2010 will be a good year for the UPS market

Fiscal 2008-09 was a bad year for the UPS market and as per DQ estimates the
overall value declined by 3%. The UPS market in India is composed of numerous
vendors and as we take a closer look, the low-end of the UPS space has a lot of
regional and unorganized players catering to a loyal client base consisting
mostly of SOHO and SMBs. But over the last one year, many of the unbranded
players felt the heat of the recession together with ambiguous consumer PC
consumption trends had shrunk their numbers. Also with the consumer PC market
more bent towards larger notebook adoption makes the intake restricted only to
the desktop users who mostly settle for 0.5KVA to 1KKV power back devices.

Market Realities

According to data available from market researcher, IDC India, it says
during 2009, the total India market size of high-end UPS (above 5KVA) systems
was recorded at 69,802 units (Rs 13,541.9 mn). Emerson, Numeric and APC were the
top three players in terms of units. During 2009, the total India market size of
low-end UPS (less than 5KVA) systems was recorded at 2,690,782 units (Rs 9,925.2
mn). APC, Intex and Microtek were the top three players in unit terms.

According to Pankaj Chawla, lead analyst, peripherals and digital products
research practice, IDC India, UPS market in India was traditionally an
unorganized market where small players catered to local needs. With the entry of
global players, the market is becoming more organized and is expected to
consolidate.

As we look at last year one saw players like Socomec deepening their presence
in India leading to greater competition in the high-end UPS space.
Interestingly, most large vendors are concentrating majorly on the high-end
power backup capacities where bigger value lies in. Also high-end UPS is no
longer a box solution space. Mid to large enterprises opt for highly customized
solutions and the amount of backup and try to seamlessly mesh UPSs with their
requirements.

Even for big companies which derive large portions of their revenues from
high-end space, 2009 was a flat year and capacities upwards of 30KVA did well.
In capacities above 30KVA, its only the few branded players who dominate
certain verticals. Says Venkat Rao, country manager, medium and large UPS
systems, Emerson Network Power India, Last year there is no significant growth
in the UPS market and it remained very flat. But things are changing for good
and 2010 looks like a growth year for UPS. While UPS as a market in India is yet
to be fully tapped, I think the role of small and unorganized ends with smaller
capacitiesmostly the sub 30KVA ranges and in the high-endit is only the large
players who have the required solutions.

Clearly, in the last one year the mood among the UPS players was to hold on
to their respective strength areas and try to maximize the value instead of
volumes. Here the larger players certainly has an edge because for them entry
level basic KVA is just a small slice and they are able to sustain their
performance and achieve parity in terms of overall deployed KVA and value. But
for smaller players it was a tough ordeal as they are to a large extent
dependent on the desktop PC market. Some of the players catering to lower end of
the UPS space did adopt novel ways to capture more market share. Take the case
of WeP which took to market with its compact and small form factor UPSs. This
was seen as a good strategy by analysts as UPS was seen as a dull looking
peripheral device, that got a boost with design changes players like WeP did to
the UPS form factor. Overall as an industry, the entry level UPS capacities
would be a very tough market as consumer and vendors strategies keep changing.

Quips Gaurav Burman, director, transaction business, APC by Schneider
Electric, India, Unlike last year we believe 2010 will be a good year for the
UPS market in India while large vendors will derive bigger value from high-end
capacities, but low-end UPS market will also grow as consumers still need that
variety of applications.

Market Consolidation

As we look at the current market dynamics the road ahead for the UPS market
is one of consolidation. Given the complexities of UPS business many foresee
that there is a possibility of bigger players merging, despite being competitors
to garner more market share. But much depends on the market revival in 2010 and
if things continue to remain flat, many players will explore the M&A route.

From a market share perspective, the lower end of the UPS space will see many
players even exiting, if they are unable to achieve volume-value parity.
Interestingly, all big players do have entry level offerings and with the likely
exit of some of the regional players only catering to low-end will augur well
for them to push more low-end offerings in the market. Says Jerome Rodriguiz MD,
Socomec India, There is no doubt that the UPS market in India is very
promising. It is also important that India still remains the market where the
price levels are the lowest, and by far, even as compared with neighboring
countries. Sales volume may grow; pressure on price remains the same.

While vendors are upbeat about a positive 2010 for the UPS market, but much
depends on the peripherals refresh cycles by large verticals like BFSI and
telecom. These two verticals has cut significantly on non-core IT investments
and only when hot verticals come out of this cautious mode, UPS market will see
bigger numbers and larger growth.

Shrikanth G

shrikanthg@cybermedia.co.in