The Uttam group is a business house more than a century old and rich in history, it was founded in 1900 with its headquarters in Dera Ismail Khan, in a then undivided India.
In the early days the group carried out trading and export-import activities, mainly with neighbouring countries Afghanistan and Iran and trading in tea, dry fruits, spices and textiles – of which India was a major source in those days.
Named after its founding fathers, the parent company was known as Rup Chand Uttam Chand and the group soon moved into the heart of India, to New Delhi in the late 1930s. Sensing a great opportunity in an evolving industrial gas industry, the mid 1960s saw another development for the company as it ventured into the manufacture of hydraulic oil systems and formed Rup Chand Uttam Chand Industries. The project was promoted by Dr Panna Lal Bhatia, who had returned rich in experience from Germany, after completing his Doctorate.
Perhaps the most significant development from an industrial gas perspective came in the early 1970s, as the group diversified into manufacturing industrial and medical gases under its present name of Uttam Air Products Private Limited. Since 1972 the company has established itself well, having added a German air separation unit in 1980 under the name of Gopala Gases Pvt. Ltd and established a third unit in Delhi in 1986, under the banner of Uttam Air Products Private Limited.
A 100 tpd plant was then established in Alwar in 1994-95 by the name of Techgas Equipment Private Limited, New Delhi, in collaboration with Swiss firm Carbagas – a subsidiary of Air Liquide. The Alwar plant is now managed by Air Liquide India.
Today, Uttam Air Products is managed by Karan Bhatia, who joined the company at the age of 21 after completing his management course at the world famous Harvard University in the US. The company has grown more than ten-fold in the last decade and has aggressive expansion plans.
So where is the company’s focus at present and where will further growth emerge from in the future? Bhatia explains all to gasworld as our interview progresses.
A focus on the domestic market
Uttam Air’s focus is primarily on the domestic market, with the group’s product portfolio a mixture of 80% healthcare and 20% industrial. India, with its burgeoning healthcare sector, is one of the fastest growing markets in this arena – as anybody who has been to a state controlled hospital in the past fifteen years will confirm.
Tremendous growth in the Indian healthcare sector has been made during this period, as formerly state-controlled hospitals have been replaced with modernised facilities. State-of-the-art hospitals have mushroomed in the country, providing the best quality healthcare services and enticing patients from America and Western Europe due to the low cost of treatment – a trend that has become a norm rather than an exception. Perhaps the term ‘Medical Tourism’ has originated as a result of India, where patients go to low cost healthcare service-providing countries to get their desired treatment.
Bhatia is clearly optimistic about the opportunities provided by this booming healthcare sector, for the industrial gas producers. As he shares with gasworld a market report on the comparisons between healthcare facilities in India and the Western world, we’re startled by the data he shares. India has just 1.5 hospital beds for every 1000 people, whereas the North America & Western Europe region has around 7.5 beds for the same number of persons, and its Chinese neighbour has 4.3 beds per 1000 people. Such statistics appear to put India on the same level as that of African countries in terms of healthcare infrastructure, if not even lower down the ladder.
However, Bhatia avers that things are improving in the healthcare sector, following the liberalisation of the Indian economy in 1991, since when a lot of private hospitals have emerged which not only match the best in the world, but are also a lot cheaper than their counterparts in the West. Indian government too, has started taking initiatives for the improvement in quality of services at government-controlled hospitals, while also opening-up new hospitals.
With a population of more than one billion and a middle class society bigger than the total size of the population in the US, whose purchasing power is steadily increasing, there is to be an increased focus on the healthcare sector in the coming years. Such a development would require an unprecedented demand for liquid oxygen and nitrous oxide and with Uttam Air situated in the national capital, the company is well placed to satisfy this demand.
Bhatia notes that as well as supplying the gases for the healthcare industry, Uttam Air has been supplying the entire infrastructure for gas supplies at hospital sites in various locations across the country. The company also exclusively partners in India with Western Enterprises, a US-based medical gases equipment company and part of the Berkshire Hathaway group.
A new venture
A new venture into the cylinder market of late has seen Uttam Air enter into a joint venture (JV) with Luxfer Gas Cylinders to manufacture Aluminum and composite cylinders in India.
The new deal, Bhatia reveals to gasworld, builds on the previous success of Uttam Air as a distributor for Luxfer’s products in India. The JV was signed in December 2008 and involves both technology transfer and financial contribution from Luxfer, while the new company has been christened as Luxfer Uttam India Pvt. Ltd and construction work for the manufacturing facility has already started. Production is scheduled to commence in June 2009.
A benefit of the deal is that the JV would make quality product available at short lead times and competitive prices for Indian and Asian markets. Bhatia explains, “Almost all medical customers including home care customers are using only steel cylinders because of non-availability of quality and affordable light weight alternatives.”
These lightweight cylinders would also be made available for use as fire extinguishers, and in the SCUBA and beverage industries, as aluminum cylinders are technically preferred as well as aesthetically better. Luxfer has enjoyed a reputation as the best quality Aluminum cylinder supplier for a number of years now.
The installed capacity at this production facility, located in State of Haryana, is 400,000 per annum. According to Bhatia, despite there being a number of players in the cylinder manufacturing industry, there is an acute shortage of quality cylinders in India as most manufacturers are catering for export markets. A chunk of the domestic production is going to Iran, which is undertaking a major overhaul of its infrastructure in gas industry and CNG automobiles requiring high pressure cylinders, Bhatia says.
Economic downturn and its impact in India
As the curtain descends on an extraordinary period of high growth, the global economy is going through its worst phase since the great depression of the late 1920s and early 1930s.
The Indian economy, which was seen as unstoppable and often prompted comparisons between its economic growth and China’s economic growth, has seen reams and reams of print media filled with talks of the upcoming Asian century. We questioned Bhatia on how the global financial crisis is likely to impact upon the global and Indian industrial gases industry.
“Though the Indian GDP is likely to slow down from 9%, which it has registered for the last three to four years in succession, to 6-7% for at least the next two years, it wouldn’t have much impact on Indian industrial gas industry as most of the industrial gas business is dependent on basic industries like iron, chemicals, glass and healthcare, which are not going to be affected by a significant amount.”
“Indian government has made a priority of developing the infrastructure segment for overall economic development. Even after the onset of the financial crisis, government has announced fiscal measures in terms of excise duty cuts for manufacturing, and various other measures to keep the momentum in these sub-sectors.”
Bhatia states further, “There might be an initial dip in the Indian industrial gas industry, because of delays in implementation of projects in gas-consuming industries, but the medium and long term story of growth is intact. Considering all the factors, the gas industry is likely to grow at an average between 12-15% in the next three years, if not higher.”
However, on the price front Bhatia believes that prices are bound to come down by 10-15% globally, in the face of reduced energy prices and a slowdown in consumption and the purchasing power of end-users. In an Indian context, he suggests that he doesn’t expect prices to fall as steeply as global prices.
The Indian gases industry has shown a lot of promise in recent years, riding on the fast growth of consuming industries such as steel, glass, electronics and chemicals. Things had been looking quite bright up until last September, when leading economies promptly went into a tailspin.
“The decoupling theory of Indian economy from the US economy has been proved wrong, but the extent of the effect wouldn’t be that marked – we have seen some of the projects in the steel sector getting postponed, but sooner rather than later these projects will be implemented,” Bhatia explains.
“There have been no postponements in glass industry projects, there would be five float glass projects going on-stream in the next 12-18 month period, as well as a couple of container glass manufacturing plants.”
“Solar cell manufacturing has attracted a lot of investments in the last year and will be a huge demand driver for the gas industry in the coming days, almost all the major domestic ‘biggies’ have announced their plans to set up solar cells and thin film technology. An initial delay is seen in this sector, but not because of global or Indian economic conditions, rather it’s more attributable to falling crude prices which, after touching this historic high of $147, have tumbled to $33-35 per barrel. In chip manufacturing the government of India announced its semiconductor policy earlier this year (2008), which has acted as a catalyst for investments in this area and will be a huge market for industrial gas industry and companies.”
“In the automobile sector, we have seen huge growth in recent years and most of the automobile manufacturers have set up their manufacturing in the country. By western standards our automobile sector is small, it produced just 1.76 million passenger cars and 545,000 commercial vehicles in the last fiscal year (Indian fiscal year is April to March of succeeding year). This is much smaller than major producers such as Japan, the US, China and far behind even Germany and South Korea, but it’s the year-on-year (YOY) growth which is important in an Indian context,” Bhatia says.
“We have travelled a long distance in this area if we look back just five years. The automotive sector would be an equally important area of industrial gas consumption as the steel and electronics industry.”
AIIGMA, AIGA & APGA
As our interview progresses we move from discussion of the growth drivers for the Indian gases industry, to the associations that preside over the industry in this part of the world.
Bhatia is President of the All India Industrial Gas Manufacturers Association (AIIGMA) and gasworld asked his opinion of how AIIGMA and other industry associations, such as the Asia Industrial Gas Association (AIGA) and the Asia Pacific Gas Association (APGA) are helping the industrial gas industry in the country.
“AIIGMA, as an association, was started and promoted by Dr Panna Lal Bhatia (Bhatia’s father) in 1975, and in these 33 years it has come a long way and has helped industrial gas industry in the country in a lot of ways,” he tells us.
“It has acted as an interface between the Indian government and industrial gas industry players in the country. However, it can achieve a lot in days to come, by way of introducing technical courses geared for industrial gas industry – there is an acute shortage of trained workers in the Indian gas industry and there is no single institute or training centre which has a discipline in the industrial gas domain.”
With skillsets as much a barrier to future progression as any other factor, this is an issue Bhatia appears prepared to address as 2009 unfolds. He told gasworld, “As President of the association I have taken certain steps in this direction and hopefully there should be some good news in coming days. AIIGMA is also playing a pivotal role in harmonisation of the Indian Standards with the International Standards Organization (ISO). AIIGMA is also hosting a ISO TC 58 (gas cylinders) meeting for the first time in India.”
Noting the importance of harmonisation and cooperation between fellow countries, Bhatia concludes our interview and comments, “The APGA had its first meeting in China and was attended by an AIIGMA representative, this association is primarily a federation of gas associations in the Asia pacific region. It is currently at an infancy stage and we are hopeful this would be good for facilitation between the gas companies in the region.”