HVAC set to ride on manufacturing wave

With the recently elected government putting renewed thrusts on manufacturing sector growth, the need for specialized HVAC solutions for new industrial units will become a huge business opportunity. Sandeep Menezes looks at the HVAC growth opportunities across India’s industrial and manufacturing segments.

Today the Indian HVAC market is growing at a rapid pace which can be attributed to the huge rise in domestic real estate construction activity. As per a recent estimate by Indian Society of Heating, Refrigerating and Air Conditioning Engineers (ISHRAE), the HVAC products market in India is currently valued at Rs.15,000 crore, having grown from a Rs.10,000-crore valued industry in 2010. ISHRAE also states that the Indian heating, ventilation and air conditioning (HVAC) market is expected to grow by nearly 30 per cent over the next two years to boast of a capitalization of over Rs.20,000 crore, which will be mainly due to the buoyed acceleration in infrastructure and real estate activities.

Construction activities such as mainly concerning retail, hospitality, health-care and commercial services or special economic zones (SEZs), all of which require HVAC systems has been leading to higher demand for HVAC systems.

Generally speaking the largest air-conditioning share (78 per cent) in the country concerns commercial services. Governmental development schemes and incentives also contribute greatly to this trend and CAGR growth rates of 14 per cent in investment are envisaged over the 2012-2017 period.

Infrastructure investment has witnessed 575 per cent rise between the 10th and 12th five year plans, which has heavily contributed to the growth of HVAC industry.

Shift Towards Industrial HVAC:

In recent months, the HVAC sector was facing a lot of challenges due to the slowdown in the construction industry because of policy indecisiveness. Some of these challenges were deferment, postponement and even cancellation of projects, drying up of finance, below-cost bidding, and pressure for cost-cutting, spending freeze and the looming specter of funding crisis due to the prospect of lesser number of construction projects being sanctioned in the near future. Even if the projects get cleared or sanctioned – it will be at least another six months for things to start moving on the ground.

This led to the HVAC industry looking towards new growth avenues such as the industrial segment.

Industrial HVAC Segment:

Going by the industry estimate of Indian manufacturing sector touching a capitalization of $1 trillion by the year 2025, opens huge optimistic growth windows for the domestic HVAC sector.

Boosting manufacturing was a major theme of the budget speech and there were a number of pro-manufacturing initiatives mentioned by the Finance Minister. For instance, the government intends to set up a National Industrial Corridor Authority to coordinate the development of industrial corridors across the country. The Finance Minister also introduced a number of tax concessions, investment incentives and new industrial “clusters” meant to stimulate manufacturing growth.

With government renewing its commitment to manufacturing growth through policy initiatives and incentives, the setting up of new industrial units and expansion of existing manufacturing sites will receive a boost. This could present a huge growth opportunity to the HVAC industry across India.

Green Trends in Industrial HVAC Industry:
The Indian HVAC sector aims to provide cost-effective solutions that cater to the needs of the commercial and industrial customers by introducing eco-friendly systems. These systems put in place by phasing out hydrochlorofluoro carbon (HCFC) gas have played a major demand driver’s role in the bloom of the sector. With energy conservation and implementation of greener measures being one of the major standouts of the industry, the move away from non-greener refrigerants towards more sustainable technologies is being seen as a major demand driver in the industry; one that will set forth a future course of action for the industry.
While today, greener HVAC solution is the major demand driver for the industry there are also some other critical drivers. It is important to outline the fact that a greater upgrade in technologies and constant innovations in the HVAC market has resulted in the acceptance of cutting edge innovations by potential industrial consumers, which has lead to the growth of this industry.
It is common knowledge that selection of the right equipment for heating, ventilation and air-conditioning saves any property a lot on its energy expenditure. The technology shift is likely to make management, monitoring and usage of energy even more convenient.

As many MNCs are investing into setting up of manufacturing and production facilities across India, the push towards energy efficient HVAC solution will receive a boost. These MNCs have strong traditions of eco-friendly solutions in their global operations which would hopefully be emulated here in India.
It is estimated that HVAC solutions consume nearly 50 per cent of all plugged energy consumption therefore any increase in energy efficiency of such systems will lead to huge savings for industry nationwide.

Industrial Cooling Solutions:

In factories that house large boilers, large furnaces and other heating equipments, air cooling emerges as an important cooling solution.

For decades, nobody bothered to cool industrial environments, so the question could arise—why now? The cooling of industrial environments was an expense; why add another during tough economic conditions? But looking at the advantages, installing industrial cooling for industrial establishments, and also vital installations such as airports, retail chains, banquet halls, proves its worth.

Industrial cooling is slowly gaining increasing importance as corporates are looking to create a congenial working environment for their shop floor teams.

Future Scenario:
The only reason India lacked emerging as the manufacturing base for global supplies was due to unfriendly policies and complex taxation regulations. With the newly elected government stepping in to untangle the roadblocks – the manufacturing sector will take-off due to favorable scenario such as lower input costs, skilled labour availability and easing of regulations.

This manufacturing boom will lead to spurt of new industries and expansion of facilities which will directly contribute to increased growth for specialized HVAC solutions. This growth will especially benefit those HVAC players that upgrade their services with the changing scenario offering eco-friendly and energy efficient services.

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