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Feature | September 2017

Wiring the Future

The wires &amp; cables segment has come into its own in India, and with plans for huge infrastructure projects in place and an expected positive outlook on GST, the future looks bright. <p></p> <p> India has the fifth largest power generation capacity in the world and the government has ambitious plans for infrastructure development. In the power sector, cables and wires are a must and with the Ministry of Power looking at an investment of Rs.15,000 lakh crore over the next five years, the sector will witness a huge growth trajectory. </p> <p>The Indian wires &amp; cables industry today is worth more than Rs.36,000 crore, this is expected to grow to Rs.64,000 crore by 2020. The growth rate for the industry is thus in double digits, year-on-year, between 10-18 per cent. </p> <p><span style="font-weight: bold;">Amit Jain, Managing Director, CMI Ltd</span> states, 'The industry is currently growing at a CAGR of 15 per cent. We are expecting that it will start growing at the CAGR of around 25 per cent over the next five years. The next five-seven years will be a game changer for players in this segment.'</p> <p>Primary reasons for this growth expansion would be the huge government and private investments planned in segments such as smart cities, modernisation of railways, highways, digital India campaign and power for all by 2022. Thus rapid industrialisation and automation, of which cable and connection technology is the backbone of, will be the market boosters. </p> <p>'The cable market is evolving where along with standard product offerings, customised solutions are now required to support customer applications,' feels <span style="font-weight: bold;">Marc Jarrault, Managing Director, Lapp India Pvt. Ltd.</span></p> <p> <span style="font-weight: bold;">Market realities</span><br /> India is a challenging market and the government's thrust on renewables have opened up other aspects for the segment. The market is price sensitive and demands world class technologies at affordable pricing and as such R&amp;D and innovation are key. Observes Jarrault, 'Innovating to provide efficient transmission of power generated and shifting focus to the rooftop market - which is very price sensitive, is needed.'</p> <p>Competition in the segment is fierce, especially in the retail category locally and globally, with MNCs, domestic players, the unorganised segment and cheap imports making huge inroads. But Jain believes that good margins can be generated by creating USPs in terms of product quality, innovative packaging, reducing inventory levels and creating value for the customers. </p> <p>'We invest approximately 4 per cent of our revenue on R&amp;D including updating/modernising of plant and machinery and trying new raw materials. We have Indian and global certifications in place and have been able to crack the global market successfully,' he shares, adding that they hope to reap rich dividends from the investments made. Adds Jarrault, 'Our vision is to have `1,000 crore turnover in India by 2020, by expanding our portfolio, focus segments and strengthening our retail presence.' </p> <p>In terms of renewables, Lapp, at present, caters to about 25 per cent of the total 13 GW of installed grid-connected PV base in India. CMI too has noticed the government's commitment. Shares Jain, 'We do not have much traction in renewables as of now, but with the focus in policy for this segment and witnessing the increasing demand in the segment, we are looking at this market closely.' </p> <p>Another avenue opening up the segment for sustained growth is domestic manufacture, especially with 'Make in India' initiative gaining prominence. As Jarrault points out, '60 per cent of Lapp's products are manufactured in India to ensure availability and quick turnaround. Given our experience in control, power and data cables, we are confident of a significant position in the 'Make in India' drive.'</p> <p>'All our products are manufactured in our two facilities in Faridabad and Baddi. We service all our client requirements, whether in India or on the global scenario, through these facilities,' shares Jain, adding that Make in India has provided a huge impetus to the industry.</p> <p>He further feels, 'With the focus on new manufacturing facilities in India, the wire and cable industry market will definitely witness growth. And with the focus shifting to manufacturing in India, the industry wins in another way: sub-standard imports, that cause trouble and give a bad name to the industry, will possibly be replaced by more robust Indian counterparts.'</p> <p> <span style="font-weight: bold;">R&amp;D Tech</span><br /> The Indian market is fast catching up with developed countries in terms of their requirements for end-to-end connectivity solution as industrialisation and Industry 4.0 gains momentum with more focus on 'Make in India'. </p> <p>Jain believes, 'The key triggers for business growth have been constant innovation and focus on R&amp;D. Indian companies in the industry will start focusing on R&amp;D, innovation and product quality, now that the he industry is gearing up to take the global challenge head-on and is creating awareness about the need for certifications and educating the influencers in the category.'</p> <p>Shares Jarrault, 'We test our products in our laboratory and test facility to ensure they meet the high expectations of the customer. Production today requires a tailored solution for a defined application.'</p> <p>This includes, not only customised cables, but also a plug &amp; play solution cable assembly solution OLFLEX® CONNECT for production to scale up. To facilitate students with the best infrastructure and open avenues for innovative thinking, the company has also set up a Centre of Excellence at PSG College of Technology that serves as a link between industry and institution. </p> <p>Thus parameters like, customisation, R&amp;D and innovation, followed by strict quality control and inspection are an emerging as aspects of real consideration in the Indian scenario.</p> <p> <span style="font-weight: bold;">Future wise</span><br /> There are many challenges that the segment faces. Be it input costs, which can change majorly with the variation of cost of raw materials; certifications, which are not standard; and quality and R&amp;D in the segment.</p> <p>The fluctuating price of raw material (copper, etc.) is a concern area for key players in the organised sector. Points out Jain, 'It becomes an even bigger issue for players like us who are focused on the B2B segment and our bottom lines are impacted by any steep price rise in the raw materials.'</p> <p>Global certifications and requirements are very different from that in India and it is therefore important that any Indian organisation that is looking at sales abroad keeps itself updated on the global requirements. 'Constant quality checks, R&amp;D, innovations, and certifications will be the way to excel in exports. Short turnaround times on customised requirements will also help the cable companies in the global arena,' Jain suggests.</p> <p>Lack of focus on R&amp;D is another challenge in any field of manufacturing activity. One has to keep abreast with any development in the industry in the country or abroad to compete with global standards and players.</p> <p>Additionally, India always had a very complex taxation structure which many MNCs found difficult to understand, manage and administer. It complexity was a deterrent to do business, but the implementation of the Goods &amp; Service Tax (GST) is being seen to have an indirect effect on the various segments. </p> <p>According to Jain, GST impact in the B2B segment should be revenue neutral, since they will be able to offset the GST paid through input credits. 'GST applicable on wires &amp; cables at 28 per cent is enhancing our working capital requirement for the average receivables credit period. In the long run, GST is a very positive step for the organised sector,' he feels.</p> <p>Jarrault, too, sees it as a positive, 'GST will help ease all taxation with significant impact to attract investments. This change in taxation will smoothen the process of doing business in India and help India to attract FDI in core manufacturing sector.' Today non-value added activities like stock transfers cause problems. By way of GST, companies will be able to bill any customer in India as there will be no request for local VAT billing, requiring them to stock transfer the materials to the respective state and later bill it locally to the customer. </p> <p>'This would save us about 50 per cent of our time and effort. The process would be faster and we can reach our customers better. Introduction to GST will save transportation cost, transaction cost and administrative cost. It will also reduce errors, transit damages and delays,' he observes.</p> <p> <span style="font-weight: bold;">- JOCELYN FERNANDES</span></p>
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17 Oct 2016
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