Electrical Equipment Ibef Dec2008

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E L E C T R I C A L M A C H I N E RY December 2008

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ELE C TRI C A L M AC H I N E RY December 2008

The Electrical Machinery Industry in India can be classified into the following segments Generation Equipment Boilers Turbines Generators

Others Electrical Motors Wires & Cables

Indian Electrical Machinery Industry

Transmission Equipment Transformers

Distribution Equipment Switch Gears Control Gears

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ELE C TRI C A L M AC H I N E RY December 2008

India uses several sources of power and power generation has been growing steadily over the years However, growth in demand for power has outstripped capacity addition leading to a significant gap

Share of Installed Power Generation Capacity 2007-08 8%

25%

64% 3%

n Thermal n Hydro

n Nuclear n Other Renewable

Source: Ministry of Power, GoI

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ELE C TRI C A L M AC H I N E RY December 2008

India uses several sources of power and power generation has been growing steadily over the years Growth in Power Generation 2007-08

705

2006-07

664

2005-06

618

2004-05

587 558

2003-04 2002-03

531

2001-02

515

2000-01

500 0

100

200

300 400 500 Billion Units (BU)

600

700

800

Source: Ministry of Power, GoI

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ELE C TRI C A L M AC H I N E RY December 2008

Significant investment in capacity addition across segments is planned It is expected that by the end of the current plan period, the existing capacity would increase by about 50 per cent.

Expected Investment in Capacity Addition 104.54

Total

4.43

Rural Electricfication Distribution Network Augmentation & Upgradation Transmission Network Creation Generation Capacity Addition 0.00

16.20 22.63 61.27 20.00 40.00

60.00 80.00 100.00

120.00

US$ Billion

Source: Ministry of Power, Gol

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ELE C TRI C A L M AC H I N E RY December 2008

All segments in the Electrical Machinery sector have been experiencing robust growth Turbines Production, US$ Million

Switchgears & Control-gears production, US$ Million

FY’05

302

FY’04

FY’05

287

FY’03

FY’04

266 240

250

260

270

42 34

FY’03 280

290

300

310

26 0

Source: Ministry of Heavy Industry, GoI, www.indiastat.com

10

20

30

CAGR 27%

40

50

Source: Ministry of Heavy Industry, GoI, www.indiastat.com

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ELE C TRI C A L M AC H I N E RY December 2008

All segments in the Electrical Machinery sector have been experiencing robust growth Boilers Production, US$ Million

Motors - Power Consumnption, Million HP

FY’05

FY’05

449

FY’04

FY’04

395

FY’03

335 0

100

200

300

400

11 9

FY’03

CAGR 16% 500

0

Source: Ministry of Heavy Industry, GoI, www.indiastat.com

CAGR 35.4%

6 2

4

6

8

10

12

Source: Ministry of Heavy Industry, GoI, www.indiastat.com

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ELE C TRI C A L M AC H I N E RY December 2008

Apart from domestic demand, exports have also been growing Electrical Machinery Exports, US$ Million 2004-05

Transmission Equipments, Exports US$ Million 830

2003-04

2004-05

653

2002-03

328

2000-01

CAGR 42%

100

200

300

26

2000-01 400

500

600

700

800

900

35 0

US$ million

CAGR 5%

34

2001-02

203 0

36

2002-03

306

2001-02

43

2003-04

10

20

30

40

50

US$ million

Source: Engineering Exports Promotion Council

Source: Engineering Exports Promotion Council

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ELE C TRI C A L M AC H I N E RY December 2008

Apart from domestic demand, Exports have also been growing Key factors favouring India as a manufacturing base include India’s labour cost advantage and adequate supply of key raw materials such a steel and other metals

Electric Wires/Cables, Exports US$ Mn 2004-05

88

2003-04

80 38

2002-03 2001-02

23

2000-01

CAGR 45%

20 0

20

40

60

80

100

Source: Engineering Exports Promotion Council

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ELE C TRI C A L M AC H I N E RY December 2008

India offers several advantages that contribute to growth in the sector India’s comparatively cheaper and skilled workforce can be effectively utilized to set up large low cost production bases for domestic & exports market

Firm Strategy, Structure, and Rivalry

Factor Conditions

• Strong local and MNC players • Highly competitive industry • Scale and Scope of product offerings are a key differentiator

Demand Conditions

Government

• Large scale investment in power and related infrastructure planned • Ministry of Power aims to build FDI and competition in the electrical machinery sector • Efforts are on to make nuclear energy legally open for private sector with assured supplies

Related and Supporting Industries

• High level of capability in engineering sector • Highly developed steel and other metals production units with adequate supplies of ores • High private sector interest in distribution and transmission

• High demand as larger parts of the country are coming under electrification • GDP growth at above 9per cent and industry growth touching two digit levels • Major parts of national and urban railway systems switching to electric power

Source: KPMG Analysis 10

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ELE C TRI C A L M AC H I N E RY December 2008

The sector offers opportunities for growth, but will require investment in technology Threat of New Entrants • Well established players • Technology intensive sector • Requires significant investment Supplier Power • Adequate supplier base • M  ost suppliers are small in scale and size as compared to manufacturers Competitive Rivalry

HIGH

• T  echnology and product range are the key differentiators

MEDIUM

• Ample opportunities for growth

LOW

• Well established players 11

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ELE C TRI C A L M AC H I N E RY December 2008

The sector offers opportunities for growth, but will require investment in technology Customer Power • Number of players and product range • M  anufacturers extending offerings to include services as well Threat of Substitutes • No substitutes currently for products in the sector Source: KPMG Analysis

HIGH MEDIUM LOW

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ELE C TRI C A L M AC H I N E RY December 2008

Critical success factors for manufacturers in the sector Capability to Invest • B  uyer segments are very large players and prefer an assured supply with scale benefits from a consolidated supplier base. Technology • F actors like upgradation of transmission lines to higher capacity levels, larger scale generation units, etc are leading to significant changes in technology requirements Spectrum of Products and Services • U  ser industries differentiate on scale and scope access to a business relation with any such player would entail build up of a range of capabilities and products

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ELE C TRI C A L M AC H I N E RY December 2008

Attractive States for Investment Factors used to assess states for the sector:

Funds Released for Capacity generation by Individual States

• Demand conditions

3% 3%

• P  resence of supply sources of power like Hydro, Thermal, Wind, etc

2% 2%2% 17%

4% 4% 11%

6%

• P  resence of supporting engineering industries in the states

6% 11%

9%

Based on these, the following states emerge as attractive locations:

9%

n n n n n n n n n

• Gujarat • Maharashtra • Uttar Pradesh • Tamilnadu

Gujarat n Maharashtra n West Bengal n Tamil Nadu n Chhatisgarh n Himanchal Pradesh Jammu & Kashmir

11%

Haryana Uttar Pradesh Rajasthan Andhra Pradesh Karnataka

Delhi n Assam Madhya Pradesh

Source: Ministry Of Power, GOI

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ELE C TRI C A L M AC H I N E RY December 2008

Profiles of Key Electrical Machinery Players in India Bharat Heavy Electricals Ltd • B  HEL has, emerged as the forerunner in technology on equipment for power plants, contributing to about 70 per cent of market requirements • T  echnology absorption through technical collaborations with world leaders has contributed to BHEL’s achievements. The collaborations include Prommashenport of CIS; General Electric, Combustion Engineering, National Oil Well, all from the USA; Sulzer of Switzerland; Hitachi and Toa of Japan; Siemens of Germany; Asea Brown Boveri of Canada; Flakt of Sweden; Alstom and Neypic Creusot-Loire of France; and Weir of the UK

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ELE C TRI C A L M AC H I N E RY December 2008

Profiles of Key Electrical Machinery Players in India Crompton Greaves • It is India’s largest private sector enterprise, extensively engaged in designing, manufacturing and marketing high technology electrical products and services related to power generation, transmission, distribution as well as executing turnkey projects • It is one of the largest supplier of industrial systems • C  G acquired Pauwels and Ganz to complete its product range in transformers, enabling it to leverage both in domestic and exports markets

16

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ELE C TRI C A L M AC H I N E RY December 2008

Profiles of Key Electrical Machinery Players in India ABB • W  ith a wide product range, global competence and ability to provide end-to-end solutions, ABB is also one of India’s leading power systems producer • Its ability to provide end-to-end solutions (from design to execution from its wide range of power systems and automotive technology products), gives ABB a sustainable competitive edge • A  BB also has capabilities in design, procurement and implementation of automation drives for process industries

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ELE C TRI C A L M AC H I N E RY December 2008

DISCLAIMER This presentation has been prepared jointly by the India Brand Equity Foundation (“IBEF”) and KPMG Advisory Services Private Limited (“Author”).

Author’s and IBEF’s knowledge and belief, the content is not to be construed in any manner whatsoever as a substitute for professional advice.

All rights reserved. All copyright in this presentation and related works is owned by IBEF and the Authors. The same may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this presentation), modified or in any manner communicated to any third party except with the written approval of IBEF.

The Author and IBEF neither recommend or endorse any specific products or services that may have been mentioned in this presentation and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed in this presentation. Neither the Author nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of this presentation.

This presentation is for information purposes only. While due care has been taken during the compilation of this presentation to ensure that the information is accurate to the best of the

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