Key Sector Data   Market Cap (Rs Crore) 33646 Market Cap (USD Million) 5076 P/E 54.8 P/BV 4.6 Debt/Equity 0.6 ROA (%) 2.9 ROE (%) 8.5 EV/Sales 1.2 EV/EBITDA 19.1

The above table includes diversified companies such as Havells and Crompton Greaves where LED lighting business comprises a small part of the overall financials.

Global LED industry

The demand of lighting over the years has increased substantially with more and more applications being introduced to help a more effective and meaningful lighting. Citizens are learning to work, to learn and to indulge in leisure at all times of the day and night and this has been made possible because of the contributions of electric lighting.

The lighting industry has kept up with these demands and aspirations by continuously introducing new and more efficient technologies, by changing and improving lighting design and creating a more effective total system approach. Lighting has progressed over the last century from Edison's light source to today's energy efficient, task oriented economic proposition. The Lighting Industry has further initiated to reduce energy consumption for lighting by introducing more energy efficient products and working with government to execute various schemes and awareness programs to achieve this. LED (light Emitting Diode) is one of the solutions for reducing consumption of power for lightning.

By late 2014, LED lighting was closing in on 40% penetration of the global lighting market. It was the second consecutive boom year, confirming the breakthrough in the key regions of Europe, North America, and China. As per new report by LED inside, the global LED lighting market will reach $25.7 billion dollars and its market penetration will increase to 31% in 2015 as the overall lighting market grows to $ 82.1 billion.

Europe is the largest LED lighting market. It comprises 23% of the global LED lighting market despite its high electricity prices and lack of large-scale subsidies for LED lighting users. Europe's demand for LED lighting for commercial and architectural lighting applications is increasing.

China comprises 21% of the overall LED lighting market. As the manufacturing base of most LED lighting producers, China boasts a complete LED supply chain and many cost advantages. Traditional lighting manufacturers, lighting OEMs, emerging LED lighting manufacturers, and LED packaging manufacturers all are expanding their LED lighting businesses.

The United States holds 19% of the overall LED lighting market. Currently, there is a push in the industry to obtain certification from the US Environmental Protection Agency Energy Star and the Design Lights Consortium (DLC), a US-based non-profit organization. Firms which receive certification from these organizations are eligible for subsidies from local utilities providers. Additionally, LED lighting product quality is improving, helping commercial LED lighting in the US grow. The fastest-growing segment is light tubes.

Japan has just 9% of the global LED lighting market. Indeed, the Japanese LED lighting market is relatively mature. LED commercial lighting is already common in Japan's schools, hospitals and retail chain stores. Still, the outdoor and industrial LED lighting segments have considerable potential to expand.

Emerging markets, including Asia Pacific, the Middle East, and Latin America, comprise 28% of the global LED lighting market. Looking ahead, growth prospects in these markets are especially promising because of rapid population growth, favorable government policies and an abundance of private-sector LED lighting projects.

A new report by Allied Market Research, "Global Light Emitting Diode (LED) Market," estimates this market will reach $42.7 billion by 2020, registering a robust compound annual growth rate of 13.5% from 2014–2020.

Indian market

The Indian lighting market is undergoing a paradigm shift and evolving into a solution-driven one, shedding the traditional and conservative product-oriented approach. The lighting market is currently dominated by products like compact fluorescent lamps (CFL), metal halide, halogens, and T5 fluorescent lamps (TFL); incandescent bulbs are on the verge of being phased out. In the indoor segment, CFL and TFL have gained immense popularity. According to the Electric Lamp and Component Manufacturers Association of India (Elcoma), the Indian lighting industry has grown to Rs 16001 crore in 2014 from Rs 8090 crore in 2010, a growth of 18% CAGR. Within the lamps segment, the growth has been driven by CFLs, while ICLs (Incandescent Lamp) and FTLs (Fluorescent Tubular Lamps) have seen minimal growth in volumes.

Lighting Industry Size (Rs Crore)

In 2012, the LED light source market generated about US$ 100 million and remained a minority in the Indian market with only 3-5% market share. In the residential market, LEDs are mostly seen in new constructions, with existing CFL users less willing to convert to LED lighting. 

The Indian market continues to be mainly driven by government which makes up 51% of all LED orders. The streetlight market, for instance is benefiting from lighting overhaul in cities of old lights to LED. While in the commercial lighting segment there is a heightened interest in industrial lighting and in downlighters, which in India are vigorously shifting to LED as a source.

Continuous supply of power without interruption has become major problem as the demand is increasing at faster pace due to coming up of malls, residential, commercial and various electronic gadgets than supply. As such, In India, lighting application consumes significant share of the country's total power. Owing to demand-supply gap and need to conserve power, utilization of power efficient lighting source has become critically important. LED based bulbs are emerging as key viable sources of power, which can save power up-to 50%. With the introduction of LED lamps, the lighting scenario in India has been going through a drastic change. Though the overall CFL industry in the country is still growing, the growth rate has been decreasing over the last few years.

LEDs are solid state semiconductor devices, which were first introduced in the 1970s. Although, LEDs have existed for over three decades, the Indian population was oblivious of its benefits until a few years ago. The Indian LED market came into existence in the year 2009, thereby making it a nascent market presently. Even today, LEDs are considered to be a minority in the Indian lighting market.

The lighting industry in 2014-15 adopted LED technology in a big way resulting in major shift in both indoor and outdoor segments. Also LED has various advantages compared to incandescent light bulb and CFL. About 77 crore incandescent bulbs are sold every year in India and replacing them with LED lights will result in saving 25 billion units of power, annually in India. Replacing a 60W CFL bulb with a 7W LED light will result in saving Rs 500-600 every year on each bulb. Moreover, an LED light has a 10 year lifespan compared to just six months of an incandescent bulb and two years of a CFL.

Pricing

The LED market has emerged as one of the fastest growing industries in India. This industry has been majorly driven by factors such as falling prices of LED lights, increasing initiatives taken by the government and rising concerns with respect to energy conservation. LED bulb prices in India are nearing CFL prices, but might be priced down a further INR 20 (US $0.30) following the government's 50 million LED bulb purchase tender to be issued in the next ten days, reported The India Times.

Online LED bulb retail prices in India range between Rs 160 to Rs 250, while most CFLs retail price range between Rs 130 to Rs 215. LED bulb prices have plummeted in the last 18 months from Rs 310 per bulb. Indian LED bulb manufacturer NTL Lemnis projects LED prices to drop another Rs 20 as LED bulb technology improves and production capacity scales up. Energy Efficiency Services (EESl is expected to invite bids in a single tender of 50 million LED bulbs in December 2015, surging bulb volumes might drive down LED bulb costs further. Various state governments have also initiated LED bulbs bulk procuring and then distributing it to consumers.

India's Monthly LED Lamp Production Volume up 30 Times

Government LED lamp distribution programs has driven up LED luminaires productions to 30 million per month, compared to 1 million a year ago. EESL coordinated the energy efficient programs, and is launching a similar program for star-rated agricultural pumps and ceiling fans. The company is also facilitating state governments in floating contracts for retrofitting LED streetlights and maintaining them, creating a market for Energy Service Companies (ESCOs).

According to EESL, the government revised and raised its investment in energy efficient electrical equipment from Rs 74000 crore (US $11.23 billion) 6 years ago to Rs 150000 crores, following the success from its LED lamp distribution program. About Rs 35000 crore of this budget is allocated to energy efficient lighting and streetlighting, while Rs 50000 crore is invested in solar pumps.

EESL also intends to raise its investment target 140 times to Rs 70000 crore in the next five years from the fixed budget of Rs 500 crore for the last two years. The company has invested about Rs 5000 crore from Rs 90 crore, and proposes to raise its loans from German development bank KfW, Asian Development Bank, and AfD (France Development Agency).

EESL is a joint venture of state-run NTPC, Power Finance, Rural Electrification, and Power Grid, and generates income from profits that accrue to the distribution companies that purchase less electricity from generation firms due to energy savings. EESL procures LED lamps in bulk through competitive bidding and distributes them to consumers through power distribution companies.

Capacity

The government's LED lighting program run by EESL has made the LED lamp industry scale a peak in 18 months, a process which normally would have taken three to five years. In comparison it took CFLs 10 years to reach the same scale and capacity, while the scale has brought down the costs of manufacturing of LEDs and prices down every quarter Several Indian manufacturers have moved out of manufacturing incandescent bulbs, and shifted 50% of its assembly lines from CFL to LED lamps.

Major lighting players including Philips, Havells, Surya Roshni and Compact have raised LED production; Everready Industries and Syska LED are also likely to grow their distribution program to reach a pan-India level. These expansion projects would drive 7W LED prices to Rs 73 per unit against Rs 310 a few months ago. EESL reserves 20% of LED tenders for small firms, many companies including MIC Electronics and EcoLight LED systems have raised their production capacities.

Under the program, EESL procured LED lamps in bulk through competitive bidding and distributed them to consumers through power distribution companies. Power Minister Piyush Goyal announced that 30 million LED bulbs under the scheme. LED manufacturing companies, however, do not project CFLs demand disappearing completely in the next three years. There might still be a market for the bulbs in low-tier cities and rural areas, due to consumer habits, lack of awareness and established distribution chains. About 600 million incandescent bulbs are sold in India every year, and are popular among rural population because of its low prices. Their consumption declined from 700-800 million last year to around 400 million this year. Last year, 400 million CFLs were sold and the number will decline further to 350 million this year.

LED market in India, which is hugely driven by increasing government initiatives, has grown to Rs 3395 crore in 2014 from Rs 500 in 2010. The revenue generated by LED market in India has displayed a CAGR of 61% over the past 4 years.

Benefits of LED lightning and bulbs

As compared to CFLs, LEDs are 50% more energy efficient, and have a longer life than CFLs as well. LED lights can last up to 50000-60000 hours, but as of now, the Indian LED lighting manufacturers can assure a life of 20000-30000 hours only. The biggest benefit of LED lights is that unlike CFLs, LEDs do not contain mercury, which in fact is a great threat to the environment. With no proper system currently in India for collection and safe disposal of CFLs, these are gathered and transported haphazardly and as such often end up breaking and spilling the mercury during transportation process. Broken CFL bulbs run the risk of mercury leakage and can thus pose a grave threat to all life forms within the environment, apart from contaminating ground water resources and posing toxic threat for decades and generations to come. None of these dangers holds true for LED Bulbs. If all Indian households switch to LED lights in the next three-to-four years which is very much practical and doable, it would curb carbon dioxide emissions by 60 million tonnes each year.

Comparison Chart

	LED	Incandescent Light Bulbs	CFL
Life Span (average)	50,000 hours	1,200 hours	8,000 hours
Watts of electricity used (equivalent to 60 watt bulb).	6 - 8 watts	60 watts	13-15 watts
Kilo-watts of Electricity used  (30 Incandescent Bulbs per year equivalent)	329 KWh/yr.	3285 KWh/yr.	767 KWh/yr.
Contains the TOXIC Mercury	No	No	Yes
RoHS Compliant	Yes	No	No
Carbon Dioxide Emissions  (30 bulbs per year)	451 pounds/year	4500 pounds/year	1051 pounds/year
Sensitivity to low temperatures	None	Some	Yes - may not work under negative 10 degrees Fahrenheit or over 120 degrees Fahrenheit
Sensitive to humidity	No	Some	Yes
Heat Emitted	3.4 btu's/hour	85 btu's/hour	30 btu's/hour
Failure Modes	Not typical	Some	Yes - may catch on fire, smoke, or omit an odor
Turns on instantly	Yes	Yes	No - takes time to warm up
Durability	Very Durable	Not Very Durable	Not Very Durable

 
Source: www.designrecycleinc.com

Government Initiatives – SLP and DELP programme

The LED market has evolved over the years, with South India and North India driving growth. However, low awareness with respect to LED lights continues to deter consumers from using LED lights.  The government is playing an important role in increasing LED penetration in the country with new initiatives.

PM Modi had launched LED based home and street lighting programme on January 5, 2015. The plan envisages to cover 100 cities by March 2016 and balance by March 2019, targeting 77 crore ordinary bulbs and 3.5 crore conventional street lights. There are 3.5 crore street lights in the country with a load of 3400 MW which can be reduced to 1400 MW by replacing conventional lights with LED based street lights which could lead to saving of about 9,000 million units annually worth Rs 5500 crore to municipalities annually.

Now 100 cities have been taken up for coverage under street lighting programme (SLP) and domestic Lighting Programme (DELP). The action plan has been drawn after deliberations with all stakeholders and a set of concrete activities to enhance the energy savings from the current level of 6% to 10% by 2018, implying doubling of the energy savings from about 60 billion kWh in 2014 to 122 billion kWh in 2018. It is estimated that it will take 5 years to replace street light with LED.

This DELP Programme of LED bulb is a national programme implemented by Energy Efficiency Services Ltd (EESL), a Central Govt. undertaking. Under this programme, each participating consumer will be offered four LED bulbs of 7W each, along with a replacement warranty by EESL for three years in case of any technical fault. The programme will help consumers to significantly save on the initial cost of LED bulbs by offering the same at a highly discounted price of only Rs 100 per LED bulb. The consumer can also opt for an EMI scheme by making an initial payment of Rs 10 per LED bulb, and the remaining at Rs 10 per month in the EMI option via the electricity bill.

As many as 186 cities have been enrolled in the DELP programme. Work has been completed in some places in Andhra Pradesh (Guntur, Anantpur, Srikakulam, West Godavari) and Puducherry. About 1 crore LEDs have been distributed. Distribution is in progress in Delhi, Jaipur, Ajmer, Jodhpur, Thane, Mulund, Bhandup, Ratnagiri, Kanpur and Varanasi. Agreements with 63 cities were signed in Andhra Pradesh, Rajasthan, Uttar Pradesh and Delhi NCR and agreements with 68 more (Maharashtra, UP, AP and Himachal Pradesh) are in final stages. The government plans to distribute 15 crore LEDs by March 2016.

The central government's programme to get consumers to replace less efficient CFL or incandescent lights with LED bulbs at a discount has reduced national capital Delhi's peak load by 145MW and creating savings of over Rs 61 lakh daily in power bill. 

PM Modi had announced the campaign, called Domestic Efficient Lighting Programme (DELP), on 05 January 2015. It was rolled out on 1st June in Delhi and will close on 31st December. Since its launch, 43 lakh bulbs have been distributed among nearly 11 lakh households in the capital, resulting in an estimated daily energy saving of 1.5 million units. 

The scheme is also yielding environmental dividend. EESL, the nodal agency implementing the scheme in the participating states, expects a reduction in daily greenhouse emissions equivalent to 1,259 tonne of CO2 in Delhi. 

Power minister Piyush Goyal has projected a target of distributing 6 crore LED bulbs through the DELP scheme. The government has already distributed about 3.88 crore LED bulbs. This has reduced the countrywide peak demand by 1,292 MW, saving Rs 5,000 crore. The scheme is also estimated to save more than 11 million units of power and brought down daily greenhouse emissions by 11,288 tonne of CO2. Also, the renewable energy ministry has stopped subsidy on CFL-based solar lighting system to encourage the use of the LED version. 

The Bureau of Energy Efficiency under the Ministry of Power, India SSL and Energy Efficiency Services Limited (EESL) have jointly launched a LED lamp government procurement business model and "roadmap". More than 302 government departments are participating in the procurement project. Over 186 Indian cities have joined the residential LED lighting replacement project, and are exploring plans to advance the transition promotion. As for public lighting sector, the government plans to replace residential lighting and streetlights with LEDs in 100 cities by March 2019. Additionally, the government's Super Efficient Equipment Program (SEEP) for LEDs aims to replace residential incandescent and fluorescent light bulbs with LEDs. The country's Street Light National Program (SLNP) is targeting the overhaul of 35 million streetlights nationwide to cut energy consumption by 9 billion kilowatts, and conserved 15 megawatt's of energy consumption through installed streetlights.

Each LED bulb helps a consumer save anywhere between Rs 160 to Rs 400 per year and has a life expectancy of 25,000 hours. The Indian government aims to conserve 8.5 million Kwh of electricity consumption per day or 15,000 tonnes of CO2 by replacing 770 million traditional bulbs and CFLs with LEDs nationwide, and 35 million streetlights in the next three years.

Imports feed demand

As demand is big, most of the LED demand in India is met by import. The total sales volume of LED lights in the country is composed of domestically manufactured and imported LED lights. The Indian LED market has been traditionally dominated by imports of LED lights from countries such as China, Taiwan and Korea among others. The imports market for LED lighting in India has been dominant primarily due to the low price of imported products. Additionally, the absence of national standards for LED lights has allowed the unorganized sector to thrive in India. During 2014-15, India imported LED lightening products worth USD 222.3 mn, with China making up to 85% followed by South Korea. The analysis of CSA Research on exports to India LED lighting product showed that there are a wide range of LED lighting products exported to India, the distribution is not concentrated. On the first half of 2014, LED strip light is the largest product type exported to India, the export value accounted for about 32%, followed by bulb, accounting for about 20%, flat lights, tube lights, downlights and spotlights were accounted for more than 5%. Despite the presence of domestic manufacturing facilities, a major chunk of the demand for LED lights is met by imports. The low quality of these imports is one of the biggest hindrances in the growth of the Indian LED lighting market.

A number of facilities for manufacturing and assembling LED lights have sprung up in India over the past few years. The government in its budget in February 2015 has reduced excise duty from 12% to 6% on all inputs for use in manufacture of LED driver and MCPCB for LED lights and Fixtures & LED Lamps, subject to actual user condition. For inputs for use in the manufacture of LED driver and metal-core printed circuit boards (MCPCB) for LED lights, fixture and LED lamps Special Additional Duty (SAD) is reduced from 4% to nil. The government is pushing for local manufacturing of LED under its program "Make In India".

The low inferior quality of imported LED lights and bulbs are seeing pressure from high quality LED lights and bulbs from domestic manufacturers. Users are also slowly gaining confidence in the Indian manufacturers who have proved their capability to deliver value for money products to the price sensitive customers. Customers now look for factors like reliability and quality of the products and prompt after sales services that the Indian manufacturers offer. Today, Indian manufacturers are also investing in R&D and taking care of the durability and quality factors in terms of materials and components. With the falling prices for certain LED lighting products like LED downlights, LED bulbs and LED lamps, and LED streetlights demand has increased significantly. For example, 15W downlights, which were selling at Rs 2500 each, have come down to around Rs 1500. Even LED tubelights of 18 W, which replaced 36W FTL, have come down from Rs 3000 to around Rs 1700. The reducing price tags have also increased the buying power of the Indian customers and have led to increased penetration across different sectors in India. Although the first investment on LED lighting is a little more as compared to the conventional lights, the return on LED bulbs is becoming increasingly attractive as prices continue to drop.

To reduce reliance on LED imports, a total of US$ 2.5 billion has been injected into two major semiconductor subsidy programs, including the ST Microelectronics Fab in Gujarat, very close to the fab installed by De Core Science & Technologies Ltd. in Gandhinagar, Gujarat.

Most of LED lightning and bulb players are unlisted players in India while 31% of market is captured by unorganized players. The major players in the LED industry are Philips, Osram, Bajaj, Havells and Syska LED lights among others. Philips held the largest share in terms of revenue generated in FY 2014 and held a market share of 26% in 2014. Philips was followed by Syska with a market share of 15%. Unorganized player held 31% market share. However, as there is no major entry barrier currently in LED business, the industry experienced huge surge of new brands from small players.

LED Market Share

Top Brands of LED Lights in India

• Philips
• Osram
• Havells
• Wipro
• Bajaj
• Eveready
• SYSKA
• Oreva
• Moser Baer
• Surya

Source: www.ledlightsinindia.com

Outlook

According to leading industry player Surya Roshni, the market size of Indian LED industry may touch Rs 21600 crore by 2020 on the back of government's decision to switch to LED for all street lamps and public space lighting. The turnover of Indian lighting industry by 2020 is expected to be Rs 35,000 crore and LED may account for Rs 21,600 crore, which is significantly over 60% of this total turnover.

Government initiatives, aggressive marketing to create awareness and major advertisement campaigns regarding benefits of using LED lighting, will contribute to demand creation in this segment. With increased construction activity and refurbishments, LED fixtures are also expected to emerge as a key growth area for the lighting and fixtures segment. LEDs are poised to replace the traditional sources of lighting and, hence, will be at the core of growth strategy for lightning industry. Streetlight and outdoor applications will generate majority of the market revenues in the overall market. Railways, industrial, automotive and indoor applications are emerging as other key growing applications in the country. Streetlight application leads in India's LED lighting market owing to the initiatives taken by various state governments to deploy LED based streetlights. Overall industry, which is presently in nascent stage, will grow with coming years. India has undertaken the world's largest LED-based lighting program, which aims to replace 770 million incandescent bulbs and 35 million streetlights over a three-year period. These schemes have been largely successful, recording energy savings of 109,000 GWh while reducing 85 million tonnes of CO2