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Switching gears



With over 30 years of experience in the area of electrical equipments for industrial as well as domestic applications, Salzer Electronics Limited has today emerged as an established player in the switchgear industry. Known for the high quality standards that they set and the latest technologies that they employ, the Coimbatore-based company is constantly approached by other leading players in the industry to manufacture products on their behalf. Today, Salzer's products are well received in the international and local markets alike.
Salzer is one of the few if not the only company in the electrical industry to receive international approval and certifications for their manufacturing process and and innovative designs.

Shashidhar V takes a look at this independent multi-product entity and its growing prowess in a competitive market.



“When technology changes, you have to adapt to that moment. You need to introduce new products that bring those technologies to the market,” says Rajesh Doraiswamy, Jt. Managing Director and CFO, Salzer Electronics Ltd. The excitement is evident. And, why not? After a lull of more than four years, the electrical industry could see a turnaround in the days ahead.

With more than 30 years of experience in the area of electrical equipments for industrial as well as domestic applications, Salzer Electronics Limited is an old hand in the market. Incorporated in the year 1985 in technical collaboration with Saelzer Schalt Fabrik GmbH, Germany, for the manufacture of CAM operated Rotary Switches, the company soon emerged as an independent multi-product entity with a wide range of electrical products covering a variety of applications for the domestic, industrial and automobile segments.

From a single product, the Coimbatore-based company is today engaged in the manufacturing of various low voltage electrical components like Rotary Switches and Load Break Switches, Modular and Foot Switches, Wiring Ducts, Automobile Switches, and other electrical components like Torodial Transformers, Cable Ducts, Terminal Connectors, Relays, Energy Savers, Wires and Cables, etc., at their four state-of-the-art facilities.
Almost 80 per cent of their products are made in-house, and are the market leaders in Rotary Switches with a 40 per cent market share, and are the largest producers in Asia. The company enjoys a network in over 45 countries.
And, despite the industry continuing to be flattish, the management at Salzer have set for themselves a steep target – that of achieving a growth of `1000-cr by 2021. And, it is towards this end that the company’s attention is now focussed.


Wind beneath their wings
The company, to make sure that they achieve the target that they set for themselves, has evolved some growth strategies, besides the mergers and acquisitions that they have made over the years (See Box: Marketing and Technologies Tie-up). In the last two years, the company invested close to `60-cr, of which around `25-crores is on a new data cables facility. Then, there is also a new plant for the manufacture of transformers, wire harness, and certain new products that they have developed.
“I think we will force ourselves to grow at least at 15 per cent per year,” says Doraiswamy. “That should be our minimum growth target YoY. We have added some new products in the past year, year-and-a-half, and we are planning to bring in more products into our fold.”
The company is also looking at some new geographies that they have not ventured into until now.
For instance, the company does not yet have a presence in lot of the African markets. “While we are doing very well in Iraq, and Egypt, but in Africa, in the southern part of Africa and the central parts of Africa, our presence is minimal,” says Doraiswamy.

“So, I think, with this, on a normal scenario, we should be growing at about 15 per cent YoY. And, if we do that, I think we should be close to `1000-cr by 2021. So, basically, we should double in four-and-a-half years at 15 per cent,” he adds. The company, this year, is quite confident to touch about `485 to `500-cr.  


Mix-n-Match
The primary segments that Salzer operates in are:
-  The switchgear segment.
-  The building segment – It is the only segment which is B2C.
-  Energy management, where they primarily control the street lights with a special controller added to a combined network to ensure energy savings. Incidentally, the company is the only Grade I CRISIL-rated operator for street lighting in India.
The company’s primary bread-and-butter, though, comes from their industrial switchgear vertical, which contributes close to 52 per cent revenues for the company, with exports contributing 23 per cent. “This means that almost half of our production is exported from the switchgear segment,” says Doraiswamy.
The company has been constantly maintaining exports in this vertical at around 40-45 per cent. “And, that is one of the reasons why we continue to remain stable in spite of all the turbulence in the industry. If we had been a company that focused largely at the Indian market, then we would have been in trouble in the last 4-5 years,” Doraiswamy adds.
Presently, 30 per cent of their switchgear business caters to the power sector, while the rest caters to other industry segments. “So, if the core sector grows, we are in business. So, the modernisation of sub-stations, PGCIL projects, NTPC projects, etc., we get business out of that. And, then, any private investments happening into new industries, like new industries being set up in Andhra Pradesh, for instance, translates into business for us,” adds Doraiswamy.
The company, as mentioned earlier, have added a few new products in the recent past – one of them being distribution transformers. “This is a year old product that we developed in collaboration in terms of design and technology with an Austrian company, Trafomodern. This is an air-cooled dry type transformer, up to a standard size of 800kVa. We are looking out for to expand the transformer range from single phase to three phases. We have a ready customer – Schneider – for who we made transformers based on those designs. These are all fixed transformers,” informs Doraiswamy.
In this segment, the company are also having some of the reactors, and chokes which are primarily used in the traction application, to cater to the increasing business that they see coming from the railways.
Salzer, for those not conversant with the company, has been servicing the railway since 1998. “At that time, we were the first Indian company to manufacture the DC Switches, primarily the higher rating DC Switches of 250V, 500Amps. We were the only company at that time having a CPRI certification.” But, technology changes have forced the company to offer newer solutions.
“Now, you might have noticed that the railways are coming out with new technology called LHB coaches, which is primarily a German technology. Besides the external changes, when you go to the internal functioning in terms of the electrical and mechanical properties, there are many improvements with respect to LHB coaches. And, one of the primary parameters on those LHB coaches what we do with the railways is what is called a ‘disconnecting device’. We supply this device to the railways,” adds Doraiswamy.
This current year, Salzer did close to `7.0-cr business only on this particular product. And, with the production of LHB coaches set to increase by almost three times the current number, the scope in terms of improving their share of business with the railways is a lot wider.


The Cable Guy
Presently, though, their primary focus is on copper products, consisting mainly of PVC insulated wires and cables. Among the focus areas would also be special purpose wires, such as elevator cables, solar cables, and data cables. “We have not restricted our cable business to only household cables. We have expanded it to elevator cables. Demag, for instance, is one of our biggest clients. Similarly, we have entered the solar cables business. And, then, data cable is another extension which offers immense potential for us,” says Doraiswamy.
In terms of top-line, wires are playing a major role in the company’s fortunes. Though the volumes in the solar cables business are presently miniscule – about `4.0-crores to `5.0-crores per year – the company is hopeful that going ahead, they will be able to double their revenues. Towards this end, the company is in the process of setting up a separate facility within their existing cables unit at Coimbatore at an investment of roughly `25-crores.
“In terms of metres, 300,000 metres a year is what we are looking at our new facility,” informs Doraiswamy. “That should work out to 30,000 metres a month of CAT6 and CAT7 cables. What we have understood about the data cable market is that it is growing, primarily because of the IoT coming into the picture. All the equipments are talking to each other. So, most electrical equipments come with data cables now. A few of our clients with who we are working now have shown interest in taking data cables from us. And, their requirement is quite large.”
According to Doraiswamy, the plant should be ready in the next 6-8 months. “With that, we hope to clock sales of `100-cr in the next 2-3 years,” he says. The advantage that Salzer enjoys is the backing that they have in terms of their relationship with Larsen and Toubro. In 1993, Salzer entered into a business association with L&T to market Salzer products at a pan-India level. According to company officials, presently, 35-40 per cent of the company’s product off take is done by L&T. “So, while copper volatility will always affect the market, but since we have a back up from L&T, we operate on a monthly-average basis. So, this volatility doesn’t affect us as much as it does other players,” Doraiswamy says.

Moreover, even though the company does offer the domestic segment wires, their primary concentration is moderate on these wires. “We concentrate on the submersible cables, or what is popularly known as flat cables,” informs Doraiswamy. And, considering that Coimbatore is the hub of automobile manufacturing, the company managed to do about `120-`130-cr on their cables business alone last year, close to 60-65 per cent only on those flat cables. “The rest is by way of panel wires, or industrial wires, or domestic wires, or special cables all put together,” says Doraiswamy.

On Auto Mode
Sensors is another new area that the company is trying to venture into. The applications for these sensors, say company officials, will be automotive – the hydraulics, the off-road vehicles, and railways. Besides, it would also include electric vehicles.
“We should hopefully get into this by FY19 or FY20,” says Doraiswamy. “It is still in incubation. We are trying to do some sampling and we are also trying to get in some technology partners from Europe. It is still at a very early stage. But, the idea is to get into these sensors – pressure sensors, temperature sensors, etc.”

Building a portfolio
The company also manufactures products catering to the building segment, though it is not an improved market for the company. Here, the company is trying to improve their share by introducing some of the additional range of products, besides switches and wires that they have been traditionally selling. The company has now introduced MCBs, which have become quite popular. “We introduced these some 6-8 months back. We developed the MCBs on our own, and not in any collaboration with another company,” informs Doraiswamy.
While the market is quite crowded in this product segment, the advantage that Salzer has is that they already make modular switches. “So, when we make DBs and MCBs, we are in a position to offer these products as one package solution to our customers,” says Doraiswamy.
Moreover, Salzer is the only Indian company in the MCB field to have a UL-approved MCB. This is besides the approval that they already have for their switches, and transformers, which they received almost 15-20 years back. “No manufacturer in the country is holding a UL approved MCB,” says Doraiswamy. “This MCB primarily goes into industries, and is not for domestic use because in terms of protection class and tripping characteristics, the specifications will change.” Presently, the company has quite a bit of exports of these MCBs to the US, under their own brand name.

Leveraging partners’ capabilities
What many may not be aware of is that Salzer is the preferred manufacture for other blue chip customers in the country, such as Schneider Electric, LMW, Larsen & Toubro, ABB, Alstom, Siemens, Plitron, Elgi, and GE to name a few. “We are the preferred supplier to Schneider and GE for the last two years,” says Doraiswamy. “It is not a business model for us, but we do it on a one-time cost plus profit basis.”
In a world that is moving into a ‘no-competition’ scenario, where everybody buys from everybody, and sells to everybody, ghost manufacturing for other leading players has become the norm. “That is how the markets are moving today,” says Doraiswamy. Left with little choice, companies are increasingly leaning on others with lesser market share in a given product category but with manufacturing capabilities to manufacture the product to be sold in another brand’s name.

“If I insist that I will only give my brand, I will certainly lose this customer for who I am manufacturing the products,” explains Doraiswamy. “But, I may still be able to go into the market and sell the products in a small quantity. But, if I have to build a brand, be it across the world, it is not going to be an easy task. It is going to take a long time, and my resources. So, I think, we have to use the partners that we have developed over the years, leverage them, and then sell.”

Moreover, if a company refuses to manufacture and brand for others, it may be difficult to sell in a market where that competing brand already has already established brand identity and a strong relationship with his customers. Luckily, Salzer has managed to retain its strong brand identity, despite ghost manufacturing for others. “We have our own identity. We still sell the Salzer brand. Close to 60-70 per cent of our business comes from our own branding,” says Doraiswamy.

Setting Standards
Known for introducing the latest technologies in the Indian market, Salzer saw its products being well received in both, the international as well as local markets, with leading OEMs including Public Sector Undertakings using standardized Salzer Switches. The primary factors that have seen a growing acceptance of their products in the market have been the international approvals that they have received and their innovative designs.

According to the company communiqué, Salzer obtained the prestigious ISO 9001 certification bestowed by NQA-UK for design, development, manufacture and supply of CAM-operated rotary switches, selector switches and allied products. The company is also certified for ISO 14001:2004 and OHSAS 18001:2007 and its products have also been approved by Underwriters Laboratories, Conformite Europeanee and RoHS compliance, and TS16949 for quality management system. Recently, a cerfiticate from International Automotive Task Force (IATF) has been received for the Wires and Cables products for easy facilitation of its exports to certain countries. “So, I think with these certifications, we are able to sell across the world,” says Doraiswamy.

Moreover, the company is invested extensively in R&D supported by a full-fledged laboratory and captive tool room, to upgrade and develop products, setting new market trends. Informs Doraiswamy, “We continuously spend on R&D to try new products in the market. We spend close to around 3.0 per cent of the revenues every year on R&D. To our credit, we have many patents. There are many patents in various stages that we have applied for.”
Salzer employs close to 40 engineers in their R&D department, in addition to the technical collaboration that they have with their JV partners with whom they share ideas, designs, and technology.

Then, there is the tool room, which gives the company flexibility in changing the design, getting new products, and making the company more flexible to the customer. “We make our own moulds,” informs Doraiswamy. “For a switchgear company like ours, tooling is a major cost. So, even though it is expensive, we have to go in for our own moulds.”

The company also has the type test laboratory in-house where they can test up to 500 amps. “This is something very special, since not every company has such a facility,” says Doraiswamy. So, any product that they make is first tested in-house even before it is sent to an external lab for testing.

Future Outlook
Despite the industry being under stress, Salzer Electronics continues to focus on adding new, niche and high margin products. The company has also identified new markets and geographies to offer total and customised electrical solutions to its existing and new customers. With strong foundations and a product portfolio offering world-class products at the most competitive price-value proposition in the world, the future seems bright, for now at least.
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Today, nearly 77 per cent of its revenues come from within the country, with the remaining being contributed by exports.

Salzer’s products are exported to more than 40 countries, with no country accounting for more than 4.0 per cent of the company’s revenues.

Salzer is one of the approved suppliers for Nuclear Power Corporation for Rotary Switches.

The company has one of the largest women workforce on the assembly floor.
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Salzer Electronics was founded by R Doraiswamy, a first-generation entrepreneur with over 20 years of industrial experience. The business is presently being managed by the second generation of the promoter’s family, Rajesh Doraiswamy.

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M&As, and Marketing and Technologies Tie-ups

-  In 1993, Salzer entered in a business association with the country’s engineering major, Larsen & Toubro Ltd. to market Salzer products at a pan-India level.
-  In 1995, Salzer entered into a technical collaboration with M/s. Plitron Manufacturing Inc., Toronto, Canada for the manufacture of Toroidal Transformers. The collaboration ended during 2015.
-  In 2015, the company entered into a technical collaboration with Trafomodern, an Austrian company, to expand the transformer range.
-  In 2001, Salzer Controls, a group company engaged in the manufacture of Torodial Transformers, Load Break Switches, etc., was merged with Salzer Electronics.
-  In 2008, Salzer Cables, a group company engaged in the manufacture of wires and cables in association with L&T, was merged with Salzer Electronics.
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