Being in being a manufacturer of relays and annunciators, Minilec works with OEMs like Schneider, ABB, Siemens, etc. While the company has been supplying to leading public sector as well as private companies mostly through the OEMs, Minilec has been the approved brand, which is specified by these companies. For more than 15-20 years, the company has been exporting its products to countries like Malaysia, Indonesia, Kuwait, Oman, UAE, etc mostly to the power sector companies.
In this interview with Rakesh Rao, Amit Ghaisas, Managing Director, Minilec Group, highlights on demand drivers of the relays market, effect of COVID 19 on the industry, importance of quality and timely delivery for success, and the company’s new growth plans.
How has been the demand for your products in 2019 and 2020, so far?
Well, 2019 was a really good year with a double-digit growth rate. Like all other companies, 2020 has not really been good for us as COVID 19 situation affected growth during the last few months (April, May and June 2020). However, people to whom we are speaking to are hopeful of industry coming back to steam by end of September. Sometime in September, we expect the same level of monthly business as we had last year. We can't really expect a very high growth in 2020 because we have lost a few months, but we expect situation to improve very soon and second half of the year to be much better.
As impact of COVID 19 wanes out, what factors would contribute to increase demand for your product?
We supply control and monitoring relays and even annunciators primarily to infrastructure projects. India and other countries - where we export - are mainly developing economies and scope of infrastructure developments is very high, thus offering huge potential for our business.
In India, projects in sectors like chemical & fertilizer, steel, power (which is currently still in a very high growth phase), etc, have been the biggest contributor to our growth and will still remain to be so for the foreseeable future.
What is driving the relays market in India?
With respective to investments, the government has been focusing on infrastructure areas, like power, renewables (solar energy), etc which has laid down fairly good foundation for the market growth of electrical relays (specifically control and monitoring relays).
As and when COVID 19 situation improves, these infrastructure requirements are not going to be left behind and would generate high demand for our products. Even in June, for example, we had a very good response from the market. After the lockdown was ended, we started our production by the end of May, and we had a pretty good response from the market. While it was more of a pent-up demand in June, we saw a similar trend in July as well. As market opens up more and infrastructure projects gather steam, we expect robust demand for relays.
What are the key challenges before the industry?
The government process is cumbersome pretty slow. Issuing tenders, getting approvals for tenders, getting certification for products, etc are fairly long processes. One of the biggest problems is the uncertainty over the time taken for infrastructure projects to take off. The other issue, of course, is the cash flow compounded by the COVID 19 today. If large projects get held up, it creates a cash flow issue for large OEMs and then SMEs end up facing the brunt of the whole situation.
Most of the OEMs that take up large infrastructure projects (at least in the electrical area) of the government are MNCs. There are hardly any Indian companies who take up these projects. So, all SMEs and large Indian companies in the segment end up supplying their products to these international MNC OEMs. This is one of the major hurdles in fulfilling the goals of Aatmanirbhar Bharat initiative that the government is currently pushing for.
If Indian companies can take up large projects then we could actually have a larger Indian supply chain providing their products to infrastructure projects.
Has the government’s economic package - announced in the midst of COVID 19 pandemic - helped the industry?
The government decision of not to go for global tenders for project worth less than Rs 200 crore (though yet to be materialised) will be certainly helpful. The government has offered monetary support mainly in the form of loans to SMEs. Though many SMEs are eligible for the same have not really gone and taken it up because as long as there is a slumped in demand, these loans - if taken by SMEs - will actually add to their burden. In the absence of demand, just the help of a loan to pay off pending liabilities would not be enough.
If some help is given to larger companies, OEMs or project companies to restart projects from where they had left before COVID, then it will probably give a push to the whole economic cycle and this could be a bigger help than just monetary help. Banks are flush with funds, but they do not have the right kind of borrowers.
Do you see need for automation will go up in coming months due to COVID 19?
Automation would be needed to follow the government guidelines (like maintaining social distance, etc) as well as due to lack of availability of the migrant population for employment. It is not just skilled or unskilled workers working on the shop floor have migrated, but also people from the middle level have gone back.
The automation requirement is certainly going to go up. Even small and mid-size companies will have to ramp up their automation level for manufacturing as well as non-manufacturing processes.
This COVID situation, in all probability, is going to create a decentralised manufacturing setup. So, automation cannot be avoided on many fronts now. Companies will have to opt for automation going forward, if they want to remain competitive globally.
Government has mandated PSUs to increase their sourcing from SMEs. Will such a move help SMEs?
In principle, yes. However, the concerns of PSU heads are other way around; they do not get qualified suppliers from India, specifically from SME sector, to deliver products that they want. If domestic companies start developing and manufacturing these products, PSUs will be more than willing to buy from them. Of course, quality should be the focus for the manufacturers.
Since inception, focus on quality has been the key ingredient of success for Minilec. We follow stringent quality standards with less than 0.001% failure today. Our service is extremely good. This - the complete knowhow of the situation and forthright service support - has been one of our strengthens. If we (or any other company) keep on doing good work then the PSUs would be more than happy to buy because buying from international companies is not just expensive upfront, but also expensive in the long run (due to service costs).
Are quality and timely deliveries the key issues before Indian manufacturers when they want to become supplier to PSUs?
Yes. The big issue is there are not many manufacturers who are making quality small electronic component or small level products that the PSUs are looking for. Those who are into it, quality is the primary issue because a lot of domestic companies do not have all the quality certifications.
Along with quality, timely delivery is a problem. Many companies promise the world to their customers, but they do not deliver because they are not really capable of handling that kind of work. This is an area where as an industry we need to tighten our belts.
If companies want to supply products that they are not currently manufacturing (but are ready to develop), then they should be forthright and inform the same to the customers, including the PSU. PSUs today are open to support companies who are ready to develop import-substitute products and manufacture in India.
PSUs and international companies are willing to support provided you are forthright and are judicious about what you promise.
What kind of opportunities you are looking to tap for growth?
While Minilec has been selling transducers - one of the new product lines - for the past few years, we are actually giving a more aggressive push to this product line from this year. We have introduced a few multi-function transducers this year.
Post COVID, new lines of products and technologies (like renewable energy, electric vehicles, etc) will drive the industry. We are working on products to cater to some of these emerging needs like electrical vehicle charging, solar-based products, etc. Solar products (like solar agriculture pumps) need to be controlled from the electrical side. We have developed products to control these specific activities.
Small and medium enterprises (SMEs) in electronics industry today are bound from both sides (supply as well as demand) by non-Indian entities. Our supply chain is dominated by Eastern countries (especially China) from where we source semiconductors, components, etc. Our customers, OEM project builders, are primarily Western companies. While we realise that, at least for now, we do not have the strength to become a really big OEM, we can very well increase our share of the components that go into the control panel. This will be our contribution to Aatmanirbhar Bharat initiative.
So, we have come up with a few enhancements to our lines. Currently, we are working in control monitoring relays and annunciators and are thinking of expanding the relay side.
In addition, we are looking at a couple of new product lines which we expect to launch in the next four to six months. So we are increasing our overall scope within a control panel for a large project.
Other area of focus is exports. Currently, we are selling to around 16 countries, of which 7-8 take up most of our export volume and our customers are primarily power PSUs. Now we are looking at product lines that we have been supplying to customers from non-power segments (like chemicals, water, etc) in India. We intend to expand our exports by tapping customers from non-power sectors in other countries by leveraging on our India experience.
- With inputs from Pushkar Oak
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