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Indian market will at least double in next four years

Indian market will at least double in next four years
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First Published: Wed, Sep 14 2011. 11 57 PM IST

Growth plan: Irani says UTC is targeting $2.5 billion in sales in India by 2015. Photograph by Kumar/Mint
Growth plan: Irani says UTC is targeting $2.5 billion in sales in India by 2015. Photograph by Kumar/Mint
Updated: Wed, Sep 14 2011. 11 57 PM IST
Hyderabad: United Technologies Corp.(UTC), the US conglomerate that makes Carrier airconditioners and Otis elevators, expects to increase revenue in India fivefold to $2.5 billion by 2015, says Zubin Irani, senior managing director for commercial companies at UTC’s India unit. Irani, 39, oversees the Hartford, Connecticut-based UTC’s commercial (excluding aerospace) companies in India that include Carrier, Otis and UTC Fire and Security. Irani, who has a Master’s degree in materials science from the Massachusetts Institute of Technology and a Bachelor’s degree in materials science and engineering from the Indian Institute of Technology, Kanpur, outlined the company’s growth strategy in an interview during a visit to Hyderabad for a company event. Edited excerpts:
On UTC and its presence in India:
Growth plan: Irani says UTC is targeting $2.5 billion in sales in India by 2015. Photograph by Kumar/Mint
In India, we have been around for over 100 years. We had the first installation (of elevators) in 1892 actually, in Raj Bhavan in Kolkata. And since then, we have been able to establish a leading position in the elevator market with Otis, in commercial airconditioning—that means air conditioning for larger projects, offices, etc., with Carrier. Our prestigious jobs would include Delhi International Airport terminal 3... that’s airconditioned by Carrier. The Commonwealth Games Village is airconditioned by Toshiba, which is a brand that Carrier sells and services... (in) the Mumbai International Airport, the new one that’s coming, the full security—electronic security, access control—is being done by Chubb Alba, which is a UTC Fire and Security company... The ITC Gardenia hotel in Bangalore is cooled by Carrier high-efficiency chillers and that’s the first platinum hotel in Asia. Collectively we have over 80 sales and service offices, four factories and three R&D (research and development) centres, over 4,000 direct employees, and 5,000 indirect employees (in India). Bottom line is we have a very strong and established starting position.
On the Indian market potential:
In our view, the market will at least double in the next four years, driven by a couple of things. Probably the biggest trend is urbanization—250-300 million people are going to move to the cities in India, and to house those people, to build housing for those people, to make sure that they can travel properly, almost $1 trillion of capital needs to be spent.
Similarly on infrastructure, the government is planning to spend $1 trillion—50% government, 50% private—over the 12th Plan (2012-17). That will be spent on power plants, airports other kinds of projects that require our products. Bottomline is we see the market almost doubling. Air conditioning was $1.5 billion in 2010; we see that growing to over $3 billion; elevators from about 30,000 units to 70,000 units; fire and security systems, we think, will go from $1.1 billion in 2010 to $2.2 billion in 2015.
On sustainable development of buildings:
It is not just about the growth in the market; it is about how the growth is going to happen. Today, the fact is that buildings consume something like 40% of the world’s energy—energy that is used in operating the buildings and all the material that goes into a building’s construction. The fact is that India is aiming to reduce its emissions by almost 20-25% by 2020. We can’t do it if we don’t focus on more sustainable growth and more sustainable development of our buildings. Most of buildings still need to be built. Over two-thirds of our building footprint is still to be built out.
So, we have on one hand a tremendous challenge, but also an opportunity to really ensure that our building footprint is built in a sustainable way, which means it uses lesser energy, the materials use less energy going in, etc. That’s where frankly UTC comes in. Our philosophy towards sustainability matches very well with what the nation needs today and what the consumers need. When UTC looks at sustainability, we look at it from the standpoint of three things. One is products. Today we manufacture some of the world’s most efficient products. We spend almost $3.5 bullion on developing these products—UTC globally. Second is processes—how we manufacture the product is also very important. In our Gurgaon factory for example, we have reduced, between 2006 and 2010, energy consumption, water consumption by over 50%. The third is about the people and communities around us. We want to foster an environment where innovation happens and people understand that sustainability is important and innovation happens around sustainable designs, etc... We believe innovation in energy-efficient buildings, energy-efficient design cannot happen in silos. Only the manufacturer is not able to come up with solutions that will drive energy efficiency and push the envelope. It has to be a collaborative discussion between the architect, the consultant, the end user, the manufacturer...
On UTC’s business targets and growth plans in India:
Our goal is simple. The market, we said, is doubling. We want to grow four or fivefold in India. We were a little over $500 million in 2010, in sales. We want to be $2.5 billion by 2015 and we want to do this by actually looking at four different areas. One of them is to be basically providing cutting-edge, integrated solutions across building management systems. We are the only company that has a full portfolio—Carrier airconditioning, Otis elevators, fire solutions, security solutions and building management system solutions with automated logic. When we look at ourselves as an integrated provider, we don’t have a competitor in the market.
The second thing we are doing is really building a strong operations footprint in India, in terms of how we want to grow our sales moving forward. This involves expanding the capacity of our factories. We started a fire and security factory in Bangalore (last week). This is going to make gaseous suppression products...fire suppression systems using gas for more critical systems like power, oil and gas, etc. We will localize more products over there over time. Otis is also in Bangalore and there we have announced that we will double capacity from about 5,000 units to 10,000 units. It will be the largest factory in India for elevators. We are going to do this over the next two years. Carrier also has some major expansion and localization plans.
The third is to to grow aggressively through mergers and acquisitions. We we are on the lookout and frankly we are talking to a number of companies, looking at potential partners. It might be either to strengthen our position in customer segments we think are important. It might be to improve our solution offerings to customers. Some of them might help us get better local manufacturing capability.
So there are many reasons why we will do it. I can only tell you that UTC has sufficient funds to do acquisitions. We are always on the look-out for companies that would have a strategic fit, and if the price is right and the timing is right, we will do it. The fourth one is really building our talent. As UTC, we are in a much stronger position to acquire talent as well as develop talent and retain talent rather than say if we operated as separate business units...So we have started recruiting as UTC from schools, we have set up a system to move talent across business units, we have set up new programmes to bring in talent...
On approach to Indian market:
In India, we want to approach the market collectively. Our brands Carrier, Otis are very strong. We want them to continue to be strong brands. But we believe there is additional value, incremental value by going to the market as UTC.
If you look at our market of customers, in India there are probably 30 to 40 large developers, infrastructure players. That I would say constitutes a significant portion of our market,. and when you have that situation, you have a tremendous opportunity to reach out to those customers, build stronger relationships and prove that through having delivered in one business unit we can deliver across the board. Today developers are looking to form those strong relationships with reliable partners that can deliver on their requirements because frankly they would rather focus on other things and let somebody take care of their needs for air-conditioning, elevators, fire and security in terms of delivery.... We believe that, as UTC, going together we have a very good chance of forming those relationships... UTC looks at India very strategically. It is one of the top markets. Our chairman and CEO Louis Chenevert is very passionate about India and has clearly made India a focus in the company. We are looking at adopting a new approach in India. That is why we are going at it this way. That’s why we have set up a UTC corporate office in India, which is not there in other markets. This a very unique, distinct approach we are taking in India, where we want to flood the market as UTC.
a.penna@livemint.com
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First Published: Wed, Sep 14 2011. 11 57 PM IST