The Electrical Equipment Industry consists of companies that make a range of products for a diverse customer base.

This sector is fragmented, but there are a few members that lay claim to a sizable portion of sales. Products include electrical motors, commercial and industrial lighting fixtures, heating, ventilation and air conditioning systems and components, and, among others, electrical power equipment. Operating structures involve high fixed costs. Too, copper, aluminum and steel are essential raw materials used in the manufacture of products. (Fluctuations in commodities prices can have an impact on the group's earnings performance.) The industry spans all corners of the world, and it is subject to the influence of the macroeconomic cycle. Electrical equipment shipments, orders, and backlog provide a fairly accurate indication of an individual company's sales prospects. Rising orders help to build backlog and lead to higher shipments and sales. Order cancellations, however, can accelerate top-line declines. Plant utilization lends insight to a company's pricing power and earnings potential. Also, product quality and ease of integration (into manufacturing systems) will influence demand, pricing and profits. Operating efficiency is crucial for these companies to succeed. For the most part, the industry's operating margin ranges from 10% to 20%. Some leaders achieve margins in the 30s and 40s, and a few, with profitability measures in the single digits, lag behind. Popular efficiency and cost-reduction methods include Six Sigma, Lean Manufacturing, Best Practices and common production platforms. Effective hedging strategies can bring volatile commodity prices under control. In most cases, research and development expense is less than 5% of sales. Nonetheless, R&D outlays are important to the industry. Innovation allows a company to improve its competitive position.

Managements work to keep up with shrinking product life cycles and attain standardization to maintain cohesiveness and save money. Generally, net margins hew close to 10%. For equipment makers with little or no debt, net margins about match operating margins. Those with significant debt obligations often have net margins in the single digits. Managements tap the equity and debt markets, and use cash, for expansion and acquisitions, depending on the comparative cost of capital and their tolerance for risk. The industry has a history of substantial merger and acquisition activity. Scale is important to profitability. Only a handful of the companies included in our grouping have annual sales below $1 billion. Acquisitions offer access to new markets and products, as well as ample cost synergies. Usually, the larger the company and the more extensive the record of buyouts, the less risk there is to investors. There are few factors governing the growth of electrical and electronics industry:

Research & development played an important role to the increased productivity and highervalue added electrical and electronics products. Foreign investments accelerated growth in production and export as well. To expand their business, foreign companies have done huge investment which lead developing countries in establishing production units. Global industries like Medical, Telecommunications, Industrial & Automotive industries have been cordially supported by electrical & electronics industry. Increase in income changed living standards of the common mass. As a result, it increased the demand of electronics especially consumer electronics products globally. Electric & Electrical industry is highly fragmented which comprises of many small and medium size enterprises resulting into a huge industry. Asia Pacific region is emerging as the most spinning place for the consumer electronics industry, as the markets remain still unbroached. Innovation has played importantly in this industry. It led to a consistent demand for newer and faster products and applications.

Indian electrical equipment is one of the fastest-growing industries in the country, catering to a gamut of industrial sectors. The power sector remains the largest consumer for electrical equipment. Increased activity in Indias power sector (generation, transmission and distribution), improving industrial climate and GoIs initiatives over the past few years have been key drivers for growth in this industry. Moreover, it is highly fragmented, with SMEs having significant presence. The electrical equipment industry has a strong manufacturing base in India and produces a wide range of products. Electrical equipment and machinery are principally used in the power sector (generation, transmission and distribution) and manufacturing industries such as automobiles, cement, steel, petrochemicals and refining, etc. Electrical equipment broadly includes rotating machines (Electrical generators and electric motors), switchgears and control gears, transformers, cables, capacitors, transmission lines and energy meters.

To keep pace with the reforms in the power sector, over the years, GoI has encouraged foreign participation in the manufacture of electrical equipment through joint ventures, an example being the joint venture between Larsen & Toubro and Mitsubishi Heavy Industries (MHI) and with Mitsubishi Electric Corporation (MELCO) in Jul 2008. As long as the problem of acute shortage of power continues to plague the country, ample opportunities exist for foreign electrical equipment

manufacturers to enter the Indian market. GoI has also encouraged Foreign Direct Investment (FDI) into the sector. During Apr 2000 to Jun 2010, the electrical equipment industry attracted FDI inflow of US$ 2.2 bn, which represents 2% share in Indias overall FDI inflow. However, despite a strong domestic manufacturing base, imports play a crucial role in the sector. Significant expansion in domestic manufacturing capacity and research and development (R&D) activities would be required for reduction of reliance on imports of electrical equipment. A number of well established players operate in the Indian electrical equipment industry, from large public sector companies such as Bharat Heavy Electricals Ltd (BHEL), private players such as Crompton Greaves and multinational companies such as ABB Ltd to numerous small and medium enterprises (SMEs). Besides China, India is among the few developing economies with capabilities of manufacturing an entire range of equipment for power generation and transmission. India has developed strong capabilities in manufacturing products such as transformers and generators as reforms in the power sector have induced players to improve quality levels.