Ducted products -- cooling troubles

Suresh Krishnamurthy

The ducted products segment calls for a considerable degree of engineering skills from the companies in the segment.

Value-addition in this segment is fairly high and so are the margins. In fact, the ducted products category would squarely fall under the capital goods, rather than the consumer goods, category. Due to the specialised engineering skills involved in both equipment manufacturing and project management, the number of players in this segment is small.

The major players in this segment are Voltas and Blue Star. Both have years of expertise and now possess a strong hold over this segment. Carrier Aircon has also been enhancing its presence in this segment. Thermax, which manufactures vapour-absorption chillers, and direct-fired absorption machines is also a strong competitor. While Blue Star and Voltas offer turnkey solutions, Thermax and Carrier Aircon have been content remaining equipment manufacturers.

Companies in this segment faced pressure on several counts in 1999. Industrial investment continued to languish while there was a migration in demand from ducted splits to mini-splits. While the very same companies can provide mini-splits, the competition in this market is relatively high with the presence of more brands. More important, vapour-absorption chillers first and then direct-fired absorption machines started eating into the market shares of these companies in a big way because of their cost-effectiveness.

However, since then both Blue Star and Voltas appear to have made a strong come back. They countered the threat by introducing screw compressor chillers and offering other cost-effective solutions. Since then the market share of vapour-absorption chillers has eroded steadily. More important, the fact that demand has emanated from the software, telecom and healthcare sectors where vapour-absorption chillers are not a major threat also appear to have helped these companies.

The ducted product is a fairly small segment in India compared to international standards. It suffers from poor capacity utilisation and, therefore, the cost of manufacturing is relatively high in India compared to international standards. In this backdrop, imports still remain a real threat to the industry.

Curiously, such a state of affairs has worked to the advantage of Blue Star and Voltas. In India, margins in manufacturing the equipment have been quite low compared to those in installing the equipment. These two companies, which offer turnkey solutions, have not been averse to importing the equipment preferred by the customer. However, on the other hand, companies such as Thermax and Carrier Aircon, which do not undertake project management, have had to struggle to penetrate the market. Given this state of affairs, Blue Star and Voltas appear poised to extend their hold over the market for ducted system.