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ndustry Focus: Gensets
DGSETs Capacities Witnessing an Upward Trend in India: Infra Spending, Industrial Production, Capacity Building are key Drivers 10% CAGR over FY17-20
After a subdued FY13-17, when industry volumes declined at a CAGR of 5% (primarily due to a sharp fall in sales for telecom towers), we expect the industry to grow at a CAGR of 10% over FY17-20. (Over FY04-08, the industry had grown at a CAGR of 10%).Growth would be driven by higher volumes in the mid/high HP segment; demand for low HP products is likely to remain subdued. Key end markets that are seeing a revival are Infra. (Roads, Metro Rail, Railways), Commercial (IT/ITES, Data Centers, Hotels, Hospitals, Educational Institutions), & Manufacturing (Pharmaceuticals, Automotive). We highlight that <15% of the demand for DG sets is for prime power & 85-90% of the DG market is for backup power - this implies that despite low power deficits, need for DG sets would continue. Pricing alone would not lead to market share gains for any player in DG industry. Given that DGsets are primarily used for backup & typically last for 10 years or longer, decisive factors go beyond price. Brand positioning, dealer network/distribution, service centers, product portfolio, & reliability are some of the key decisive factors. This is all the more imp in case of the MHP (375-750kva) & HHP (>750kva) ranges, where timely availability of backup power is crucial. MNCs such as Perkins, MTU, Volvo & Indian players like KOEL, Greaves Cotton are striving to increase presence in the MHP/HHP segments, while Cummins India is trying to take share in the LHP (<160kva) segment. Cummins is the market leader in the MHP/HHP segment while Mahindra, KOEL & Ashok Leyland lead in the LHP segment. GST reduced share of unorganized players, especially in LHP segment, & would be beneficial to incumbent organized players. 84 || April 2018 ||
ELECTRICAL MIR R OR
Road to recovery For the last five years, DG industry volumes have been subdued. During FY13-17, volumes declined at 5% CAGR, driven by (a) lower power deficits, as demand for power declined with macroeconomic slowdown, (b) weak demand from key end markets â&#x20AC;&#x201C; Industrial/Manufacturing, Real Estate & Infra., & (c) collapse in demand from telecom towers from a peak of 100,000 DG sets in FY11 to 30,000 units in FY17. We expect the industry volume growth to revert to 10% CAGR over FY17-20; growth would be driven by rising demand in the key end markets of Infra. (Roads, Metro Rail, Railways), Commercial (IT/ITES, ||www.electricalmirror.net||