Capital Goods: Sector Update | 21 October 2016

India Electricals

Please refer our detailed

report dated June 2016

Energy Efficiency Services Limited (EESL) order tracker

Lighting continues to be the dominant category

EESL orders at INR10.5b in 1HFY17; target to reach INR36b in FY17 and

INR63b in FY18:

EESL orders stood at INR10.5b in 1HFY17, with the lighting

segment contributing 70% of orders placed. Within lighting, LED lamps (47% of total

orders) was the largest category, followed by LED tube lights (13%) and streetlights

(10%). EESL started procurement of fans and air conditioners in FY16, which formed

miniscule proportion of overall order awards. However, we note that the share of

fans grew to INR0.76b (7% of total awards; INR96m in FY16) and of air conditioners

to INR87m in 1HFY17. For FY17, EESL has a target to procure 150m LED lamps (90m

in FY16), 2m fans, 2m streetlights, ~0.6m pumps and 50m tube lights with capex of

INR36b. This is expected to rise to INR63b in FY18, with fans, air conditioners and

pumps procurement also picking up in a meaningful manner.

LED lights – largest category in procurement (70% share):

Lamps at INR5b

(47% share v/s 37% in FY16) remains the largest procured category. Phillips has

retained its market leadership (38% share vs. 13% in FY16), primarily due to a major

tender (50m units) where it is supplying 9W LED bulbs for INR38/unit. We highlight

that no other company was willing to participate at this price and thus the entire

contract was awarded to the L1 bidder. Tube lights (20W LED) at INR1.4b (13%

share) saw procurement of 10m units at a price of INR140/unit (it sells these to end-

customers at INR200/unit). This compares favorably to retail price of INR500-

600/unit. Surya Roshni (20% share) and HQ Lamps (20% share) were the market

leaders in this category. Street lights (10% share) saw ordering worth INR1b, with

BVG India grabbing a 74% share (INR78m) for the supply of 165,000 LED streetlights

to Goa.

Fans and air conditioners account for only 8% of procurement at INR851m:

EESL has sourced 1m BEE 5-star-rated fans for INR78m (INR770/unit) in 1HFY17 vs.

0.1m fans sourced at INR960/unit in 4QFY16. These would be sold to consumers at

~INR950-1,000/unit v/s retail price of INR1,600-1,800/unit. EESL aims to procure 2m

fans in FY17. For 5-star-rated BEE air conditioners, INR87m worth of procurement

has been done, primarily for central government buildings.

Fans, air conditioners and pumps pricing unlikely to go the LED way:

W

hile

EESL bulk tendering would lead to lower prices for categories such as fans, air

conditioners and agricultural pumps (on higher volumes procured and savings on

channel margins, typically at 20-30% of sales), the price decline is unlikely to be of

the same magnitude as LEDs, in our view. This is because: a) technology in these

product categories is mature and cost of production is unlikely to decline

significantly hereon (unlike LEDs) and b) warranty (4-5 years) and servicing

requirements (8-10 years of life) will ensure participation from only serious players

and weed out non-serious competition. EESL has already implemented minimum

Ankur Sharma

(Ankur.VSharma@MotilalOswal.com); +91 22 3982 5449

Amit Shah

(Amit.Shah@MotilalOswal.com); +91 22 3029 5126

Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

8 August 2016

1

Investors are advised to refer through important disclosures made at the last page of the Research Report.

Capital Goods

service center requirements in recent tenders to ensure competition is restricted to

serious players.

EESL will negatively impact prices and be margin dilutive for light electrical

companies

Within our coverage – Havells, Voltas and Crompton Greaves Consumer Electricals

(CGCEL) – the exposure to EESL is limited to ~0-7% of overall sales. However, this

share would rise as EESL increases procurement of fans, tube lights, air conditioners

and agricultural pumps. Our interactions with management indicate that players

would be judicious in bidding for EESL tenders and try to balance volumes with

profitability. However, as EESL procurement volumes rise, these companies would

be tempted to increase their share, which would negatively impact margins over the

medium term. Havells India is likely to be least impacted (16% of sales from fans and

14% from lighting) as it would like to focus on sales via its traditional channels

(distributors/retailers) and use Promptec to participate in streetlight tenders from

EESL. CGCEL could be most affected as EESL is now shifting focus to fans, agricultural

pumps and tube lights in FY17/18; these categories account for 94% of sales for

CGCEL. However, we do note that CGCEL is a small player in the agricultural pumps

market. Voltas could be impacted from FY18/19 as EESL’s procurement of air

conditioners picks up.

Valuation and view:

We maintain our

Neutral

rating on Havells (TP: INR420; 33x

FY18e EPS) and Voltas (TP: INR360). We retain our target price of INR190 (32x FY18e

EPS) and our

Buy

rating

on

Crompton Greaves Consumer Electricals.

21 October 2016

2

Capital Goods

EESL order award analysis for 1HFY17

Lighting remains biggest category in procurement (70% share)



EESL awarded orders worth INR10.5b in 1HFY17 (v/s INR22.5b in FY16) for LED

streetlights, LED lamps, tube lights, fans, air conditioners and miscellaneous

equipment/services. LED lamps (47% of total orders) was the largest category,

followed by tube lights (13%) and streetlights (10%). EESL began procurement of

fans and air conditioners in FY16, which formed miniscule proportion of overall

order awards then. However, we note that the share of fans has grown to

INR0.76b (7% of total awards; INR96m in FY16) and of air conditioners to

INR87m in 1HFY17.

Exhibit 1: Market share by product category in EESL tenders in 1HFY17 (INR10.5b)

Fans, 7%

Others, 22%

Streetlghts, 10%

Tubelights, 13%

Aircon, 1%

Lamps, 47%

Market share by product category in EESL tenders in FY16 (INR23.5b)

Others, 36%

Streetlights, 26%

Airconditioner, 0%

Fans, 0%

Lamps, 37%

Source: Company, MOSL

Lighting – LED lamps, streetlights and tube lights





LED lamps (9W) at INR5b (INR8.3b in FY16) was the largest category in 1HFY17.

Phillips was the market leader (38% share), followed by Compact Lamps (20%),

NTL Electronics (17%), Crompton Greaves (10%) and Wipro (7%).

The top five players accounted for 92% of the market in 1HFY17. Phillips

managed to maintain its leadership position due to a tender for 50m units of 9W

LED bulbs (INR1.9b at INR38/unit) that it won in Aug-16. This is the lowest price

ever tendered for 9W LED lamps, and since no other company was willing to

match this price, the entire order was awarded to Phillips.

21 October 2016

3

Capital Goods

Exhibit 2: LED lamps market share in EESL (INR5b) in 1HFY17

Surya Roshni, 2%

Wipro, 7%

HQ Lamps, 4%

Crompton

Greaves, 10%

Others, 1%

Phillips, 38%

Compact Lamps,

20%

NTL Electronics

India Ltd., 17%

Source: Company, MOSL

Exhibit 3: LED lamps market share in EESL (INR8.3b) in FY16

Fiem Industries,

6%

Wipro, 6%

National Small

Electric, 3%

HPL Electric &

Power, 7%

Orient

Electicals, 7%

Compact

Lamps, 8%

Crompton

Greaves, 11%

Source: Company, MOSL



Eveready,

6%

HQ Lamps, 12%

Others,

2%

Phillips, 13%

Osram, 8%

Surya Roshni, 11%

According to media reports, EESL procured and distributed ~90m LED lamps in

FY16, which implies that average procurement price in that year was

INR90/unit,

down from the initial INR300/unit. As we highlight below,

procurement price for EESL tenders in Aug-16 had come down to INR38/piece in

case of the order awarded to Phillips (retail price at INR350).

Exhibit 4: LED price movement over past two years in EESL and retail market

Period

Jan-14

Sep-14

Nov-14

Feb-15

Mar-15

Jun-15

Mar-16

Aug-16

FY17e

LED bulbs offer in

tender (m)

0.8

2

3

8

8

50

-

50

200

EESL price per

bulb

310

204

149

104

82

77

55

38

44

Retail

prices

599

400

300

215

Source: EESL, MOSL Research



We do highlight that competitive intensity has reduced from earlier years since

there is a domestic manufacturing/assembly clause introduced by EESL to

4

21 October 2016

Capital Goods



ensure that complete imports from China are not supplied by manufacturers

and that the products can be replaced/serviced during the three-year warranty

period. To illustrate, Syska cannot participate in EESL tenders since its products

are completely imported from China.

Our interactions with management indicate that EESL’s aim is to converge retail

prices of LED (9W) with CFL (18/20W). Retail price is INR200-250/unit for LED

and INR80-120/unit for CFL, which implies that there is still some time to go

before their retail prices converge, and EESL is likely to remain in the market by

then.

Exhibit 5: Retail prices of 9W LED bulbs continue to be more than double of EESL prices

Name of company

Wipro

Syska

Phillip

Moser Baer

Crompton Greaves

Price/unit (INR)

200

214

218

200

202

Source: Flipkart, MOSL

Exhibit 6: Retail price of 20W LED tube lights much higher than INR140 procured by EESL

Name of company

eco Element

Syska

Noble Spira

Crompton Greaves

Murphy

Price/unit (INR)

665

650

535

510

525

Source: Flipkart, MOSL

Streetlights – competitive intensity lower than lamps





As seen in the case of LED lamps, LED streetlight prices have dropped from

INR137/W in Jan-14 to INR85/W currently. However, this price fall is lower than

that in case of LEDs and is reflective of lower competitive intensity in this

segment – the top 5 players accounted for ~94% of the market in 1HFY17 (65%

in FY16).

Most lighting industry players participated in the bids for streetlights. We

highlight that Havells had 5% share in 1HFY17 (13% share in streetlights orders

in FY16) but did not participate in lamp tenders – its participation in streetlights

is via Promptec (acquired last year), which operates primarily in the LED

streetlights category.

21 October 2016

5

Capital Goods

Exhibit 7: EESL streetlight orders in 1HFY17

Florida

Electrical, 8%

Havells, 5%

MIC ELECTRONICS,

3%

Orient Electric, 7%

Eon Electric

Limited, 2%

HPL Electric &

Power Ltd, 1%

Source: EESL



BVG India Pvt Ltd,

74%

BVG India, a Pune-based unlisted player, won order for 165,000 LED streetlights

in Goa for USD12m (INR775m); it had the highest share in orders at 74% in

1HFY17. Other key players winning orders were Florida Electrical and Orient

Electrical.

Exhibit 8: Market share in streetlights with EESL in FY16 (INR6b)

Surya Roshni, 4%

Crompton

Greaves, 6%

National Small

Electric, 8%

Bajaj Electricals,

9%

HPL Electric &

Power Ltd, 10%

EON Electric, 15%

Others, 6%

Phillips, 4%

Fiem Industries,

13%

Havells Limited,

13%

MIC Electronics,

13%

Source: MOSL, EESL

Tube lights – major focus area for EESL with target to procure 200m in FY17



EESL has started procurement for tube lights (20W LED) from Q1FY17, aiming to

procure 50m during the course of the year. It has been able to procure tube

lights at INR140/unit and sell those to customers at INR200/unit (incl. taxes and

other charges) v/s retail price of INR600/unit.

Exhibit 9: Retail price of 20W LED tube lights

Name of company

Eo Element

Syska

Noble Spira

Crompton Greaves

Murphy

Price/unit(INR)

665

650

535

510

525

Source: Flipkart, MOSL



EESL procured 10m tube lights for INR1.38b in 1HFY17. This started from

2QFY17 with the first tender awarded at INR140/tube light. Including taxes,

6

21 October 2016

Capital Goods

price to customers is INR220/unit v/s retail price of INR500-600/unit. The

distribution of tube lights is expected to start from October-16.

Exhibit 10: EESL market share in tube lights (20W LED)

13%

20%

Surya Roshini Ltd.

Compact Lamps Pvt Ltf

Crompton Greaves

19%

H.Q. Lamps

Phillips

Eveready

16%

20%

12%

Source: MOSL, EESL

Exhibit 11: EESL accounting for 28% of LED market in India in CY15/FY16

Description

LED lamps procured by EESL

Streetlights procured by EESL

Total

LED market size in India

% of total LED market

INR m

8,320

5,947

14,267

50,920

28%

Source: MOSL, EESL, ELCOMMA

Fans – 5-star-rated fans lead the way



EESL started procurement of BEE 5-star-rated fans in 4QFY16, which has further

picked up pace since 1QFY17. EESL has been able to procure fans at INR700-

955/unit from Usha International, which comes up to ~INR1,100-1,200/unit at

retail level for end-consumers. This compares very favorably with ~INR1,500-

1,700/unit price at which these fans are currently available at major online

websites.

Exhibit 12: Market share in EESL fan procurement in 1QFY17 (INR760m)

Orient Electric,

20%

Marc Enterprises,

30%

Crompton

Greaves, 23%

Surya Roshni, 28%

21 October 2016

7

Capital Goods

Exhibit 13: Retail price of 5-star-rated fans v/s EESL procurement price of INR1,000-1,100

Name of company

Orient Smart Saver 50

Crompton HS Plus 48

Havells ES 50

Bajaj Electricals 50 Isi

Activa Aspira 5 star

Usha 5 star Technix

Crompton BEE 5 star

Price/unit(INR)

1,659

2,009

1,915

1,599

1,029

1,837

2,356

Air conditioners – 5-star-rated air conditioners the preferred mode



EESL also initiated procurement of air conditioners on pilot basis in FY16, with

orders being won by Voltas, Hitachi and Carrier. Hitachi with one order worth

INR9.2m had 72% market share in FY16. EESL placed orders worth INR87m in

1HFY17, with Voltas winning a bulk of this (97% share for supply of 5-star-rated

air conditioners to the central government building in New Delhi).

Exhibit 14: EESL air conditioner orders at INR87m in 1HFY17

Others

3%

97%

Volas

Source: EESL, MOSL

Exhibit 15: Air conditioner market share in FY16 (INR12.8m)

Voltas, 9%

Carrier, 19%

Hitachi, 72%

Source: EESL, MOSL



In terms of pricing, Carrier has supplied 1.5-ton 5-star-rated air conditioners for

INR42,877 v/s retail price of INR45,000/unit, which is not materially different.

However, this was for the supply of only five units – as volumes of procurement

go up, prices would trend downward.

8

21 October 2016

Capital Goods

Pumps – aim to replace 21m inefficient agricultural pumps







EESL has recently started procurement of pumps, with the first tender being

awarded to M/S Aquasab Engineering for a contract value of INR1.38m. EESL

aims to replace 200m electric pumps with energy-efficient 5-star-rated pumps.

There are 21m electrified pumps in India, which are used for agriculture and

consume 92.33BUs energy every year (~18-20% of total electricity consumption

in India). At present, farmers get electricity either free or at very low cost (free

or INR1-1.5/unit) and thus are not interested in improving efficiency of pumps.

Average efficiency level of inefficient non-star-rated pumps is in the range of

25%-30%, while efficiency level of star-rated energy-efficient pump sets (5HP) is

40%-45%. The savings potential by mere replacement of inefficient pumps with

star-rated pumps is estimated at 20-25%.

21 October 2016

9

Capital Goods

Energy Efficiency Services Limited

An opportunity and a threat for light electricals industry



EESL is a government-owned company (jointly controlled by NTPC, PGCIL, PFC

and REC), which has taken the lead to reduce energy consumption by

introducing demand-side management (DSM) measures. This is primarily done

via replacement of inefficient appliances with star-rated energy-efficient ones.

Its initiatives span across:

a. LED lamps, streetlights, tube lights

b. BEE 5 star-rated fans

c. BEE 5 star-rated air conditioners

d. Energy-efficient agricultural pumps

DSM measures are part of the National Mission for Energy Efficiency

Enhancement(NMEEE) launched by the Ministry of Power with an aim to save

~INR585b, primarily via efficient electricity consumption by end-consumers. We

highlight below the targets set for replacement of lights, fans, air conditioners

and pumps by 2019/20.



Exhibit 16: Demand-side management measures

Description

770m LED bulbs and 35m streetlights

20m agricultural pumps

**160m fans and 1.8m air conditioners

Total

Benefit (INR b)

450

120

15

585

Source: MOP, MOSL, Company, **EESL targets 44m fans



To put this into perspective, annual market volumes for lamps (ICL plus CFL)

stand at 1,261m, while the government intends to replace all ICLs (770m annual

sales) with LEDs. According to EESL, it has already distributed ~150m LEDs and

aims to complete distribution of 770m LEDs over the next three years. Of its

target to distribute 35m streetlights, 1.14m is already distributed. It has recently

started tendering for LED tube lights, fans and air conditioners.

Exhibit 17: EESL targeted volumes vs. achievement till Aug-16

Description

LED lamps

LED streetlights

Pumps

Fans

Air conditioners

Target (m)

770

35

21

160

1.8

Met (m)

149

1.1

NA

NA

NA

Exhibit 18: Annual volumes of key product categories in India

Description

Lamps – ICL, CFL,(ex LED)

Tube lights

Fans

Agricultural pumps**

Air Conditioners

Volumes (m)

1,261

245

50

21

4

Source: MOSL, Industry, ** for pumps this is the installed base of electrical agri pumps

21 October 2016

10

Capital Goods





Fans could be most impacted; pumps to follow, in our view.

We believe the

impact on air conditioners would be the least, as even if EESL meets its target of

distributing 1.8m air conditioners over three years, this would be ~10-12% of

the annual market and may not cause a major disruption in the market.

However, in the case of fans where the target is to distribute 44m units, annual

procurement by EESL would equal to 15m units or ~30% of the annual market

size of fans in India and could cause a fall in the retail prices. For pumps,

primarily the existing inefficient pumps are targeted, which could drive

replacement demand. However, since aesthetics and features would not be a

differentiator, this would also negatively impact pumps pricing.

EESL has started procurement of LED lamps from Jan-14, when procurement

price stood at INR310/unit and retail price at INR599/unit. In its latest tender in

Aug-2016, procurement price had dropped to INR38, while retail price had

dropped to INR200-350. Similarly, in case of LED streetlights, the price has

dropped from INR137/W to INR85/W.

Exhibit 19: LED lamps price movement over past two years in EESL and retail market

Period

Jan-14

Sep-14

Nov-14

Feb-15

Mar-15

Jun-15

Mar-16

Aug-16

LED bulbs offer in

tender (m)

0.8

2

3

8

8

50

-

50

EESL price per

bulb

310

204

149

104

82

77

55

38

Retail

prices

599

400

300

215

200

Source: EESL, MOSL Research

EESL – an opportunity as it accelerates replacement demand and provides

new distribution channel to light electricals players



Initiatives taken by EESL to replace inefficient products (lamps, streetlights, fans,

air conditioners and pumps) would lead to higher market growth as EESL

facilitates an additional channel to reach end consumers. More importantly,

it is

tapping replacement demand rather than catering to new demand for these

products, thus accelerating growth in these segments.

The government’s drive

to replace ICLs with LEDs has led to explosive growth in LEDs, with sales growing

from INR8.5b in CY11 to INR51b in CY15. On the flip side, since LED lamps last

longer (6-7 years) than traditional ICLs (~1 year), the replacement cycle would

get prolonged.

21 October 2016

11

Capital Goods

Exhibit 20: Growth in lighting segment in CY14-16 driven by LEDs

Lighting market(INRm)

20%

16%

15%

12%

9%

CY08

CY09

CY10

CY11

CY12

CY13

CY14

CY15

CY16E

CY17E

5%

21%

YoY(%)

24%

15%

9%

18%

CY18E

Source: ELCOMMA, MOSL

Exhibit 21: Sharp jump in LED sales, driven by government initiatives under EESL

LED sales(INR m)

91,467

50,920

33,950

5,000

CY10

8,500

CY11

12,500

18,250

CY12

CY13

CY14

CY15

CY16E

Source:ELCOMMA, MOSL



It helps companies fill in spare capacity and achieve economies of scale in

production. This helps recover fixed costs over a larger number of units and

reduce costs which are passed on to EESL. More importantly, our discussion

with companies indicates that participating companies would provide their no-

frills model in EESL tenders while keeping premium models and features to be

sold through the traditional distributor/retailer network.

EESL – threat of lower retail prices due to increased procurement



The street is worried about the impact of lower prices on margins as EESL starts

bulk procurement of fans, air conditioners and tube lights. There are fears that a

similar price fall may be seen for these product categories, as has been

witnessed in the case of LED lamps and streetlights. We present below our

views:

a.

LED lamps:

The price fall in case of LED lamps has been steep, with prices

down to INR38/unit in August, ‘16 from INR300/unit as of Jan-14. However,

this has come as a result of

a)

higher procurement volumes, with EESL

procuring ~90m lamps in FY16 itself and planning to procure another 150m

in FY17; and

b)

a significant fall in prices of LEDs globally. We highlight that

Bajaj in its recent analyst concall mentioned that it was becoming very

selective in bids with EESL – pricing had come off substantially and it was

not profitable for them to take orders any longer. This is in contrast to FY16,

when ~60-70% of lighting sales were from EESL orders. In our view, LED

21 October 2016

12

Capital Goods

prices seem to have bottomed out and will likely remain at same levels or

increase as players realize that it is not profitable to supply at current prices.

b.

BEE 5 star-rated fans:

As per the EESL website, it has been able to procure

fans at a price of INR780-955/unit from Usha International, which would

come to ~INR1,100-1,200/unit at the retail level for end consumers

(inclusive of taxes and duties). This compares to ~INR1,500-1,700/unit price

at which these fans are currently available at major online websites.

However, in case of EESL tenders, manufacturers are able to: a) save on

distributor and retailer margins (~15-20% of sales) and b) provide in bulk

and thus enjoy economies of scale in manufacturing. Since Q1FY17, EESL has

stepped up its procurement of fans, with a target to distribute 44m 5 star-

rated fans till FY19. Assuming EESL is successful in this, it would need to

distribute ~15m fans each year, which would equal to 30% of the market.

Moreover, as volumes increase, so would the likely downward pressure on

prices. In our view, given the aggressive targets for fans, this category could

be the most impacted by EESL’s procurement.

c. BEE 5 star-rated air conditioners:

We believe the impact on air conditioners

would be the least, as even if EESL meets its target of distributing 1.8m air

conditioners over three years (FY17-19), this would be ~10-12% of the

annual market and thus may not cause a major disruption in the market.

More importantly, air conditioners need regular servicing since they have an

average life of 8-10 years. This, in turn, would help weed out non-serious

players in the bidding process. Our discussion with companies indicates that

they would offer no-frills model to EESL, which would be different from the

ones sold via regular trade and thus help avoid cannibalization of sales.

EESL

has already put in place minimum service center requirements to weed

out non serious players from the fray.

d. BEE 5 star-rated pumps:

There are 21m electrified pumps in India, which are

used for agriculture and consume 92BUs of energy every year (~18-20% of

electricity consumption of India). EESL targets to replace these inefficient

pumps with 5 star-rated pumps, which are 30% more efficient. EESL

provides a robust distribution channel for light electricals companies to

distribute products across villages. In case of pumps, replacement demand

could see a boost as the targeted market is primarily existing inefficient

pumps. However, since aesthetics and features would not be a

differentiator, this would negatively impact pumps pricing.

21 October 2016

13

Capital Goods

Takeaways from meeting with Energy Efficiency Services Limited

We recently met with the senior management team at Energy Efficiency Services

Limited to understand the distribution plans over next three years. Key highlights

from our meeting:

Ambitious targets across lamps, fans, pumps and streetlights



EESL has a target to distribute

770m LED lamps, 35m streetlights, 44m fans,

1.8m air conditioners and 21m pumps

over the next 3 years ending FY19. EESL

works under the deemed savings model where the savings is shared with the

discoms and Urban Local Bodies



Focus is on a)Retail - LED lamps, Tube lights, Fans, Super-efficient A/C’s,

b)

Institutional

- Pumps, Streetlights, Building Efficiency



Procure

the products via e procurement

and have distribution agencies set up

kiosks for selling to customer. The distribution agency is paid on the basis of

each unit sold. An awareness agency is also appointed to create awareness of

the campaign



Building in minimum service center requirement for vendors in case of tenders

for fans, AC's to ensure product gets serviced post warranty; will reduce

competition

Exhibit 22: EESL investment plans over next 5 years

Description

FY17

FY18

FY19

FY20

FY21

Total

INR b

36

63

90

119

157

465

Source: EESL, MOSL

Exhibit 23: EESL investment plans by product category

Capex/investment by product category

Residential - Lamps, Tube lights Fans, Air conditioners

Streetlights

Pumps

Total

170

100

220

465

Source: EESL, MOSL

LED lamps – aim to bring parity between CFL (18W) and LED (9W) pricing



150m bulbs distributed till date with 90m in FY16 and target is to do 150m in

FY17. Another 100m lamps to be sold via the traditional channel



Aim is to converge retail price of LED (9W) with CFL(18W). Retail price of LED is

INR200-350/unit while a CFL retails at INR100-120/unit. Will step out of the

market once prices converge



Have a domestic assembly clause so imports from China cannot be given by

vendors - Syska which completely imports has never participated in the EESL

tender

21 October 2016

14

Capital Goods







The LED lamp programme is on in 17 states and prices are down by 85% to

INR55/unit. 87% of bulbs are bought on upfront payment while balance is

bought on EMI basis where EESL appoints collection agents

2-10 lamps are given per household, EESL works on a cost plus model where it e-

procures the bulbs, adds taxes, awareness costs, distribution costs and ROE, 2.5

year warranty is provided on the bulbs

Recent tender for 500m lamps has seen the lowest price of INR38/unit by

Phillips as L1 in this bid. However, no other manufacturer had been willing to

match this price and Phillips has got the order for the 500m units.

Tube lights – increased focus from Q117 onwards



Focusing on LED tube lights post LED lamps; procured tube lights for

INR180/unit. Will sell to

consumer for INR230/unit vs. the INR600/unit in the

retail market



Target is to sell 50m tube lights in FY17 – we highlight that the CY15 sales of

FTL’s in India stood at 245m

Streetlights – slow off take initially but now gathering pace



Under UJALA, target to replace 35m streetlight and 9b units of annual power

consumption can be saved. Already done 1.2m across 153ULB's across the

country



No upfront cost for the ULB; EESL takes care of installation, commissioning and

maintenance. It has a back to back contract with the manufacturer for the same

for 7 years



** Savings is calculated upfront for the no. of lights being replaced; smart app to

monitor street lights usage and also to switch them on/off from the mobile

Pumps – targeted savings of INR200b annually with replacement of 21m pumps



BEE 5 star rated pumps are given free to the farmer and the savings for the

discoms(30% more efficient) is shared with EESL



Target is to procure and distribute 1.26m pumps over 2 years for

INR57b(annual market for pumps is 3m) and eventually replace 21m electrified

pumps in the country which are inefficient



Replacement of 21m electrified pumps would save 173b unit of power and

INR200b of state subsidy which is given to farmers (30% of INR640b subsidy

given each year)



Implementation is difficult but EESL doing 3 things: a)Tie up local electrician to

promote 5 star rated pumps, b) Free maintenance for 5 years vs. current

INR2000-3000/year so the farmer saves INR15000, c)Smart app to control the

pump and EESL can also monitor usage

Fans – EESL to step up procurement in FY17; procurement price down to

INR780/unit and retail at INR1000/unit



Recently procured 1m 5 star rated fans for INR780/unit which would retail at

INR1,000/unit vs. INR1800/unit in the channel



Target is to procure 2m fans in FY17 and eventually procure 44m fans till FY19

21 October 2016

15

Capital Goods





Engage with the industry to procure 5 star rated fans which are not sold much

currently; eventually once acceptance from the consumers, have mandatory BEE

star rating for fans as currently rating is voluntary.

Not looking at BLDC fans - were able to procure these for INR1800/unit and final

price to consumer would be INR2300/unit vs. 5 star rated fan which is at

INR1000/unit; given only a 15W differential, going with 5 star rated fans

Air Conditioners – EESL to start procurement from FY18 onwards



Pickup

in A/C procurement only from FY18 onwards

- would not want to invest

their own money but tie up with banks, credit card to offer EMI scheme to

customers, risk is higher since value per unit is much higher



Initial focus is on the institutional market - Central Public Works Department,

State PWD's, Bank ATM's



Looking to procure super-efficient inverter A/C with rating of 4.5 vs. the current

3.5; implies 30% more savings



Consumers not to be given an option

of which brand to buy

- will get only one

option at the kiosk set up for sales

21 October 2016

16

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