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Spotlight | January 2014

Retail and R and D: The twin growth engines

Schneider Electric, the France-based specialist in energy management with operations in more than 100 countries, is slowly but steadily expanding its reach in the competitive Indian power retail market. They are strengthening their base for research and development (R&D) activities to cater to the Asia-Pacific market.

The company's Indian subsidiary Schneider Electric India has also claimed that its retail foray, which is just two years old, has delivered healthy dividends, and the firm is expanding through retail route. Going ahead, the energy equipment maker is emphasising more on energy-efficient products and making the brand a household name in the country. Schneider ventured into retail after acquiring Luminous (a provider of energy efficient solutions) in 2011.

´Currently, we have more than 50,000 sales points across regions through Luminous, and we also want to further accelerate our retail expansion in various other locations,´ says Anil Chaudhry, Country President and Managing Director, Schneider Electric India. The company has been distributing a range of products including switches, sockets and distribution systems for home and small and medium business segments through retail outlets. ´ We are very much committed and focused on our retail business,´ he added. In the immediate term, Schneider Electric is looking towards expanding its geographical presence in addition to partnering and retailing outlets in Tier II, III and IV locations. Also, the company has embarked on 'Xperience Efficiency Yatra' [across 50 cities] to commemorate its 50 years of operations in India, and to collaborate and share knowledge on energy challenges as a part of retail growth plan.

In order to expedite deep penetration in Tier II cities, the company´ s retail focus has been backed by strong local R&D activities. According to Chaudhry, currently there are over 1,250 engineers working on designing and developing products not just for India, but also for the global market.

The R&D team also gets inputs from a strong marketing team on the specifications of the products. ´ India will always remain a strong R&D hub for the group. Availability of talent, knowledge and skill in the country makes Schneider Electric a major hub for innovation and R&D,´ says Chaudhry. Schneider has made about eight acquisitions in the last 7-8 years to grow its business in the Asian markets. Currently, it operates 32 factories at various locations in India.

Energy efficient move
Schneider is helping its clients to achieve savings up to 30 per cent. India being a critical market for the company, apart from China, the Group has invested heavily in an R&D centre at Bangalore. The R&D centre is the second largest in the world after Europe, and is engaged in Indian as well as global innovations. It contributes to the company's strong presence in the local market. In 2009, the company acquired Meher Capacitors (a manufacturer of electrical components), and in 2010, they acquired Uniflair (a marketer of precision air conditioning, technical cooling systems), Areva T&D (a provider of power equipment) and Zicom's electronic security systems integration business. In 2011, Schneider acquired Digilink, a manufacturer of structured cabling solutions.

Providing field services and professional services to help clients acquire efficient energy management systems, Schneider Electric India has enjoyed a strong presence in data centre space.

S Nagarajan, Vice President, Power Business, said, ´ The company has been working with 70 to 80 integrators in various market areas such as home (lifespace) automation, IT, building management systems, utilities, solar (renewable energy), water management, and food and beverages. He added: ´ With innovative equipment dedicated to renewable energy sectors, we expect to expand our business scope. In the renewable segment, the Group expects growth of 15-20 per cent y-o-y.´

Stressing on the increasing demand for energy, especially in countries like India, Chaudhry emphasises on how difficult it is becoming to address the demand. ´ By 2030, energy demand will go up four times. New energy sources like solar are not yet viable. Most current sources are fossil fuel based, which pollutes the environment and are leading to climate change. The need is to save energy, and use it efficiently,´ he added.

Analyst take
Frost and Sullivan, in its recent analysis, recognised Schneider Electric with the 2013 Global Total Plant Ecosystem Energy Optimisation Customer Value Enhancement Award. This award was presented because the company demonstrated excellence in implementing strategies that proactively created value for customers by improving the return on investment that customers make in its services or products.

According to information posted on company's website, Schneider Electric, as an industry leader for superior process automation solutions, is recognised for its PlantStruxure architecture, which helps customers to meet their business goals by optimising the total plant, rather than just individual aspects of it.

"Overall, Schneider Electric's integrated platform is gaining popularity across enterprises of all sizes, and infuses reliability, scalability, and flexibility in plants' processes," said a senior industry analyst Muthuraman Ramasamy.

"Schneider Electric understands that for customers to become truly efficient, they must integrate formerly distinct systems," said Frost and Sullivan´ s Senior Analyst Sonia Francisco. To support this transition, Schneider Electric has developed the EcoStruxure architecture, which serves as a single platform that can connect to diverse solutions, including the Plant¡ Struxure architecture.

Management take
Emmanuel Babeau, EVP Finance, Member of the Management Board Amongst the most important achievements of 2012, I would like to highlight the one point margin improvement of solutions, which reflected our focus to reinforce the way we execute solutions. We will continue to seek efficiency to achieve the targeted two point improvement by 2014.

In addition, cost efficiency initiatives delivered savings in line with our expectations despite challenging business conditions. The benefits of our new approach to supply chain management helped us to generate a one point reduction of the inventory-to-sales ratio. This structural improvement should continue to bring in benefits in the future. We are therefore on track to deliver all financial targets of Connect.

Jean-Pascal Tricoire, Chairman of the Management Board
We've stepped up our engagement in social responsibility and sustainable development in five key directions: environment, social, society, ethics, and dedicated actions for under¡privileged people.

We measure our progress in our Planet and Society barometer, and integrate this indicator in the incentives of our leaders. In addition to our support to the UN Global compact since 2003, our commitment has been recognised, and we are proud to be part of ethical stock indices and ratings of reference such as Dow Jones Sustainability Indices (World and Europe), carbon disclosure project, Global 100 Most Sustainable Corporations and Ethisphere Most ethical companies.

We are also particularly proud of our BipBop Access to Energy programme. In 2012, this initiative brought electricity to more than 340,000 households, and we trained over 10,000 underprivileged youngsters in the field of electricity.

As a specialist in efficiency technologies, Schneider Electric has been an active contributor to the debates over the world energy challenge and climate change, explaining some of the new solutions offered by technology.

S Nagarajan, VP, Power Business
Out of the total business of Schneider in India, buildings comprises about 40 per cent in both commercial and residential. In the industrial segment, we are about 10-15 per cent, while in energy, we are about 20 per cent. IT solutions occupies the remaining pie with approx. 10 per cent. We witness IT segment as a growth sector this year. In the last 2-3 months, I've witnessed that IT spending has increased, which might bring in good business for us.

Although, we've witnessed slow growth in infrastructure space, which was lagging in the last 18 months, we see good growth in this segment in the coming few months. Things are moving ahead in the demand-supply side. Speaking about smart grids, I think they we are here to stay. India will be at the front runner in this segment and Schneider is already investing in this. We see it as a potential market, and that is why we have got some places wherein we are doing it on a trial basis. We are expecting considerable order inflow in this space in near future.

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