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Feature | September 2015

Current affair

With manufacturers doubling their capacity, the wires and cable industry is gearing up for an overhaul. The demand, which was subdued due to a drastic drop in GDP, is likely to pick up at CAGR of 16 per cent, post 2015.

The wires and cables industry has moved on from being the small industry it was 20 years back, to a very large industry over the last decade. Predominantly providing challenging opportunities in the field of manufacturing, supply chain and procurement, India as a market, is gaining importance in this industry.

With cabling being a necessary component across industries, manufacturers have started producing a multitude of cables such as power cables, fire safe cables, single cores, multi cores and data cables. According to Global Industry Analysts Inc., the wires and cables industry is expected to generate $113.9 billion by 2015. Cut to India, where the market has showcased steady growth, and a recent research at Netscribes, expects this to touch Rs 57,200 crore by 2018.

Ergo, the industry´s slow shift from unorganised to organised with a growth CAGR of 15 per cent due to propelled demand for power and infrastructure segments, has been touted as a positive sign. The government´s emphasis on power sector reforms and infrastructure will drive it further. Moreover, initiatives by the one-year-old government on overall developments, including plans for 100 smart cities, Make in India, PPP in railways, home for all by 2022, electricity for all, focus on defence equipments manufacturing, and focus on renewable energy is a positive sign for increase in demand.

Opportunities in offing
The opportunities and potential in any developing country is huge, as it relates to infrastructure development, housing, industries, etc. Today, growth expectations in India are very high, and there is also huge opportunity in developing new technologies for each segment. For e.g. the automotive industry is moving from the existing AV/AVS/AVSS family to light weight wires like T-3 and CIVUS.

From Manish Goel, Managing Director, Shilpi Cable Technologies Ltd´s point of view, there is demand for fibre-optic lines in Tier III, IV, V and VI cities, as Tier I cities are wired up and Tier II are almost complete. Also, with government initiatives like Smart Cities and Digital India, the demand for these wires look positive.

This industry will continue to prosper, owing to demand from auxillary industries and the nationwide smart-grid implementation. The slow shift towards renewable energy is also expected to provide opportunity for this industry.

While the Indian electrical equipment industry is broadly segmented into the generation, equipment, transmission and distribution sectors; the wires and cable industry in India forms a quarter of the total T&D sector. The government notified 14 power transmission schemes worth Rs 33,900 crore during 2014-15, which have all been allotted for bidding by private sector companies. These schemes will facilitate ways for transfer of power from new hydro electric projects in Bhutan and generation linked projects in Chhattisgarh and Odisha, among others.

These include 765 kV and 400 kV transmission system strengthening schemes/programmes in the northern, western, southern and the north-eastern regions.

Apart from this, the Indian market is set to offer opportunities in quite a few major refining and petrochemical projects, that the Centre has lined up. There is also similar impetus in steel and cement sectors-India is expected to add an additional capacity of 50 million tonnes of steel in the next 4-5 years.

To this, Marc Jarrault, Managing Director, Lapp India Pvt Ltd, says ´This will eventually lead to focus on supplying cables for specific applications pertaining to the industry needs.´

According to analysts, the cable industry in India has the potential to develop further, and they see demand in both top of the line and used machinery. Experts are of the opinion that the industry is passing through drastic changes, with frequent innovations in new customer savvy designs and quality.

Futhermore, the government´s promise of investment in railways, ports, smart cities, renewable generation and distribution amongst others, will also help propel the demand for cables to around 16-20 per cent annual growth over the next 5 years. Skilling India Skill development has been a priority for the government, who have initiated programmes through National Skill Development Corporation (NSDC) and various other agencies. Besides which, various industries and wires and cables manufacturers have also simultaneously initiated their own skill development training.

In India, about 35 per cent of wires and cables available in the market are sourced from unorganised sector players that have a lackluster focus on quality and technology. This has worried Hitesh Kariya, Business Unit Head, Wires & Cables, Anchor Electricals Pvt Ltd.

He elaborates, ´This kind of parallel market is a grave concern and would be hard to tackle in the future. However, the organised market is becoming increasingly aware and is making efforts to create awareness and educate buyers on the significance of quality products.´

´While the primary buyers for wires and cables are mainly electricians and contractors; Anchor is ensuring that they are introduced to good practices of safe wiring installation through ICAI (International Copper Association of India) seminars and handbooks, and making them aware of the importance of using good quality wires and cables,´Kariya explains.

Meanwhile, KEC International Ltd´s experience has been very positive. KEC is successfully using the SMT (self-managed team) model in their world-class Vadodara plant, under which, the company has recruited teenagers (around 18 years of age) from the rural hinterland in Madhya Pradesh, Gujarat and Rajasthan.

Praising the young guns, Nikhil Gupta, Executive Director - Cables, KEC International Ltd shares, ´We have trained them on all aspects of cable manufacturing and find them quite intelligent and capable of running and troubleshooting the complicated processes involved here. We believe that there is no dearth of people in India who can be trained and developed into a capable and skilled workforce.´

Capacity additions
We observed that, when major players start building up their capacity, it brings in an element of positiveness in the market.

And indeed, several wires and cables manufacturers are striving towards it. For e.g., Polycab Wires, who claims to have a 40 per cent market share when it comes to top five players and has invested Rs 500 crore in the last three years. They plan to invest heavily in capacity additions for brownfield as well as greenfield units. And, for this expansion plan, R Ramakrishnan, VC & JT MD of Polycab Wires, who is the Group CEO, gives all due credit to the initiatives of present government. ´We have investment plans of about Rs 1,500 crore in the next three years. So every year we are likely to invest about Rs 500 crore or more.´

In addition, joining the bandwagon is Anchor Electricals. The company is doubling its capacity by investing in higher capacity machinery, and adding new products within the next three years to meet growing demand from various initiatives set by the government.

According to Anchor´s management, these are very positive signs for increase in demand. The management also suggested that, a portion of power projects is expected to shoot the demand further. Hence, the company is also exploring the export market that is showcasing a good potential.

Meanwhile, one of the oldest players in the Indian continent, Lapp India is leaving no stone unturned when it comes to capacity addition. The company has always believed in India as a manufacturing destination and this inspired them to set up their manufacturing unit in India way back in 1996.

Their Bangalore unit is the second largest manufacturing unit with a capacity to manufacture about 60,000 km of multi-core cables and 78,000 km of single core wires per annum. Lapp Group´s follow up investment in its manufacturing plant in Bhopal demonstrates their intent and long term commitment to India. The unit has strengthened their base in the single core wire segment and catered efficiently to growing customer demands in India. It has an existing capacity of 1,000 km of single core cables daily, catering mainly to the building segment. The Bhopal facility also produces 36,000 km of multi-core cables resulting in an overall capacity increase of 60 per cent in multi-core cables, which is used in major industries today, in addition to the existing 216,000 km capacity in single core wires.

Meanwhile, amongst these bigwigs, a relatively smaller player-Shilpi Cable-is making their presence felt. The company is increasing production capacities for non-RF cables which are widely used in automotive, consumer durable and B2C segment, with a total outlay of Rs 50 crore this year.

However, KEC International, despite having a capacity to manufacture around 3,000 km of LT cables and 250 km of HT/EHV cables per month is cautiously making moves. According to the company spokesperson, at present the industry capacity is under-utilised, and for capacity addition, demand has to increase significantly to justify any new investments, if they plan to grow organically.

The demand
With rapid urban development, fire safety issues are a constant concern in public spaces like malls, commercial establishments like metros and also homes. With growing importance for safety, industry experts have seen a growth of fire survival cable.

This provides optimum cabling solutions in fire mishaps, by maintaining circuit integrity for temperatures upto 650 C, 750 C and/or 950 C as per application requirements. They come with annealed bare copper or annealed tinned copper conductors. Having a double layer glass mica tape for insulation, these cables also come with special linked polyethylene. The inner and outer sheath comes with Halogen Free compound with galvanised steel wire which prevents spread of fire. Unlike other wires and cables made of plastic, these cables have the capacity to sustain high temperature for a minimum period of time under fire.

There has also been growth in demand for Halogen-Free Flame Retardant (HFFR) cables that have excellent temperature index, are flame resistant and have oil resistance properties. These cables have outer sheaths that are specially designed with halogen free compound which reduces emission of fumes and acid gases in the event of fire.

The main challenges, according to Manish Goel from Shilpi Cable is the price rise and competition from Chinese imports. As the price of copper continues to increase, profit margins are reduced and the companies find it difficult to compete in the international market. Furthermore, the importance of certifications like ISI and BSI are also required for better working operations.

Nikhil Gupta from KEC International concurs. Nikhil has witnessed severe under-cutting in pricing in the highly competitive market. On many occasions, industry bigwigs have felt that the price prevailing in the market is simply unsustainable to deliver a quality product. While customers initially benefit with lower up-front cost, the same customers ultimately pays the price when deliveries are delayed, through product failures and higher total lifetime costs. Another challenge is, that although the government wants to promote ´Make in India´, many export benefits have been taken away.

Meanwhile, Anchor Electricals has another element to add. They feel that the key challenges plaguing the cable industry include tight liquidity positions, difficulty in getting the right manpower-towards manufacturing, operational and service activities, including reducing the lifetime of cables due to improper installation, which is due to lack of awareness of safe installation practices. Also, substandard products at low prices from unorganised sector, which follows unethical practices in manufacturing, are very unsafe for consumers. Tight vigilance to overcome counterfeit market with stringent control on the unorganized market for safer products is needed, Anchor feels.

At the end, it is important that the government regulatory bodies expedite the decision making process to upgrade the rules and regulations for wires and cable and other industries that would result in a major industry overhaul. The focus should also be on having standards for cables with specialised applications like solar cables, ZHFR cables, RoHS & REACH compliant products, EV charging cable, fire alarm cables and communication cables.

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