Beat the Clock

Beat the Clock“Global players having strong turnkey experience will eventually push back localisation of EHV cable manufacturing in India. Any new entrant will have to beat the clock to survive,” said Vivek Kohli, President (Strategic New Business and Projects), Hindusthan Vidyut Products Ltd.With 2014 elections nearing and national utility not floating any big tender vis-à-vis very high idle capacity, the conductor manufacturing companies are reeling under pressure. In a conversation with Subhajit Roy, Vivek Kohli talks about the true picture of the cables and conductors manufacturing sector in India as well as HVPL’s plans and strategies.Established in 1959, Hindusthan Vidyut Products Ltd is one of the leading manufacturers of electrical conductors, cables, and insulators. How do you look at the current market scenario?The Planning Commission has set a target of adding another 88,000 MW of power generation capacity in the 12th Five-Year Plan (2012-2017). This is quite an ambitious target considering the fact that the generation target has not been met in any of the 11 preceding Five-Year Plans. In the past, the conversion rate between plan and actual has been as low as 50 per cent.This massive addition in generation capacity, if it happens, would also bring along with it a much bigger demand for cables and conductors from the transmission and distribution sectors. There are ambitious plans for the electrification of rural areas as well. There are plans to augment renewable energy capacity from current 22.4 GW to 30 GW by 2017.Currently markets can be stated to be quite low profile in the wire and cable segment. As far as medium-voltage power cables are concerned, several new players have entered the market and we currently have a condition of oversupply in this segment. Cable manufacturers’ have created excess capacities and margins are going south continuously. With the dollar exchange rate going up, there has been a 15-20 per cent increase in raw material prices (like XLPE) which are essentially imported and manufactures are struggling to overcome this situation. The scenario is unlikely to improve in EHV segment as well. Though demand may increase a little, the supply position is expected to exceed demand in few years to come. This is due to several bigger international players targeting this market. Global players having strong turnkey experience will eventually push back localisation of EHV cable manufacturing in India. Any new entrant will have to beat the clock to survive. With failures of several JV in this segment, EHV cables will continue to be imported from quality large international companies and that is not a good sign for local manufacturers. With 2014 elections nearing and national utility not floating any big tender vis-à-vis very high idle capacity, the conductor manufacturing companies are reeling under pressure. Some of them are either on the path to closure or reducing their operations. This may be a temporary phase but the current situation is quite bleak.Now the Govt plans to allow Chinese manufacturers setting up their power equipment service centres in India. How is this going to make an impact over industry performance?The recent pact between India and China, during the visit of Indian Prime Minister, is more focussed initially on the opening up of power equipment service centres. These centres will be feeding points for a large percentage of Chinese power generation equipment which have been imported. At the moment, in case of failures, most of the equipment is sent back to China for repair. In that context, the opening of such centres will reduce costs and will be beneficial for the buyers of such equipment. At the same time, there is a lot of distress in local component manufactures and they may find it very tough competing with the Chinese. With increase in the import of power equipment, Indian local equipment manufacturing industry has been steadily losing its market share.  After the service stations, the next logical step for the Chinese equipment manufacturers will be to set up base in India.  This natural graduation from service station to manufacturing shall impact not only local players but also manufacturers’ from Europe who have set up shop in India.In the wire and cable industry, till now the threat from Chinese manufacturers has been countered by strong opposition by domestic players. However, it may also be quite pertinent to add that in the wire and cable industry, the quality of Chinese products has been under scanner at all times. This will remain a key differentiating factor for good quality Indian manufacturers for some time to come.Tell us about your product portfolio.At present, we are manufacturing high-voltage cables up to 132 KV and power transmission conductors upto 800 KV. We have a strong export presence in both cables and conductor business and have exported to more than 23 countries. In the year 2012-13, we have exported 66 KV EHV cables. We have recently supplied special conductors for river crossing as well for hilly terrain of Europe with extra strength material. Our R&D efforts have led to manufacturing of various types of HTLS (High temperature and Low sag) conductors. To meet our group’s vision “to be a global leader in sustainable energy solution with the best of the quality, technology and competitiveness”, we are poised to take these products at a larger scale to the global markets. How is the demand for LT and HT XLPE power cables?Wire and cable consumption in India was around $3.0 billion in 2000. The usage dropped down from 2002-2007 and again climbed to $5.4 billion in 2008. Along with the rest of the World, India too suffered in 2009 and consumption fell to an estimated $3.2 billion followed by some recovery in 2010. The industry is estimated to grow steadily to $6.8 billion by 2017. The wire and cable industry comprises 40 per cent of the entire electrical industry in India, which is expected to double in size over the next five years. The industry has grown at a CAGR of 15 per cent as a result of growth in the power and infrastructure segments. Although there has been a slowdown from 2012 onwards, we are quite hopeful that growth will again pick up from 2015 onwards. The government’s emphasis on the power sector reforms and infrastructure is expected to further drive growth. Currently the EHV cables market is growing at the fastest pace and is estimated to be $300 million. Growth was slow for many years but has now started picking up. With the government’s ambitious plan in power generation and transmission, and with faster urbanisation, the demand for underground high-voltage cable projects will increase. The medium- and low-voltage power cable market is estimated to be $900 and $1,800 million respectively due to growth drivers like rural electrification, and the boom in the power, industrial, realty and construction sectors. A large segment of low-voltage cables is composed of building wires and that segment itself is conservatively estimated at $800 million.You have ventured into the manufacturing of LT and HT XLPE power cables. Are you planning to venture into some other products segments?As stated earlier, power cables as well as conductor margins are shrinking rapidly. To mitigate this risk, we have decided to diversify into other businesses where we expect higher returns than power cables and conductors. While we shall continue to drive power business for the niche markets, we are adding the speciality chemicals and infrastructure business to our portfolio. We are the first power product company to add new diversified and specialised products in our portfolio. This is a strategic shift and we are using our strong business strength in venturing into these new areas.Backed by strong European partners, with in-depth experience in areas right from raw material, design, manufacturing, hardware and international projects with the additional benefit of providing end to end solutions, we have added quite a few products in our portfolio like Gap type, ACSS, Super thermal Alloy Invar and other types of HTLS conductors. We have plans to manufacture carbon core HTLS conductors for export markets. These new generation HTLS conductors are widely used in several global markets and there is acceptability for any of the HTLS technology depending upon application. For both domestic and global markets, we are focussed on offering HTLS products as per the application and have the bandwidth to recommend the right conductor and solution as per the customers’ requirements.Brief us on your manufacturing capabilities and facilities. We have three manufacturing units for power conductors and one unit for HV power cables. All our units are strategically located in close geographic proximity to the end-customers. We are setting up a new unit for conductor manufacturing in Odisha. This unit shall help us to become more competitive for east, north east and south borne projects. We plan to build it with state-of-the-art machinery and it will be mainly dedicated towards the manufacture of HTLS conductors. This plant will be integrated backwards to derive a cost advantage and that will help us to offer our customers a competitive price. Our plants are well equipped with best of the machines and experienced technical and commercial executives. This has enabled us to continuously produce zero defect products, thereby creating a brand image as a quality player in both domestic as well as international markets. You received an order worth Rs. 373 crore from Power Grid. What are the significant orders you bagged this year? What is your current order booking?Apart from Power Grid, we have recently won order from WBSEDCL and export orders from Europe, Yemen, Mauritius, Zambia and Bhutan, at relatively better margins. We are in the final stages of booking some more prestigious export orders for conductors to fulfil our capacities.Do you have any plan to enhance focus on export markets?We have aggressive plans in the export markets and are currently in the process of evaluating the business potential and margins across various geographies. We exported our first overhead conductor in 1961 and have an experience over 50 years in the power conductor business. A strong and dedicated technical team backed up by consistent financial performance adds further to our capabilities. All our products, including HTLS conductors, meet stringent quality standards. We are able to compete in international markets due to our high quality product, packaging and on time delivery commitments. We have consistently been able to meet the challenges of long transit time and different temperature zones for transportation of our products. These differentiators make us a quality supplier globally. We certainly have an edge in exports because of our expertise in producing quality products, as that gives a lot of comfort and value proposition to the customer.Milestones
1959: Charter of company formation signed1960: First overhead conductor making plant commissioned at Faridabad1961: Executed first major conductor export order from Faridabad unit of the company1982: First PVC insulated LT cable manufactured1984: First XLPE insulated LT cable manufactured1993: First HT XLPE cable –up to 33 KV manufactured (by offline curing method)2003: CCV line-with Nokia, Finland-make extruders commissioned. Manufacture of dry   cured HT cables up to 33 KV commenced.2008: 66 KV cable produced and tested2013: First HTLS conductor produced and tested