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At C&S Electric, innovation is not imited to products alone

MRINALINI PRASAD ,  Thursday, August 25, 2011, 11:03 Hrs  [IST]

Rishi Khanna.jpg— Rishi Khanna, Director, C&S Electric Ltd

C&S Electric Ltd is amongst India's biggest exporters of low and medium voltage switchgear. Its wide range of electrical and electronic products finds application in power generation, distribution, control, protection and final consumption. Rishi Khanna speaks about the company's phenomenal growth and gives insights on the company's recipes for success. Looking confidently at the future, Khanna sees C&S growing by 20 per cent annually in the medium term. An interview by Mrinalini Prasad.

From essentially being a switchgear company, C&S has emerged as a multi-faceted electric company with presence in power busbars and lighting & wiring accessories. Please share with us the growth plan adopted by the company.
Even before the switchgear components, the mother business of C&S was LV switchgear panels. In the mid-1980s, C&S added in a short time a vast range of LV components like switches, fuses, air circuit breakers, contactors, motor starters etc, and built its network of distribution around the country. Success came quick since the foundation was sound. From thereon always C&S has looked at expanding the frontiers of its business in terms of geographies, new verticals or joint ventures. Our exports of the flagship company C&S Electric are close to Rs.jpg150 crore now and this does not include the exports of our JV companies. This has been an important strategy for growth as not only has it given revenue but the learning and experience has given confidence and ideas for growth of business at home.

We are constantly getting into new verticals. To give some examples, we entered the medium voltage switchgear line a few years ago through a JV with a Portugese company, C&S Efacec MV Ltd, which is making waves in the Indian MV switchgear industry. We have started our own company and plant in China and expect to tap the vast Chinese market for all our products. We have also become a pioneer in the solar energy field and have been one of the first to commission a 1- mw grid connected solar power plant at Biwani, Rajasthan.

What is the current contribution of your switchgear business in the total business by the company? Where is the foreseen in coming 3 to 4 years?
Switchgear contributes around 50-60 per cent of the business. We expect excellent growth in this segment but naturally some of our newer ventures like solar or electrical turnkey business are likely to grow faster. This percentage may thus reduce slightly in coming years. Overall the outlook for switchgear business in our domestic market as well as international market looks strong.

Untitled - 45.jpgWhat have been major innovations in the Indian switchgear industry over the recent past? Please tell us about new products by C&S in this segment.
The switchgear industry is a mature industry the world over and India is no exception. So the new products that come into the market are usually only incrementally better in terms of fundamental technology, but have always some new features which may be sometimes described as "new bells and whistles". This is the case in many industries, including for example, the automotive industry.
The main shift in switchgear technology has been the increasing use of electronics. This has been the case for the industry as a whole and also for C&S as we have added some electronic functionality or the other in all its products. Protective relaying has advanced in a big way and the use of multifunctional relays and advanced communication protocols like IEC 61850 have made big inroads into the industry. However the full benefits of these technologies have not yet been fully harnessed by the users who still prefer in many cases "redundancy", which is to retain also the older systems in parallel - to put it perhaps a bit over simplistically. Innovation is not limited to the products alone. The manufacturing technologies and logistics systems are often an area where innovative edge makes as much difference as in the product itself. Also innovation can sometimes be at an emotional level, for example "ease of use" or simply the power of product aesthetics. C&S is active on all these fronts.

Apart from the existing markets, you were planning to expand your footprints in other geographies as well. Which are the new markets you have explored or are in the process of exploring?
We have made some inroads into practically every market in the world now, so it is not so much about new geographies now. It is about deeper penetration into the geographies where we have been already present now. The approach is simple—we have increased quantity and quality of our manpower in this field and are setting higher targets. The market is huge and our share is tiny so there is enough room for us to quadruple our exports in 3-4 years. We do pick some markets from time to time where we focus. In recent times, these markets have been Russia, Africa and North America. We have an office in Moscow and in Dubai. We also now have a focus on the Chinese market. It will be a slow start, which we have already had. But the market is 5-6 times the size of India's market. And we already have a reputation in China for our superior quality as compared to the Chinese companies thanks to the supplies we make to our global accounts who have their plants in China. So we have great expectations from this in the long term.

Please tell us about the competition in the sector. What are the strategies adopted by the company to maintain its position as a leader in industrial switchgear export market?
The competition comes from the same people we compete with in India—nobody is new! On the one hand we have the European and Japanese giants, and on the other hand the Chinese. Of course the Chinese companies also come in all types and one cannot generalize. Over the years we have developed our own unique positioning—an elusive alchemy of product quality, customer service and intelligent marketing.

What is your view on competition from Chinese suppliers in the domestic market, especially in the LV and MV category?
It is a reality in India and in the world. Chinese competition has reduced pricing for all, even those like us or the Europeans who do not directly always compete with them. Unfortunately, not all, but many Chinese companies produce and sell products of very low quality, which do not comply with any standards of safety or standard of performance. And there is a large market in the developing world for such products and many traders are only too happy to make a buck and promote such products.

 In China there are, for example, hundreds of companies that make cheap, poor quality switchgear products literally on the road side. These companies could never sell these products in the Chinese market, as they have no certifications or comply with no proper standards. Yet these companies thrive on exports to markets in Asia, Middle East and Africa where such products get sold. But this attitude is the same as saying "Why have a plug at all, why not just put the wire directly in the socket?" The sad truth is that this happens everyday in our electrical world. You would never see something like that in Europe or USA. But having said this, not all Chinese companies are like this. The Chinese companies which make good quality products however, typically have costs equal to or higher than ours. So they have been restricted largely to their huge domestic market.

Untitled - 46.jpgWe perceive that Indian power utilities now prefer EPC and turnkey contracts, as opposed to direct procurement, for switchgear. What do you think? Do you have plans to take up T&D contracting?
Switchgear requirement of large projects in power sector are usually a separate requisition as it is a substantial purchase. I would estimate 70 per cent of the procurement takes place directly as a switchgear package whereas the 30 per cent goes through what we call EBOP (Electrical Balance of Plant) contractors. I personally feel that it is up to the customer to decide what suits him better. More experienced customers prefer to buy switchgear direct because the value addition of the EBOP contractor is not much. As far as our switchgear division is concerned, we are focused on product supply and not on turnkey project execution. However we have an electrical turnkey projects division which is active in the kind of space mentioned by you. This is a fast growing business for C&S and is an internal customer to the switchgear division.

The company, we believe, has been exploring opportunities to set up manufacturing units in Middle East and in China. What has been the progress on that front?
We are exploring manufacturing facilities in China only. In the Middle East, it is only our Dubai office. In fact, our China company and facility are already in production since over six months now and things look promising. However our strategy in China has been deliberately one of taking one step—waiting, watching and then planning the next step. The first step has gone well. We will now execute and unfold our strategy gradually.

We understand that India lacks testing facilities for MV and HV switchgear. What is your view?
Actually, we have the facilities; it is only that they are often over booked. I am not so aware of the HT side but in LT/MV side, all facilities are available. Lead times can sometimes be long as there is always a lot of testing in the pipeline. But we have seen in China also the lead times are long. Still some public-private partnership here may help speed up the things.

What are your medium-term growth objectives for C&S?
In terms of numbers, our intention is to grow at a CAGR of 20 per cent organically over the next five years and also add about $50- 100 million of turnover through acquisitions. Many are under consideration but it is too early for me to speak about any of these to you. Other than numbers, our endeavor continues to be to build our organization, its capabilities, its culture and its people. C&S is a wonderful place to work at and this has been one of our core strengths always. In the future too we shall endeavor to grow and contribute to society and to the process of our nation building.
 
                 
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