Indian Transformer Industry: Capitalizing on changing current

The Rs55bn Indian transformer industry will benefit from the strong demand expected from reforms in the power sector. We expect the industry to witness a CAGR of 30% plus in value terms over the next five years against approximately 17% CAGR in the past three years. Improved realizations and higher volumes will largely drive this growth. The government intends to add massive capacity to the generation side and create a National Grid for distribution of this power, both of which should boost demand for transformers. The funding issues for the same have been taken care by the World Bank (WB) and Asian Development Bank (ADB).

Annual demand of about 122,679MVA expected for the next five years
The country’s installed base for transformers stands at 759,240MVA per annum (till 2004 – Source: CMIE). There are about 20 players in the organized segment with nine of them controlling about 60% of it. Installed annual capacity of these nine players will stand at approximately 105,154MVA by end of FY07. Demand for the equipment is expected to remain robus t with the XIth Five Year Plan targeting an addition of about 68,000MW to the existing generating capacity. Assuming the historical achievement rate of 60%, we expect 61,050MW of additional generating capacity coming up over the next five years.

Coupled with this, demand will also stem from the replacement market where transformers installed 25-30 years ago will have exceeded the expected life span. In addition, exports to countries where power reforms are underway i.e. Africa and Middle East provide growth opportunity. Also, huge industrial capex lined up in power intensive industries i.e. oil and gas, metals and cement act as a booster. Based on the above demand factors, we expect a strong annual demand of 122,679MVA for the next five years.
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