40 January 2015

CEW Features

Chemical Engineering World

Guest Column

The global economy has started to show signs of recovery. Fresh investments are being planned in the process industry worldwide. Indian pumps and valves manufacturers can thus expect opportunities to grow in the export markets, especially in the Middle East and North Africa (MENA) and NAFTA regions. But it is essential that they first get their house in order by building robust processes, say Shripad Ranade, Senior Principal, TSMG and Yogesh Shivani, Associate Consultant, TSMG.

Indian Pumps & Valves Industry: Time to Go Global

and is expected to grow at an annual rate of 7 to 10 per cent over the next few years.The new government in the centre is expected to take policy initiatives that will help the Indian industry. The signs of recovery in the global economy also bode well for pumps and valves manufacturers. It is thus time for domestic manufacturers to strive to overcome current challenges and gear up for the next phase of growth.

Indian Pumps IndustryGlobal pump market is estimated at USD 47 billion in 2014 and is estimated to reach USD 56 billion by 2017. The Indian pump market is close to 2 per cent of the global market and was estimated at ` 8,500 crore in FY14. Agriculture and Building services are the two largest end use segments, as depicted in the figures 1 and 2.

The pump industry is classified into centrifugal and positive displacement pumps, with centrifugal pumps being 95 per cent of the market, within which single stage radial flow pumps and submersible pumps together make up 70 per cent. Rotary

The global economy has had subdued growth for the last few years with global output contracting by 0.6 per cent in 2009. However, it is expected to embark on a growth trajectory going forward largely on the back of developing economies, and the IMF expects global output to grow by 3.8 per cent in 2015.

The Indian economy seems poised for the next phase of growth after sluggish performance over the past few years. The recent data on the composite performance of eight core industries coal, crude, oil, natural gas, refinery products, fertilisers, steel, cement and electricity is seen to be encouraging. Assuming such trends are sustained in the coming months, there would be much better industrial growth in H2 of FY15.

The pumps and valves manufacturers are significant suppliers to the process industry and also cater to other end use sectors such as automation for discrete manufacturing and pumps for agricultural use. The pumps and valves market in India provides an opportunity of `17,500 crore

Fig 1: Indian pump market (` Cr). Fig 2: Key end use segments

Shripad Ranade

Yogesh Shivani

42 January 2015 Chemical Engineering World

CEW Features

positive displacement pumps account for the largest share of positive displacement pumps. Key manufacturers of centrifugal pumps in India are: Kirloskar Brothers Limited (KBL), KSB, Grundfos, CRI and Aqua Group.

India exports pumps to nearly 70 countries. In FY14, exports stood at `1,280 crores, having more than doubled over three years. As much as 16 per cent of Indian pump manufacturing capacity is geared for exports. Key export destinations are the Middle East, North Africa and other more developed economies such as USA, Germany and Russia. The emerging markets of China and Latin America also provide attractive opportunities.

Our discussions with industry players reveal that succeeding in global markets will require increased focus on quality along with low cost positioning and active marketing. India is well positioned to grow into a much larger manufacturing base for pumps driven by attractive factor conditions. It is very likely that India will be a significant exporter of pumps in the coming years.

Indian Industrial Valves IndustryIndustrial valves market is divided into two segments - On-Off valves and Control valves. On-off valves accounts for 98 per cent of the valves market by volume and 80 per cent by value. About 88 per cent of the demand is from projects, while 12 per cent is replacement demand. Global market for industrial valves is expected to reach USD 75 billion by 2017 with China, Africa, Middle East and India expected to propel the demand. Figure 3 shows the Indian market which constitutes ~2.5 per cent of the global market. Oil and gas followed by power, petrochemicals, chemicals and fertilisers are the major end use sectors, as shown in figure 4.

The Indian valve industry is highly fragmented with around 600 valve manufacturers, of which more than 95 per cent are in the micro, small and medium enterprise (MSME) category. Top 10 players service 40 per cent of the market. Demand for high end customised valves is bound to grow in the MENA region with

their shift from upstream oil and gas based economy to supply of refined petroleum products. Large addition of refining capacity is underway in the MENA region. Investment in desalination plants will further increase demand for valves. The NAFTA region will account for about 18 per cent of total valve demand by 2017. Discovery of shale gas and huge investment for its extraction has turned USA into a net exporter of oil and gas. These investments will drive demand for valves in the future.

Way ForwardIndian pumps and valves manufacturers must capitalise on the anticipated growth opportunities that the domestic as well as the export markets present. With the global industry becoming more and more competitive, it becomes imperative for any manufacturer to strive for excellence with both inward and outward focus.

Inward Focus: Bulk of manufacturing in the Pumps & Valves industry is project based which necessitates the need for having strong but flexible business processes in organisation. Domestic

companies face growing complexity in terms of product portfolio, geographies, customer expectation etc. as they grow in revenue. Symptoms such as high and erratic lead time, underutilisation of plant and people and tapering of profit margin point to current processs inability. Those companies which will embrace evolved business processes will remain competitive and grow further.

Outward Focus: With a substantial part of future opportunities expected to come from the export market, it has become inevitable for the Indian manufacturers to be at par with their global peers. While Indian products fare well on the quality front, there exists a lacuna in branding and service delivery.

While a few forward looking companies have already felt the need to address these challenges and are reorienting themselves, a large section of the industry has significant work to do in this regard. These point towards the need to gear up with robust processes to ensure relationship building with global customers and hence profiting from global growth.

Fig 3 : Indian industrial valve market (INR Cr.) Fig 4: Valves demand by end-use sectors (FY14).

Fig 5: Key focus areas for Indian manufacturers.