T&M Industry in India:Can manufacturing be the key?

In my blog of March 2, we had discussed the various "M" factors which may affect the T&M industry in India very positively.One of the factor was Manufacturing! Manufacturing-call it Strategic, EMS,ODM driven by making India more competitive,or moved by local job creations,or creating the offset as in India Government policy -it can lead to fillip in both sales of T&M as well as the automation of test systems. Now the local manufacturing requires more than a directive policy and procurement process-it requires whole new ecosystem and injection of Technology,Capital through FDI and People Development in this function.

There are at least 10 new projects under Central Government,where the procurement of large scale electronics hardware-components,subassemblies and systems will take place.The local industry can be motivated to sieze this opportunity to supply majorly thru this manufacturing.T&M can be a derivative gainer in the sense of supplying testers and systems and services to help there.Domestic demand of such hardwares is expected to be 400B$ by 2020,and progressive local value addition will be key here!

The demand drivers of these large scale projects and procurements are the Strategic Defense Projects,the Governance Projects of the various states,and the centre,NEM telecom infrastructure and Consumer/Digital Life Style products.Lifestyle products will be driven by home-security as well as the Automotive Electronics and money dispensing machines on new mCommerce  platforms!Facilitating market access in these projects will be central policy of the Government.

I estimate the marginal T&M testers will be to the tune of Rs 800 Crore,as easily the projects are almost 40,000 Cr Rupees worth and 2% of that fihure should be easily earmarked for T&M.Off-Course T&M amount will be shared by majority imported T&M eventhough the main equipment for these projects can be majority indigeneous,given the incentivising/access policy.Is Indian Electronics industry in general listening to this opportunity,and more meaningfully the T&M vendors preparing with their manufacturing test solutions?

T&M Industry in India : FY13 drivers and beyond !

As we discussed in the last blog, Indian Economy crrently is sort of struggling and needs a little bit of boosting through policy initiatives and other measures.Since perception is reality,it is the image and brand of India which needs refurbishing.Our major tech sectors can be very effectively deployed to do this,if  international investors feel secured putting money here!

T&M industry serves mainly the technology sectors.If these sectors themselves dont grow the derivative T&M industry tends to struggle more.The T&M industry can be very effective in helping make the user industry create solutions and grow their span offer.This will in turn support the growth of T&M market as well.Looks a little "missionary" in words,but T&M industrys role has always been critical-helping users design and produce their products better.

Another way we in India can create bigger T&M pie. And that is creative consolidation of smaller T&M companies in niche areas and geographies to merge.That is a little more involved work today,as all these companies are slogging to somehow survive the overall setback in Defense,Telecom and other major businesses.Here we need to see geographic profile of box T&M players and encourage them to consolidate for better scale.Likewise we need to consolidate T&M companies in the Power,Educationand Railways sectors.The interesting thing is the T&M companies see the opportunities in these businesses but dont have strength financially,or market support wise.Sector consolidation will help immensely.Some of them will get a rerating in the stock market where they are listed few years back and languishing now!

I definitely think the industry has to write their new course off the inflexion point.It cant just depend upon a residual market of portables.That area is highly commoditised and cant support so many Global and scattered Indian Companies.T&M always works on the 1X10 principle (Instruments should be 10 times more precise than the target). I am sure we will rise to the occasion as the opportunity is now! 

T&M in India: FY 13 drivers point to Growth of sustaining nature!

T&M industry in India is poised to grow very well if it is able to seize large projects opportunities in the telecom and defense sectors.In both these sectors sizable deals up to 200M$ will get finalised in FY13.The important thing to factor
is which of the major companies have been working on solutions architecting and application profiling of tests.All the projects have lot of systemic value and the
technology solution capability,and ability to articulate them to tech user will be
important.Locally created solutions will obviously be preferred although the core
testers may be procured from international sources.

Many big telecom operators are looking towards the NEM vendors from international
sources for their TCO,RoI,CEM and QoS and SLA related commitments to their clients
or their CFOs.That is where the smart T&M companies can act and provide a value-add link to their customers.We will discuss how some of the techno-economic impacts can
be made by the test companies.Watch this space!

T&M Industry in India: Acquisition and Consolidation,FDI

In this blog concerning the growth through Consolidation of T&M industry in India,we will talk of couple of T&M Services companies which need to be looked at,from the point of view of strengthening the financials and improving the service offering of these.First to come in mind are good number of small operators who give out on rent the T&M instruments widely used in maintenance of physical layers of the telecom.Instruments in use are the Sitemaster and OTDR and the RF monitors of different kind.There is no recognised MNC brand operating in the country,except Livingston.Some others like Electrorent,TestEquity etc tried entering the market but failed.A few Indian mercantile companies are in this business ,mainly Mumbai and Kolkata based traders.So the first level of T&M Consolidation can be done by a Global Lease Rental and Asset Management and Reconstruction company to achieve at least a revenue of say 26-28 Cr pureplay services in this segment.Because of the depressed market conditions,there is a case of wise cherry picking here.

Another recommendation will be in the area of such companies in the Power sector maintenance.Again there has been severe depression with mainstream power companies and they are wanting to shed or hiveoff the testing and maintenance business to separate specialist organisations.Entrepreneurs can explore such opportunities at BGR,JSPL and some smart power operators companies.Here the consolidation of T&M companies can lead to creation of a platform which can lead to real big operations.They will have scope of big expansion when UMPP,Nuclear and Coal based power projects are put into stream.

The aerospace and Defense related maintenance companies can be consolidated in a more innovative way.There are good large assets are available of many MROs of aviation (Commercial Aviation)in several cities where there is MROs headquarters.So these can be consolidated to achieve better profiability and scaling too.


We will keep this piece of Acquisition and consolidation going in couple of more blog posts.Keep watching!

T&M Industry in India: Acquisition,Consolidation,FDI and other tidbits!

T&M industry in India has been very interesting phases over the last 40 years or so.It has been having various steps of Concept Development,Channel Acquisition and Distribution metamorphosis and channel disruptions etc.Mainly there has not been much of the indigeneous industry right since the 70s.Only a clutch of the local industries has been at the helm of affairs, names flashing then were Aplab and Motwane et al.So, the onus had been on the MNCs to develop local market.And the task,risk and cost of having direct presence being very high,the idea had been to develop the local associates (from an Agent,Sales Rep,to Distributor)to be a virtual Principal company.

A combination of renowned Principal, and very professional distributor was real lethal those days.Basically the two T&M companies ruled 80percent of organised selling and supporting the India Business.In the late 80s the situation started changing as India had by then a little liberalised and exposed to many modern projects in Aerospace,Defense and Telecom sectors of the Country.More Western and Japanese companies in T&M space started courting Indian market then.New alliances,new business models and local talent hunt dovetailed US returned Professionals.After 1991 the scene was fairly stable in terms of reforms and India started liberalisation approach unidirectionally!

FY2K and post 9/11 the tech world was so much changed and love affair between the Bangalore and the valley reaching crescendo, practically everybody wanted an India backoffice presence.New companies started registering and all T&M companies operating through local subsidiaries and each was pinching the channel created by the other.Most companies were headed by people from HP/Agilent & Acterna/JDSU. Today when we talk of T&M talent acquisition,we seem pretty full and the way companies now can move on is Consolidation, Consolidation and Consolidation.

In next few blogs we will discuss possible realignments,acquisitions and how to do it more inexpensively.And more cash-accretively, as the finance types say!

T&M Acquisitions in India can be motivated by Offset Policies!

Since 2006 the central cabinet had given a kind of green light to various user ministries to pursue the so called "Offset Policy" in major procurements the user departments are making.The current proposal stands at the !00 M$ or 200 M$ thresholds for these offsets to get triggered.This actually leads to offsetting of 30% of procurements through local companies,or locally created companies by MNCs for offsetting the total contract outgo.In bigger cases the threshold can be as much as 50% contract value.

To coordinate in a systematic manner across different user ministries/sectors a National Offset Authority is chaired at Cabinet Secretary Level.Today mainly the Defence Ministry are seizing the opportunity because of large scale/Big ticket projects procurement.Total offset pie available to cater to Defense itself is estimated to be worth around Rs 20000Cr!

This is where opportunity,a creative one can come for T&M companies.As the local procurement will consist of 3rdparty hardware,3rd party software,services and program management,independent Engineering Services and lot of jigs,fixtures,tools and testers,the whole gamut can be managed by T&M Services banner easily.This will require astute sales and business planning,local companies creation and motivating small,niche hitech companies to come to India and get plugged in with this huge,sustainable and game changing one for T&M industry!

Designing a business model for different high technology sectors will be very involved process.Depending upon resources of information,taxonomy,databases,bills of materials and global/local pricing on products and services these models will have to be tweaked.Many of the processes of procurement are getting eDriven and therefore they can be very cost efficient and suitable for Governance Platform too.T&M industry more particularly T&M services will benefit.M&A of various main technology companies and therefore attendant T&M companies will benefit by this opportunity.We need to see how it plays out and how we respond in an enterprising manner!

T&M Industry in India:FY13 Drivers for the Customers

The FY 13 has started with some mixed feelings and hangup of policy paralysis and balance sheet constraints for the Government.The overhang of policy retrospective for tax calculation on Capital Gains is there,with deficit on balance of payment widening.Rupee is flirting around 51 to a Dollar.T&M demands naturally is not auguring well because all the major purchases need to be imported.In such a scenario the different sectors using T&M are stacked up as follows:

Defense: The controversy and major scandals reported in the press recently will have its contingent effect on T&M purchases in the three wings of services.SMT/STE products and tools in EME TG trials will be slightly delayed but tendered purchases will happen as in the pipeline.Likewise the field purchases through tenders of DGS&D will happen as planned.

Telecom: The major driver in the operator sement will be the LTE.The TDD version is automatically decided per the band alloted and the choice for adopting International standards.Many vendors have done the PoC with major operators and initial orders for LTE infrastructure are trickling in.So the deployment T&M either directly,or through lease rental will happen.Even though fizz may not be there! Likewise major fiberisation project will go through.

Research & Development/Education sector: This will show a big boost with some major T&M purchases planned and under discussion at DGS&D and local Demand Officers level.The good part is that the demand will be higher than last year,more evenly distributed and geographically balanced.Perhaps North India overall will pip to the post when it comes at the year end.South and West will not be brighter this year!

So, Let us welcome the year fingers crossed.Hope is high but a couple of Government announcement positively could boost sentiments.