Q)What kind of changes are being observed in the field of metering in India, especially with the advent of renewable energy integration?
A)The market for meters in India was estimated to be 3,000 crore in fiscal 2015, with organised participants contributing to over 80% of the total market. There has been a continued and visible shift from demand for traditional meters to demand for metering solutions, which helps in energy management as compared to mere monitoring and billing functionalities.
Demand for electronic meters dominates the market for meters and will continue due to replacement market for electromechanical and old meters and orders from power utilities. Of this, power utilities account for nearly 90% of the revenue generated from sale of tariff meters.
In fiscal 2015, the industrial segment was the largest consumer of panel meters, power generation companies for tri-vector meters and commercial establishments for electronic meters.
With increasing focus on reliability and accuracy, the contribution from these segments is likely to witness an upward trend.
Prepayment meters have recently seen steady growth as more power utilities are installing them to increase consumer visibility in terms of load patterns and to reduce the percentage of under-recovered revenue. While in developed countries prepayment meters are considered to be tariff meters, in India they are considered as smart meters – and are considered as the first step towards establishment of smart cities and smart grid projects. Smart grid pilot projects are under implementation mostly in the southern and western parts of India although, northern and eastern states also have some ongoing pilot projects.
During 2016-2020, the overall market for electricity meters is expected to grow at a CAGR of 11.5%, with prepayment meters expected to grow more than the overall growth rate, at a CAGR of 15.1%, and smart meters expected to grow at a CAGR of 5.3%. However, the market for meters is expected to witness explosive growth subsequent to 2022, when the proposed civil works for smart cities and smart grids will near completion, paving way for a robust demand for smart meters. Particularly, smart meters is expected to see a double digit growth once bottle-necks surrounding the smart grid projects are cleared.
Additionally, due to various initiatives of the Government for efficient utilisation of present generation capacity, such as the ‘perform, achieve and trade scheme’ for high energy consuming industries, panel meters are expected to witness nearly a 12% growth, coupled with energy efficient solution systems. Renewable integration and energy management practices will also fuel the growth of panel meters during 2016-2020.
Q) How are you addressing the emerging challenges in this area?
A)Acceptance of Technology:Manufacturers as well as consumers have been reluctant to accept and utilise the technology available with them to its potential, as these meters have traditionally been considered to be plug-and-play devices.
While recent trends show companies investing in technology integration using the metering and control unit system to connect all source and termination points of electricity, the systems continue to remain nonoperational.
It is imperative to educate stakeholders regarding benefits of newer technologies and incentivising them to utilise such technology.
Cost and Price Pressure: The market for low-end single and three-phase meters is dominated by participants focusing on tenders from power utilities and are capable of supplying meters at competitive prices. Consequently, organised market participants with higher overhead costs face pricing pressures to match the L1 bids of such unorganized participants. The pressure on such participants for reducing prices to sustain business deters the market from growing to its actual potential.
Threat from imports in the tariff meter segment: Foreign manufacturers with capabilities to supply meters at competitive prices take advantage of the L1 based bidding process of power utilities, thereby impacting domestic players, particularly in the tariff meter segment.
Q) What kind of modern technologies are in demand in India nowadays as far as switchgears are concerned?
A)Products such as circuit breakers and automatic switches are capturing the demand for changeover switches and switching devices. Further, new products such as motor protection circuit breakers, which are almost completely imported by multinational companies, are gaining popularity among consumers, primarily due to their augmented features, replacing relays in certain applications.
Market Segmentation by End Users
(Source: Frost & Sullivan Report)
The industrial segment contributes approximately 28% of the entire market for LV switchgear with demand across all product segments. The retail segment mainly includes developers of residential and commercial projects and other commercial establishments, with increasing demand primarily for modular switchgear such as MCBs, residual current devices and distribution boards due to growing awareness among customers on use of protective devices.
Demand from power utilities and consumers of infrastructure projects however, have decreased due to reduced public sector investments.
The LV switchgear market primarily depends on the growth of end-user segments. The segment comprising residential and commercial development is expected to witness positive growth, whereas the segment comprising industries and power utilities is expected to show resilience on account of low capital expenditure and investment in the near term. Growth for all products, except MCCBs and modular devices, has been slow over the last two years.
Q)With growing use of LED lamps, power factor correction has been very essential even in domestic segment. What are your offerings in this field?
A)LEDs are gaining more prominence as compared to CFLs, especially in urban regions of India on account of their affordability and awareness. Affordable cost of LEDs and the ease of availability of such technology makes it a more attractive option. Further, unlike CFLs, LEDs do not contain harmful substances like mercury, making its end-of life disposal easy and environment-friendly. Organisations like Electric Lamp and Component Manufacturers Association of India (‘ELCOMA’) and other government bodies are advocating the use of LEDs. LEDs are now available in various forms aiming to ease retrofit cost. This has driven the demand for LEDs over CFLs.
We believe that we have an established relationship with several institutional customers and we supply our products to various Governmental Agencies. For instance, we executed several contracts from various Governmental Agencies for supply of lighting products. For instance, we executed LED street lighting turnkey projects in Srikakulam, Prakasam and east Godavari (Andhra Pradesh), various municipalities in Rajasthan and at Varansi Ganga Ghat and Varanasi Nagar Nigam, in Varanasi (Uttar Pradesh), involving supply and installation of LED streetlights and supplied LED tube lights for installation at the office of the electricity department in Delhi during the six months ended September 30, 2015. We believe that the supply of technologically advanced products enables us to maintain such established relationships with these State Utilities and Governmental Agencies. As on September 30, 2015 and March 31, 2015, we had confirmed orders amounting ` 2,534.24 million and ` 1,934.55 million, respectively.
Q) How is the scenario changing in cables & wires segment?
A)The overall electrical wires and cables market in India is estimated to be 180,000 million in fiscal year 2015. The low tension electrical wires and cables are estimated to account for a majority share of this market at nearly 70%. The estimated 30% of the overall ` 126,000 million low tension electrical wires and cables market during fiscal 2015 is accounted by the unorganised and regional market players.
The key market restraints to growth of the industry in the past years included:
a) unfavourable market sentiments
b) uncertain economy
c) industry slowdown
d) muted investment cycle and
e) slowdown in investments across infrastructure and utility projects.
The industry with its frequent innovations in new product features and quality products has graduated from being dominated by unorganised sector players to the branded and quality players with national repute since it has undergone a few changes.
The organised sector has been manufacturing high tension and specialty cables along with low tension domestic wires – whereas the unorganised players limit themselves to the voluminous low tension domestic wires market. The market is ruled by unfair trade practices, where small cable companies compete by selling products of dubious quality at low prices.
Q)How is your wire and cable vertical doing, both among your other verticals and out there in the market?
A)If you see the manufacturing setup what we have put up, it’s simply cutting-edge and one of the best out there. We currently have two fine wire drawing machines from Niehoff with other machines and tools acquired from the top suppliers of the world. Overall factory, its layout and machines we use here are all world class. HPL Cables is an independent company within a company – and we can compete with anybody in this category.
Q) Among the sub-segments of HPL wires & cables, which one is the most profitable? Realty is a bit slow in generating enough demands for wires and cables as of now, what do you say?
A)From the sales perspective, domestic wire has the largest share. However, from the profitability angle, specialty cables are much more profitable segment. But then, it requires a different way of marketing; it’s a more niche selling. Working with customers and knowing their requirements may take a few more months, but in long term it has a recurring business.
Yes, real estate sector has been pretty sluggish for part few years. I feel that things should start picking up by the end of this year.
Q) With regards to the wire and cable industry, what challenges and issues do you see as affecting the growth of the industry?
A)To me, compliance is a big issue here. When we talk to customers and people in trade, we feel that overall as a country we should go in for much higher specifications for cables and there needs to be a better compliance with the standards. Today, in some projects, we find that certain people are quoting the kind of prices, which only hurts the industry instead of helping it. In such scenario of unhealthy price competition, quality slides down further in the priority list. Moreover, the dynamics of technology is also affecting us a lot.
Technology changes quite fast and adaptation to the pace of change in technology is a necessity and is quite costly. For example, there used to be ordinary PVC wires earlier, which now has graduated to fire-retardant with a lot of variations in itself such as fire-retardant low smoke, etc.
Accordingly, specifications are also changing and going up. As and when specifications go up, the consumer remains the ultimate beneficiary. Although the cost might go up marginally due to investment in technology and adaption to changes, the benefits are manifold and that needs to happen. Despite of standards being there compliances could be weak sometimes – that need to be corrected.
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