MANAGEMENT ANALYSIS

Large business potential for LED products:

The LED product market in India is poised to grow substantially in the years to come - especially in the period 2015 - 2020. Amongst others, LED lighting products and LED display products will play the key role in the growth process.

LED Lighting:

LED lighting has taken strong roots in the country already, because of the increased awareness both in the governmental and public domains regarding their energy saving potential General consensus of the industry analysts about the year on year growth for LED lighting is around 35% to 38%. Annual business volume expected for grid based LED lighting by the year 2020 is projected to be in the range of INR16,250 - 19,500 Crore (US$ 2.5 - 3.0 billion). The immediate thrust in respect of grid based lighting is in the areas of Street lighting in public domain and replacement of incandescent bulbs in domestic households. The drive for energy efficiency, being emphasized strongly by Hon'ble Prime Minister of India, calls for expeditious replacement of the existing population of about 50 million street lights, 500 million tube lights and 900 million bulbs. This retrofitting process alone in business terms equals to INR 104,000 Crore (US $ 16 billion) sbrading over 5-7 year period

Solar powered LED lighting is also expected to a very significant driver of growth in the country because of severe shortages and uncertainties of grid based power, especially in the rural domains. The demand for this lighting, if it can be fulfilled with good products potables, Home Lights and Street lights and through effective channels and funding agencies, can be of the order of INR 52,000 Crore (US $ 8 billion), in the coming 10 year period. In addition to the need for solar powered LED lighting for rural domains, the concept of Smart Cities being strongly promoted by the Hon'ble Prime Minister of India, calls for self-sufficiency and sustainability of Power and water situations, in the targeted 100 smart cities. Sustainability in respect of power will only be through renewable source of energy - especially solar power. The demand for solar powered LED lighting is expected to go up further, with the Smart City program.

The initiatives launched across the world for mitigating the adverse effects of climate change include generation of green energy through renewable energy sources and curtailing the consumption of fossil fuels and consequent emission of greenhouse gasses. Solar powered LED lights are going to play a key role in this regard in terms of arresting deforestation and ensuring sustainable amenities in forest villages.

International budgets for the programmes to arrest climate change process are indicated to be around trillions of US Dollars. Programmes in respect of India are likely to be piloted by the Ministry of Forests, Environment and Climate change.

LED Displays:

LED Displays are in use in India in fairly large numbers in traditional applications like event coverage, sports coverage and mass communications. However, market for high-end applications especially in the Nuclear sector, Space sector, Power sector and other process control operations and Monitoring & Control of Smart cities with special emphasis on security is just evolving and is assumed to grow asymptotically in the coming years, through quick penetration and replacement of brsently deployed LCD/Plasma TVs. Projections of requirements for large scale centrally controlled and networked displays for day night visibility are already taking place. Heuristic estimates for displays covering indoor, outdoor displays encompassing small and large pixel pitches are in the range of INR 6500 Crore (US$ 1 billion), by 2020. Availability of high resolution, small pixel LED displays will prove to be brighter substitutes for LED based products in control room applications like in power plants, security and related applications in smart cities, passenger information systems in Railways, Airports and Defence related applications. These will prove to be 'Real LED tvs'. The standardization of the outdoor advertising industry in India, in the recent past, with the introduction of LED signage and the global standardisation of local Intelligent Transport Systems for GPS based PIS and advertisement displays create new scope of business application.

Centralised Control and Monitoring Systems (CCMS) and Smart Grid products:

The Centralised Control and Monitoring Systems (CCMS), as integral parts of the street lighting projects are going to play a vital role in energy optimisation in the country. Similarly the Smart Grid systems are going to prove to be a great economic and business proposition in the domain of electrical energy which will have far reaching spin-off benefits in terms of energy conservation, load balancing and brvention of pilferage.

Government incentives for growth of Electronic Industry:

All Ministries in the Government of India have responded to the call of the Hon'ble Prime Minister of India for strengthening the manufacturing base of the country. 'Make In India and Sell Globally' is the ardent desire of the Hon'ble Prime Minister and to create a necessary business & investment friendly environment in India for the electronic industry, Government of India, Department of Electronics and Information Technology (DietY) has decided to extend the Modified Special Incentives Package Scheme (MSIPS) for a further period of five years from July 2015. This scheme extends the benefits like Preferential Market Access (PMA) for electronics products, essentially made in the country, in all the Government purchases, 25% reimbursement of the project investments, concessions in taxes and duties for capital imports etc. There are further Governmental incentives, both at the Central and State levels, for R&D activities and infrastructure creation. The State Governments of Telangana and Andhra Pradesh, which are recently formed are extending whole hearted encouragement for the setting up of industries in their respective state through exbrss clearances, land allotments and other needed amenities.

Creation of LED eco-system and formation of clusters:

Based on the expertise generated over the last three decades in the field of LEDs, and based on the indications given and keenness shown by its technological and business partners across the world, MIC will do well to brpare blue prints for setting up combrhensive LED Ecosystems and Clusters covering materials, components, products and systems.

The four key components identified by the FS and IESA report (sponsored by Govt. of India) in respect of the LED lighting i.e., LEDs, Drivers, Heat sinks and Thermal interface material are required to be covered in the Eco-system.

Systematic need for planning:

While MIC has the requisite qualifications and track record to benefit from the business opportunities outlined in the brceding paragraphs, it requires to draw up meticulous and well considered growth plans with short term, mid-term and long term phases. The plans need to carefully match visible opportunities with available resources. Core strengths of the company have to be the bedrock on which the plans have to be based, in a pragmatic way.

By order of the Board

For MIC Electronics Limited

Sd/- Dr. M V Ramana Rao

(Managing Director)

Place : Hyderabad

Date : 05.09.2015