The upswing in Indian economy has enhanced the demand for construction and material handling equipments. The demand for construction equipments correlated with growth in infrastructure, ports, pipelines, roads, steel, power projects, mining and building etc. which attracts an investment of more than $ 500 billion in next few years has lead to a tremendous growth in requirement of mobile cranes and other equipments.
Construction equipment – Building on the boom
- Presently India’s Construction equipment industry has a revenue of US$ 3.5 billion in 2008 and is expected to double US$ 7-7.5 billion by 2010
- The Indian construction equipment has been growing at a scorching pace of more than 30% per annum.
- Equipment cost ,a part of a construction project ranges from 4.5% to 24%.
Foreign players
- Escorts JCB has been taken over by JC Bamford Excavators Ltd. U.K. in 2003 and is now called JCB India Ltd, which is the group’s largest market.
- Terex Vectra Equipment is a 50:50 JV between Terex corp. USA and Vectra ltd. of UK.
- Other major tie-ups include Caterpillar with GMMCO (a Birla group Company), Komatsu with L&T, and Hitachi’s 40% stake in Telcon (A TATA Company).
- Manitowoc acquired Shirke Potain and named the entity Potain India Pvt Ltd to have a wholly owned manufacturing facility in India.
- Yanmar construction company, Japan has recently announced its India foray.
- Volvo construction equipment is planning to manufacture some of its imported models in India within the next 2-3 years.
- Hyundai Construction Equipment India Pvt Limited, wholly owned subsidiary of Hyundai Heavy Industries Limited is ready to participate in the strong economy growth of India.
Rental Equipment Business –A New Trend
The equipment rental business in India is currently pegged at around 7-8% of the total construction equipment, which is US$ 0.28 billion industry which is nowhere close to what is seen in more developed markets with around 80% in Japan, 60-65% in USA and 35% in china. The Rental Equipment business in India is expected to grow to about 25% by 2010. The prominent organized players are SREI’s Quippo, Sanghvi movers, Gremach Infrastructure equipments and Caterpillar.The average cost of hiring has gone up by approximately 30-40% over the last two years.
Equipment Finance in India paves the way for an exciting future
The Indian equipment finance market is yet to evolve. There are only 3 major players SREI Infrastructure finance, Cholamandalam DBS and Birla Global finance which cater to approximately 3% of the market as compared to 65% in developed countries. SREI also provides assistance to its customers throughout the lifecycle of the equipment and has initiated reverse auctioning of equipments in 2007.
India – The Opportunity
We see good opportunities in:
- Equipment finance, leasing and rentals
- Manufacturing/ Assembly/ Relocation of used/ older plants to India
Chart 1: India Construction equipment sector –A Snapshot
Chart 2: Growth of the Industry (In US$ billions)
Chart 3: Growth Drivers for the industry
Chart 4: Dominant players in the rental equipment market
Acknowledgements:
Team India Now Report,
IBEF
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