Indian Construction Equipment Industry & Prospects Reports from Off-Highway Research gave overview of global sales of construction equipments, which had been growing since 2003 and crossed 1,000,000 units in 2007 but went down drastically in 2008, and reduced to 600,000 units in 2009, but by 2011 sales returned to 830,000 units. In value terms, in 2007 global sales exceeded $ 100 Billion compared to around $83 Billion in 2011. The developed market of Europe and US are still suffering badly and are still running 50% below their peak levels. Although these markets are growing slowly, these are traditionally strong markets which constituted 50% of demand in 2007. As a result all manufactures are dependent on BRICs, where the focus is on infrastructure development. China and India will be key market for all of them for many decades to come. In India the construction equipment growth is set for long term robust growth as per research. In unit terms market is forecasted to grow from 55,000 units in 2010 to 100,000 units in 2015 with CAGR of 13%. In value terms, the market is expected to grow from US$ 3.9Bln to US$ 6.9Bln.
A large number of international construction companies are focusing attention to enter India These are being done either through subsidiary companies or Joint venture with local partners. The structure of Indian market is changing with Indian players with global exposure are aware of latest trend and buying is increasingly moving from “based only on price” to “value for money”. Expectation is of excellent after-sales service irrespective of initial purchase price and evaluating competitive offer based on technology, productivity, reliability, maintenance cost, support packages and delivery time offered. Competition is getting very intense and market forces will result in finding own level of the price to quality ratio. In India, the sale of backhoe loader have been continuously growing since 2000 and is expected to exceed 35,000 units in 2012 and will remain most popular equipment among plat hirers and small contractors but is expected to be replaced by efficient and productive machines like crawler excavators or wheeled loaders. Summing up, all global manufactures and their component supply chains are unanimous in their belief that India market gives tremendous opportunity to grow exponentially over the long term. Despite the hullabaloo against slow pace of reforms, In 2012, a part (Infrastructure Construction Industry) of the Indian economy is gearing up for large investments. There is only one direction to go- ahead! but yes the concerns are around speed! However hope is still on and it’s better to participate in this growth story (even if it’s moving slowly) than to miss the bus for what could be a huge business opportunity.
Airport Projects: • Chennai’s second airport at Sriperumbudur could come up by 2016-17. With this Chennai will be third city after Mumbai and Goa to have two airports. The cost of project expected to be INR 6000 Crore ( USD 1.2Bln), land for project had already been procured. • An MOU had been signed between AAI and government of Jharkhand to open airport at Bokaro and Jamshedpur. Road & Highway projects: • Road ministry is planning to double the private participation for road projects . This will open a big opportunity for construction industry in 12th five year plan. • The overall investment is set to double with private partnership share increase by 10%, which will go up to 51% from existing 41%. • Moreover, plan is to spend INR 12000 Crores (USD 2.4 Bln) to build road on untouched zones in next 5Years. • Under pressure to contain expenses, the Finance ministry has recommended to Highway ministry not to use state grant for road projects but try for BoT projects, where private builder put up the capital to build and bear the risk. As per plan 20,000km of road at average cost of INR 3 – 3.5 Crores (600k USD) is planned in 12th plan with policy to first try with BoT- toll route if not than next option of BoT with annuity and last option of EPC route. • NHAI (National Highway Authority of India) is planning to build 3600 km road for financial year 2012-2013. Railways Projects: • Dedicated Freight Corridor ( DFC), launched six years back is running late but geared up after the SP government started ruling UP. It is expected INR80,000 crore (USD 16 Bln) cost escalation. Key reason for delay is land acquisition, which is completed by 67%. • The government plan to create six corridors for bullet train that will run @ 300kmph. These corridors are Pune-Mumbai-Ahemdabad-Delhi; DelhiChandigarh-Amritsar; Howrah-Haldia; Hyderbad-Dornakal-Vijayawada-Chennai. French Consultant, Systra in its report suggested total cost of INR 57,000 crores (USD 11Bln) which is INR 100 crores (USD 20 Mln) per km. Power Projects: • New policy to be framed to facilitate working of six power plants based on imported coal, namely Adani Power, JSW Steel, Coastal Energen, DCW and Ind Barath Power, total capacity of these power plants is about 4650MW, with combined coal requirement of 6 million tonnes. • Power transmission sector to have total investment of INR 2 Lakhs crores, the power transmission companies are eyeing to gran INR 2800 crores business for which bids are likely to open in this year. Comapanies like Sterlite Grid, L&T, Lanco Infratech, GMR group, REC transmission and KEC international are expected to be in race for two important transmission to b executed on PPP model.
With feasibility report completed for 750 mw Siang Upper Hydroelectric Project in Arunachal Pradesh, NTPC is moving fast for building up the project of INR100,000 crores (USD 20 Bln) over a period of 10 years. Port Projects: • Welspun led consortium has assumed role of a port operator by winning bid for Vizhinjam port. Consortium on finally acceptance of its offer, will invest INR970 Crores (USD 190 Mln) on the superstructure of the port. The port operator can operate for 30 years than hand it over to state. • Vizag port with 57 metric tons cargo handling capacity is all set to expand by staggering investment of INR 8231 crores (USD 1.6 Bln).
Conclusion: While market is growing, the number of manufacturers has also increased, thereby brining the best of technology to Indian customers. The customers will certainly benefit but it will be challenging in terms of the earnings for product as there is pressure on the pricing of the equipment. Compiled by Ranga Babu