Structured Cabling : Feeling the Heat

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The high growth story of the structured cabling market has been punctuated in the last fiscal. The culprit is the sweeping global recession. The structured cabling market in FY 2008-09 saw a slow growth rate registering 12.9% to Rs 1,324.48 crore. This is a slow growth rate compared to the industry's growth rate during FY 2007-08, which was estimated to be 41.8%. We predicted this slump last year. Since the US economy is undergoing recession, the growth of US based multinational companies in India has been affected. This is indirectly affecting the Indian structured cabling market in FY 2008-09.

The market is down, but the hope is certainly not out. Indian economy continues to offer lot of growth potential due to enormous scope for infrastructure development, especially in verticals like telecom, education and the government. But high demands from IT, ITeS, and BFSI, which contributed a high growth in last few years, have slumped in the last fiscal. And it is likely to continue to affect the market in the ongoing fiscal too, thanks to global recession.

Fall in realty sector, both in residential and commercial division, did have an impact on the cabling market in the last fiscal. Slump in the BPO added to the woes on the high-end cabling market.

The worst ever fluctuation in the copper and crude oil price worldwide in the last year, and the consequent difficulty in material stocking had an impact on the cable pricing for vendors. The Q2 of the last fiscal saw a steep decline in copper costs, and by the end of the year, it became necessary for all vendors to reduce prices., This reduction was done in order to pass on the price benefit to the customers, and to procure business, resulting in erosion of margins.

Five years prior to the FY 2008-09, witnessed a steady growth and had an average growth rate of about 20% year-on-year. But now this steady growth is punctuated. In developing markets like India, companies will be required to set up or rent establishments to run their businesses and this would be the scenario with all the BRIC countries as well. Therefore, during the recession, the market demand may be subdued but not entirely out. However, in mature markets, surplus capacities are used more effectively.

Score Card
Tyco Electronics' AMP NetConnect (referred here as Tyco) has retained the numero uno position this year too, with its revenue clocking Rs 340 crore in FY 2008-09, but with a lesser growth rate of 13.5% year-on-year. It achieved Rs 299.52 crore revenue in FY 2007-08, registering a 28% growth rate. Though FY 2008-09 growth rate is lesser than that of the FY 2007-08, the company's contribution remains the single largest to the Rs 1,324.48 crore mark in FY 2008-09. Its year-on-year growth in FY 2006-07, FY 2007-08, and FY 2008-09 is 43%, 28% and 13.5% respectively. At least in the last three years, Tyco's growth has been on a decline. Its growth rate in FY 2007-08 was 35% lesser than that of FY 2006-07, and the same in FY 2008-09 was 50% lesser than that of FY 2007-08.

With revenue of Rs 221 crore in FY 2007-08, Systimax CommScope's revenue remained same in FY 2008-09. The company continues to remain a market leader retaining the #2 position in FY 2008-09 as in the last many years. DIGILINK with its revenue of Rs 201 crore registered a 11.71%growth in FY 2008-09, retaining the #3 slot this year also. Its business verticals include manufacturing, BFSI, PSU, education, government, and infrastructure contributing in the same order to its growth.

Molex has clocked Rs 107 crore, registering 9.1% growth, and crossing the triple digit revenue for the first time in FY 2008-09. Pawan Hans, CG SWAN, Serco, West Inn Hotel, Vizag Steel Plant, Sutherland, IIT Chennai, Anna University, Zenta, Yes Bank, Taj Group of Hotels, Cauvery Medical, Sun n Sand Hotel, Oberoi, Common Wealth Games Control Center, etc are some of the recent wins by the company that contributed to this growth.

CDT Belden has registered an impressive growth of 87.8% to Rs 77 crore in FY 2008-09 compared to Rs 41 crore in FY 2007-08. Reichle & De-Massari India has earned a revenue of Rs 71.4 crore in FY 2008-09, which is a 29.82% increase from Rs 55 crore in FY 2007-08. It registered an impressive growth of 120% in FY 2007-08 over FY 2006-07. It clocked Rs 55 crore revenue in FY 2007-08 as against Rs 25 crore in FY 2006-07.