The Rs 5,500 crore Indian transformer industry is expected to grow at three times the pace of India’s GDP in the next five years, according to estimates by broking house India Infoline.

Analyst Kunal Sheth of Religare Securities, in an October 16 report, said the transformer sector is a play on the strong growth in investments in power generation.

“We expect the annual requirement for transformers to be more than 100,000 MVA for the next five years. This includes incremental demand from the power sector and industry,” he said.

Another major player, Chennai-based Indo Tech Transformers, is adding 4,000 MVA capacity in this fiscal, which will more than double its overall capacity to 7,450 MVA.

Sheth said the demand would primarily be fuelled by:
a) higher spending in the power sector on generation;
b) the increased spending on transmission & distribution as a result of distribution reforms aimed at upgrading the network; and
c) the upswing in the industrial capex cycle.

Another player, Emco Transformers, is also cashing in on the boom and will be doubling its manufacturing capacity from the current 10,000 MVA by the first half of FY08.

Analysts Hitul Gutka, Sachin Neema and Sandeepa Arora of India Infoline, in a February 2007 report said, there are about 20 players in the organised transformer manufacturing segment with nine of them controlling almost 60% of the market.

Apart from investments in power generation and distribution under the XIth plan, demand will further be boosted by replacement market where transformers installed 25 to 30 years ago will reach their end of life.

In addition, exports to countries where power reforms are underway such as Africa and Middle East will also provide big opportunities.

These all will be supported by a demand from the investments coming up in power intensive sectors such as oil and gas, cement etc.

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