The BIG Indian Market

Sumeet Khurana

The signals from all segments of the market are positive. At the commercial end the offices, BPO, malls – there is a significant movement due to infrastructure growth. In the last six months, the positive outlook by the industrial sector, including steel and cement, has percolated to the related sectors, including the cleaning industry. The inclination towards green practices or the compulsion to meet environmental stipulation could also be factors for the industrial sector to invest in cleaning machines. The municipal sector has continued to invest in cleaning equipment.

Unlike in the past, the concept of cleaning is catching up and more and more end users, especially with large surfaces, realise that cleaning cannot be done just manually. Be it escalators in shopping malls or washrooms in airports, effective cleaning and sanitizing can be done only with machines.

Infrastructural growth necessitates the maintenance of whatever is built; it could be airports, ports, bridges, roads and so on. The higher budgetary allocation also emphasises increase in urban infrastructure growth with JNNURM and the PPP projects. Industrial customers are expanding capacity and more power plants are under construction. Given the infrastructure investment, the cleaning industry could grow even up to 50% compounded.

End users are receptive to newer technologies. Tata Steel has invested heavily in our machines for dust-free solutions. In fact, the interest in the cleaning market is directly proportional to what the market can offer. Earlier, the demand was small and the market size relatively smaller. But now with development, there are many players in the market. As the market evolves, specialisation will begin. Until now, everyone has been providing everything. In the future, each one will offer a specialised service. At Dulevo, we believe in specialisation and are gearing up to meet demands of a specified requirement. Every company cannot be a specialist in cleaning of carpet, polishing a marble floor or cleaning a municipal road or a steel plant.

Vivek Mata

In a move to synergise and complement each other, where a single company can cover various market segments on a larger perspective and reach the client better, Charnock and Inventa joined hands to form a new company – Green Sweeping for marketing products of RCM, Italy. The prime reason for two competitors coming together is to synergise the marketing and manufacturing capabilities of each. In the long run when the products are established in the market, Inventa Cleantech Pvt Ltd could always start producing for RCM in India. Hence, the international brand too gets a comprehensive solution. Acquisitions are strategic moves to narrow down competition and have a larger share of the market. Anyone wanting to enter this market would now think a couple of times because of the existing big players.

A client, on the other hand, can get solutions under one roof and do away with the need to deploy various vendors. This is a more professional approach. Yes, the technology exists but the end users, though enthusiastic about it, are still reluctant when it comes to higher investment in advanced machines. We are far away from that mould and it would take another five to eight years for the Indian end user to graduate to that level. Nevertheless, there is a small percentage in the corporate sector that goes in for such advanced machines. There is a huge untapped market in India and we have a long way to go.

New generation green products are something that the clients will go in for in times to come and hazardous chemicals would finally wane away. The hospitality industry and the contract cleaners are looking for green products as they are cost effective. It is challenging to get them approved and trial runs are done to convince the end user. Once these are done, then there is no looking back.

Perhaps, the excise duty going up by 2% from 8%, and the already existing high taxes are not encouraging as prices are likely to go up. There is not much of a market strategy one can adopt in the given scenario. We need to survive and our margins will further slim down. To increase gains, we need to increase volumes. The market needs to mature to get into that volume game. Meanwhile, it is necessary to deliberate upon the Environment Ministry that cleaning products primarily are meant to keep the environment and surface areas clean and hence, we need duty concession. This will help to keep the entire country clean.

Pradeep Mehra

By 2012, this industry would reach a turnover of Rs8-10 billion at a growth rate of over 25% per annum. The factors boosting this industry are rapid infrastructural growth and the increasing presence of MNCs. The economic growth that is now shifting to two-tier cities indicates tremendous scope for FM companies. This is the right time to invest in this business. There are regional players who are getting together and there are mergers where Indian equity is also involved. Mergers at the unroganised level have to make real efforts to sustain by altering their attitude and adopting professional practices. Similarly, MNCs will increase general awareness, competition, especially with equal level players, professionalism and knowledge base. This will help the customer get the right standard for the money he pays and employees will receive wages as per the labour law.

There is a major shift in the strategy adopted by service providers. It is a myth that housekeeping is cleaning. Housekeeping is providing the right equipment, chemicals and right people leading to a healthy environment. By doing this, we will enrich the customer. The more players enter the market, the more people will get educated on the need for such an environment. This will increase mechanised cleaning, but given the population, we need a balance of both manual and mechanised cleaning.

While bio-chemicals are entering the market, there is not much awareness about them. Again FM is not just housekeeping; each day, the scope is expanding. India began FM with housekeeping and extended to other services like front office management, car parking, security services and so on. Today, if FM companies have got into even doing fleet management for a company, I would say it is only now that we have started filling the basket providing these services.

Stanly D’Britto

The next decade will only see the Indian growth story all over the world. In the next couple of years, the industry players will be strengthening themselves before moving into a hyper competitive stage. IT sector is completely a bullish picture. There are plenty of opportunities for every company whether it is local, regional or international. This is a positive trend.

The organised sector has a larger role to play at present. People now realise the necessity of facility services and every sector is looking for solutions. Earlier, these services were limited to corporate or IT related business where there is a need for high profile organic structure to work in. With acquisitions even at the customers end, for most of the sectors whether it is food processing, pharma or any kind of heavy manufacturing, the companies are looking towards the organised sector to maintain their property and provide them a clean environment.

With a significant growth certainty, there are a plenty of opportunities for the Indian cleaning industry. Apart from the existing untapped market, there are avenues opening up with the infrastructure growth and increase in big manufacturing units. There is a large business waiting for us in the government sector too.

A constant change is taking place in the attitude of clients towards facility management. They are looking at someone who can cater to all their offices – it could be pan-India or a global chain. Further, they are giving importance to FM. Some of the top architects in forums have been talking about the need for FM to maintain the buildings. The fact that the perception is changing is a good sign.

Definitely, post Copenhagen, people give attention to anything green. You give the client any kind of saving mantra and they say, ‘Wow’, this is what we would like to go for and make a big difference. Healthcare sector is one potential area besides government, nuclear plants and manufacturing business. We should also look at the upcoming huge residential campuses. At present, the cooperative housing societies are manned by cheap and local industry players. Over the years, that will change and they will like to have a quality single window solutions provider to service additional facilities like swimming pool, gym and electro mechanical systems along with the entire facility.

Jasmer Puri

Ours is perhaps the fourth company in the industry where private equity has been brought in. Even companies having a turnover of Rs100-200 million have gone ahead with mergers and acquisitions. This trend will take the market to the next level.

Such a trend among the smaller players will move the market from proprietary to partnership. This is an industry where one can start off with an investment of Rs10,000 and there are over 500 such family-run companies in the market. When these companies reach Rs100 million turnover mark, the real struggle begins as a company Rs100 million upwards need to engage professionals. It was when Total Solutions reached Rs500 million and Dusters, around Rs700 million, we realised that we had to move to the next level. This is how the market grows as it matures.

On the other end, many local players are doing very well in their localities. For example, there is this contractor in Ahmedabad who is probably not known even in Rajkot or Surat or Baroda but he is doing very well and wants to remain that way. Similarly, there are facility management companies that are based out of a particular place, say Chennai. Despite a pan-India presence, their strength lies in their hometown. Total Solutions was very strong in the West and Dusters in the South. We decided to create two strong bases, acquire a company in Delhi and wrap that up, which we are in the process of doing.

The Rs100 million housekeeping companies that began operations 10 years back, initially show a sharp rise on the graph, then a levelling out and finally, a downward slump which is equally sharp. These companies have to realise that they cannot stay put in the same place, they have to take a look at growth and they have to have the infrastructure and inputs to sustain that growth.

Along with the merger, we are also coming up with the customised ERP system. We went live with the central software system on April 1. We have PMS (performance management system) and are also putting PMO in place, deciding on ESOPs for the company and working on a whole lot of best practices from other industries and trying to implement them in our company.

By doing this, we are setting a role model for those companies which are smaller to us. Mergers eventually lead to a more organised and professional industry.

The cleaning industry has not been hit that badly with the downturn compared to the IT and infrastructure sectors. A multinational company that had engaged 100-odd employees to provide X-level of standard services has turned around and said that it was acceptable even if its offices were not cleaned regularly, as the costs were to be controlled. In spite of the hit, we have grown at 30% last year.

Everywhere you travel, you always see some kind of innovation. There are always newer products in the market but it can only help enhance one’s knowledge base as not all products can be made available in India. But India has some of the latest machines – auto riders, sweepers… Along with the technology, how receptive are the end-users? In fact, the end users also need to mature. Whatever innovation we have to offer comes with a price. In almost all contracts, 90% clincher is L1. While the clients appreciate that we as service providers will deliver the best, they ask us to match the lowest price.

Four to five years back, it was more the cost that mattered than the cleaning and it still does. May be things have improved by about 10%. Talking about technology, people view this industry as a cost plus industry. You have your input costs plus management fee. They don’t realise you are talking about technology, trained manpower, systems, audits, transitions but when we tell them that all this comes at a cost, they ask us to include it in our input costs.

Today, we are going to clients and telling them that it is their property. They have to give us an SLA and thereafter, it is up to us how we do it, in terms of technology or manpower. We know we have to deliver quality. But that is not what usually happens. The client says this is our property, give us 20 people! That gives us limited scope for innovation and efficiency.

Deepak Shanbhag

Sodexo is known for its food services and with the acquisition of Radha Krishna Hospitality Services, we are able to retain the number one position. Along with that we also got Unisol, which is into facility services. Thus, we are able to grow in volumes both in terms of facilities and food services. Therefore, mergers and acquisitions are essential.

If you look at the current trends, there are many equity players that have been looking at acquisitions. Such mergers happen when there is a tremendous growth in the market. There is a good prospect and potential growth. The soft services are growing in India because of many retail shops, malls, hotels and hospitals. And everyone is moving towards professional approach of outsourcing.

Most of the companies are moving towards green chemicals. So there is innovation and there is more manpower based business model. In 1998, when Maclellan Integrated Services (I) Pvt Ltd started in Chennai, that was the first international company to explore India. And now, we have 12 organised players competing against 1000 unorganised players. Mechanisation was less than 5% then, but today, even the unorganised players are moving towards mechanised cleaning because of shortage of manpower in cleaning services.

There are two trends; either you have a manpower driven model or you make it more mechanised and drive it. The latter option may appear attractive cost wise, but it can also be less productive compared to mechanisation. My experience has been that, the clients are very positive and have been encouraging mechanised services. Today, the organised market is around 150 million sqft and unorganised market is around 1billion sqft. We don’t have enough manpower and there are no major institutions to offer training either.

I feel certain incentives should be given to organisations that promote green chemicals and engage themselves in energy management or waste management. I foresee at least 30% growth for the Indian cleaning industry. The challenge would be: How would the players in the organised sector (13%) compete with those in the unorganised sector (87%) in the coming years!