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MarketOverview Segments Segments Drivers&Challenges Competition KeyDevelopments

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Keydevelopments
Date 10Feb09 8Jan09 Key developments 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 Luminous power technologies has launched a range of ecofriendly 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 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 20112012. 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 20082009 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) Mahindra powerol has launched its B100 biodiesel 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.

1Dec08

25Sept08 25 Sept 08

15Sept08

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Privateequityinvestmentshavetakenplaceintheindustrybut arefocusedonleading,organizedplayerswithbrandedproducts
PrivateEquityfirm CLSACapitalPartners RelianceCapital GoldmanSachsandGeneral Electric StandardCharteredPrivate Equity Dealdescription FundingofINR1bninDelhibasedinverterandbatterymakerLuminouspower technologies SponsoredaINR10bnprivateequityfundtopowerequipmentcompanySuKam(they f ( makepowerinverters,UPSandbatteries) InvestedINR3.75bnfor10 15%stakeinGurgaonbasedgensetmanufacturerSudhir Gensets InvestedatotalofapproxINR2.5bnfora11%stakeinPowerica,oneofthelargest makersofgensetsinIndia

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