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SEPTEMBER
2016
JANUARY 2015
CONSTRUCTION EQUIPMENT
Executive Summary.... 3
Advantage India...4
Strategies Adopted........17
Growth Drivers.......20
Opportunities......................32
Success Stories.............34
Useful Information..39
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2016
JANUARY 2015
CONSTRUCTION EQUIPMENT
EXECUTIVE SUMMARY
Construction equipment industry in India is expected to reach USD5 billion by FY20 from
USD3 billion in FY16, in value terms. While, volume sale of construction equipment is
expected to grow to 96,730 units by 2018 from 76,000 units in FY16.
Rising infrastructure
investments
The NITI Aayog estimates total infrastructure spending to be about 9 per cent of GDP by
2017, up from 7.2 per cent during the 11th Five year plan (200712)
Increasing private
sector involvement
Private sector is emerging as a key player across various infrastructure segments, ranging
from roads and communications to power and airports
The real estate market is estimated to grow to USD180 billion by 2020 from USD126
billion in 2015, driven by demand mainly from residential sector
Construction equipment forms around 7 per cent to 8 per cent of GDP and gives
employment to more than 3.0 million people in the country by 2020. It also accounts for
more than 60 per cent in total infrastructural investment
Construction equipment
analysis
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2016
JANUARY 2015
CONSTRUCTION EQUIPMENT
ADVANTAGE INDIA
SEPTEMBER 2016
CONSTRUCTION EQUIPMENT
ADVANTAGE INDIA
Robust demand
Growing demand
FY16
Total
revenues:
USD3
billion
Attractive opportunities
FY20E
Total
revenues:
USD5
billion
Competitive
advantages
India
Policy support
Source: , Department of Heavy Industries (DHI) Annual Report , CII, TechSci Research
Notes: FY - Indian Financial Year (April - March), E Estimates, CAGR - Compound Annual Growth Rate, FDI - Foreign Direct Investment
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2016
JANUARY 2015
CONSTRUCTION EQUIPMENT
CONSTRUCTION EQUIPMENT
EVOLUTION OF THE CONSTRUCTION EQUIPMENT SECTOR IN INDIA
Beyond 2000
1969 onwards
1964
Before 1960
Domestic
necessity for
construction and
mining equipment They began
were entirely met
manufacturing dozers,
by imports
dumpers, scrapers, etc,
for defence requirements
Followed by L&T,
Telcon and Escorts
JCB
Several Indian firms are entering into tieups for equipment rental & leasing
business, e.g., tie-up between SREI
Infrastructure and BNP Paribas. This is
expected to drive sales of equipment in
future
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2016
JANUARY 2015
CONSTRUCTION EQUIPMENT
MAJOR SEGMENTS OF THE CONSTRUCTION EQUIPMENT INDUSTRY
Earth-moving
equipment
Road building
equipment
Construction equipment
Material
handling and
cranes
Concrete
equipment
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2016
JANUARY 2015
CONSTRUCTION EQUIPMENT
CONSTRUCTION EQUIPMENT SEGMENT DESCRIPTION
Material handling equipments have four categories: storage and handling equipments,
engineered systems, industrial trucks, and bulk material handling
There are 50 units in the organised sector for the manufacture of material handling
equipments and many units in the small-scale sector as well
Concrete equipments
They include equipments such as concrete pumps, aggregate crushers, transit mixers,
asphalt pavers, batching plants
Road building
equipments
Road building equipments are used in the various stages of road construction
Widely used ones are excavators, diggers, loaders, scrapers, bulldozers etc
Earth-moving
equipments
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2016
JANUARY 2015
CONSTRUCTION EQUIPMENT
INDIAN CONSTRUCTION EQUIPMENT REVENUES ON AN UPTREND
By FY20, construction equipment industrys revenue is
estimated to reach to USD5 billion.
CAGR: 2.34%
6.5
5.1
In FY16, India construction equipment industry grew at a Yo-Y of around 3.45 per cent over the previous year.
3.7
3.9
4.3
4.6
4.2
5.0
3.9
2.9
3.0
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY20E
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CONSTRUCTION EQUIPMENT
CONSTRUCTION EQUIPMENT SALE ON AN UPTREND
Total no of construction equipment units sold
(000)
CAGR: 6.18%
72.2
59.7
50
45.5
96.7
76.0
68.2
66.4
55.9
60.7
40.5
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY18E
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2016
JANUARY 2015
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CONSTRUCTION EQUIPMENT
EARTH MOVING IS THE LARGEST SEGMENT BASED ON REVENUES
Construction equipment revenue breakdown by segments 2015
Earth Moving
6%
7.90%
10.72%
Concrete Equipment
10%
18.96%
Material Handling
14%
62.10%
5.92%
3.62%
4.65%
7.24%
10.00%
10.34%
23.00%
28.95%
43.00%
39.28%
2015
2018E
Road Construction
Equipment
49.46%
Material Processing
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2016
JANUARY 2015
7.00%
4.00%
6.00%
7.00%
2014
Backhoe Loaders
Crawler Excavators
Mobile Cranes
Mobile Compressors
Compaction Equipment
Wheeled Loader
Others
12
CONSTRUCTION EQUIPMENT
NOTABLE TRENDS IN THE CONSTRUCTION EQUIPMENT INDUSTRY
Increasing imports from
China
Rapidly growing
excavator segment
Equipment rental
Customised
equipment's
The private sectors share has expanded across key infrastructure segments, ranging from
roads and communications to power and airports
Of the total planned infrastructure investments worth USD1 trillion during the 12th FiveYear Plan, the share of private sector is estimated to be 47 per cent , up from 25 per cent
during the 10th Five-Year Plan
The share of crawler excavators is estimated to increase to 35 per cent in 2016 from the
23 per cent in 2015, mainly on demand for mid-sized crawlers (20 tonnes) from the
construction segment
Demand for larger excavators (30 tonnes) used in the mining segment is also expected to
increase in the years to come
Several Indian firms are entering into tie-ups for equipment rental & leasing business, e.g.,
tie-up between SREI Infrastructure and BNP Paribas
With easy availability of financial schemes and increasing use of construction equipment,
the scope of construction equipment rental industry is growing in India.
The manufacturers have also started giving end to end solutions to cater to this demand
Source: Ministry of Commerce, Directorate General of Foreign Trade (DGFT), TechSci Research
Note: R&D - Research and Development
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2016
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13
CONSTRUCTION EQUIPMENT
KEY PLAYERS
Company
Products
818.9 (FY15)
BEML Ltd
433.23 (FY15)
McNally Bharat
Engineering Co Ltd
402.38 (FY16)
247.02 (FY16)
L&T
15,678.58 (FY16)
194 (FY16)
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CONSTRUCTION EQUIPMENT
CONSTRUCTION EQUIPMENT
PORTERS FIVE FORCES ANALYSIS
Competitive Rivalry
Big firms have intense competitive rivalry, as all major world players
operate in India
Competition is deep as companies fight with each other on the quoted
price to win a contract amid high price sensitivity
Low switching costs from buyers increase competition
Threat of New
Entrants
(Low)
Substitute Products
Bargaining
Power of
Customers
(High)
Competitive
Rivalry
(High)
Substitute
Products
(Low)
Power
is
high
as
few
construction
and
mining
companies do majority of bulk
buying, which gives them an
edge
Bargaining
Power of
Suppliers
(Low)
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CONSTRUCTION EQUIPMENT
STRATEGIES ADOPTED
SEPTEMBER 2016
CONSTRUCTION EQUIPMENT
STRATEGIES ADOPTED(1/2)
Modernising products
suiting changing
customer trends
Provision of after-sales
services
In order to move up the value chain and become a one-stop shop, companies form JVs
with international players for technology transfer
In February 2016, Russias Uralmash, decided to form a joint venture with Indias SRB
International to manufacture heavy equipments in the country, with 50:50 partnership.
Oil and coal companies are demanding larger-sized mining machinery with larger capacity
so as to increase output by enhancing recovery rates
Most equipment's manufactured in India undergo considerable wear and tear; thus,
maintenance of machinery becomes necessary after a period of time
Companies are looking forward to increase their backup of trained technical professionals
to cater to maintenance demand in addition to focussing on human resource development,
to create a motivated sales and service force
For instance, Providing on-site training and spare stock of consumables to customers
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CONSTRUCTION EQUIPMENT
STRATEGIES ADOPTED(2/2)
R&D
Integrated facility
Companies are stepping up their R&D spending to manufacture equipment without foreign
assistance
Other aspects include quality control, enhancing power-to-load ratio, reducing operating
costs and use of better materials
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2016
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CONSTRUCTION EQUIPMENT
GROWTH DRIVERS
SEPTEMBER 2016
CONSTRUCTION EQUIPMENT
INVESTMENTS IN INFRASTRUCTURE DRIVING THE SECTORS GROWTH (1/2)
Investment in infrastructure is the main growth driver of the construction equipment industry. The NITI Aayog estimates total
infrastructure spending to be about of 9 per cent of GDP during the 12th Five Year Plan (2012-17), up from 7.2 per cent during the
previous plan (2007-12)
Indias investment in infrastructure is estimated to double to about USD1 trillion during the 12th Five Year Plan (2012-17) compared to
the previous Five Year Plan
9%
8.4%
FY15
7.9%
FY14
157.4
7.6%
FY13
7.5%
FY09
FY08
FY09
101.9
FY10
89.5
7.9%
69.4
FY11
75.7
8.4%
101.6
7.4%
FY12
FY11
FY12
FY14
FY15
7.2%
FY08
SEPTEMBER
2016
JANUARY 2015
11th Five
Year Plan
260.2
FY16
210.6
9.0%
173.8
FY17
12th Five
Year Plan
7.2%
181.2
6.4%
5.2%
FY10
FY13
FY16
FY17
21
CONSTRUCTION EQUIPMENT
INVESTMENTS IN INFRASTRUCTURE DRIVING THE SECTORS GROWTH (2/2)
12th Five Year Plan Fund allocation to
infrastructure sub-segments (USD billion)
India has the worlds second largest road network spanning 4.7
million kilometres
The Government intends to increase the paved road to total road
ratio and build more national highways
356.4
350.0
300.0
227.8
250.0
200.0
126.8
150.0
86.3
100.0
84.5
50.0
0.0
Transport
Japan has also pledged USD35 billion investment over the next
five years
119.4
Power
Others
Telecom Irrigation
Water
supply
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2016
JANUARY 2015
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CONSTRUCTION EQUIPMENT
GROWING PUBLIC PRIVATE PARTNERSHIPS (PPPs)
According to the World Bank, India is second only to China in
terms of the number of Public Private Partnership (PPP)
projects. Encouragingly, the government is set to continue
promoting PPP models to help achieve its investment targets
80%
65%
70%
53%
60%
47%
50%
35%
40%
25%
30%
20%
10%
0%
10th plan
11th plan
Public
Private
12th plan
Source: KPMG, TechSci Research
67%
57%
43%
33%
Phase I
30%
Phase II
PPP Projects
Phase III
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2016
JANUARY 2015
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CONSTRUCTION EQUIPMENT
INCREASED MINING ACTIVITY CONTRIBUTING TO HIGHER DEMAND (1/2)
557.68
565.02
FY10
FY11
FY12
FY13
FY14
611.00
532.99
FY08
526.33
451.74
FY07
527.52
425.11
487.90
CAGR: 4.64%
639.24
SEPTEMBER
2016
JANUARY 2015
FY09
FY15
FY16
24
CONSTRUCTION EQUIPMENT
INCREASED MINING ACTIVITY CONTRIBUTING TO HIGHER DEMAND (2/2)
Production of iron ore (million tonnes)
180.0
169.0
155.0
137.0 136.4
129.0
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16P FY17F
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JANUARY 2015
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CONSTRUCTION EQUIPMENT
GROWING HOUSING AND CONSTRUCTION MARKET TO ADD TO DEMAND
Concrete equipments sales growth
22%
CAGR
(Sales in 000 Units)
SEPTEMBER
2016
JANUARY 2015
140-190
65-75
95-120
35-40
25-35
14-18
10-15
4-6
11-14
7-10
10-16
7-8
2016E
2020E
Source: Article from a key construction equipment website (http://www.nbmcw.com/reports/event-report/5914excon-post-event-report-exhibitor-profile-and-new-launches.html), TechSci Research, BMI
Notes: E Estimated
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CONSTRUCTION EQUIPMENT
STRONG DEMAND PROSPECTS ARE ATTRACTING GLOBAL PLAYERS
FDI inflows in earth-moving equipments
In USD Million
337
235
209
170
132
74
134
134
175
134
75
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16
Joint Venture
Indian partner
Foreign partner
Ashok Leyland
John Deere
Ashok Leyland
50%
John Deere
50%
Tata Hitachi
Construction
Machinery Company
Private Limited
Hitachi Construction
Machinery Co. Ltd.
40%
Source: Department of Industrial Policy & Promotion (DIPP), Company websites, TechSci Research
Notes: FDI Foreign Direct Investment, FY India Financial Year (April March)
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CONSTRUCTION EQUIPMENT
KEY PRODUCTION FACILITIES OF SOME MAJOR PLAYERS
Jaipur Plant
Jaipur Plant
3S Integration Facility
Guwahati, Assam
Vadodara Machine Shop
Vallabh Vidhyanagar
Facility
Kumardhubi Factory
Asansol Fabrication Shop
Aurangabad Plant
Bengaluru Factory
JCB India
Bengaluru Plant
BEML
Ranipet Plant
Kolar Plant
Mysore Plant
SEPTEMBER
2016
JANUARY 2015
Gummidipoondi
Plant
Greaves Cotton
Elcon Eng.
28
CONSTRUCTION EQUIPMENT
KEY MANUFACTURING FACILITIES OF SOME MAJOR PLAYERS
The Ballabhgarh facility is the worlds largest
backhoe loader plant which also manufactures
Liftall, the pick-&-carry crane.
Ballabgarh (Haryana)
JCB India
BEML
Greaves Cotton
Vallabh Vidhyanagar
Facility
Elcon Eng.
Aurangabad Plant
Bengaluru Plant
Rail & metro Complex
Palakkad Complex
Vignyan Industries for
steel casting
Kolar Gold Fields (KGF)
Complex
Earth moving Division,
Rail Coach Unit,
Heavy Fabrication &
Hydraulic & Powerline
Division
SEPTEMBER
2016
JANUARY 2015
Two Manufacturing
plant in Pune
Bengaluru Plant
Kolar Plant
Mysore Plant
Mysore Plant
Truck Division
Engine Division
Ranipet Plant
Gummidipoondi
Plant
Source: Company websites
29
CONSTRUCTION EQUIPMENT
FAVOURABLE POLICIES ARE SUPPORTING SECTOR GROWTH (1/2)
The material handling equipment industry is de-licensed and Foreign Direct Investment
(FDI) of up to 100 per cent under the automatic route as well as technology collaboration
is allowed freely
Government of Indias focus on infrastructure development is the biggest driver for the
construction equipment industry.
100 smart cities and Make in India programme projects to boost investment.
The government has granted sops, including a large number of SEZs, to the capital goods
industry of which construction equipment is a part; especially with an impetus to increase
exports
Custom duties on a range of goods that are used in the manufacturing process have also
been lowered
In the Union Budget 201516, custom duty exemption from MAT under 80IA for
Infrastructure projects was announced. This exemption will help in reducing the cash
outflow in the initial years of the project.
De-licensing
Special Economic
Zones (SEZs)
Source: Ministry of Agriculture, Union Budget 2015-16, Union Budget 2016-17, TechSci Research
SEPTEMBER
2016
JANUARY 2015
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CONSTRUCTION EQUIPMENT
FAVOURABLE POLICIES ARE SUPPORTING SECTOR GROWTH (2/2)
Encouragement of
Infrastructure Debt
Funds (IDFs)
Issue of tax-free
infrastructure bonds
The Government of India set up the India Infrastructure Finance Company (IIFCL) to
provide long-term funding for infrastructure projects
Interest payments on borrowings for infrastructure are subject to lower withholding tax rate
of 5 per cent , down from a tax rate of 20 per cent
Government cleared model tripartite pact for infra debt funds in ports
As per the Union Budget 2016 17, the GOI exempted service tax on construction of
houses up to 60 square metres, under any scheme of central government, state
government or public-private partnership (PPP)
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CONSTRUCTION EQUIPMENT
OPPORTUNITIES
SEPTEMBER 2016
CONSTRUCTION EQUIPMENT
OPPORTUNITIES
Renting and leasing of equipment
After-sales services
Exports
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CONSTRUCTION EQUIPMENT
SUCCESS STORIES
SEPTEMBER 2016
CONSTRUCTION EQUIPMENT
BEML LIMITED: LARGEST MANUFACTURER OF EARTH-MOVING EQUIPMENT (1/2)
Gross sales (USD million)
682
691
659
626
547
591
581
536
483
466
SEPTEMBER
2016
JANUARY 2015
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15 FY16E
35
CONSTRUCTION EQUIPMENT
BEML LIMITED: EXTENDING GREEN REVOLUTION TO EASTERN INDIA (2/2)
2017
2012
2011
2010
2009
Forms a joint
venture to enter
contract mining
of coal
Begins operations at
its fourth
manufacturing
complex in Palakkad,
Kerala
BEML supplied
nations first
stainless steel
EMUs to Indian
Railways
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2016
JANUARY 2015
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CONSTRUCTION EQUIPMENT
JCB INDIA LEADING PLAYER IN THE SECTOR
2015
JCB India annual
revenue touched
to USD818.9
million
Soil compactor
63 dealers and
650 outlets across
the country
Market share of
around 50 per
cent in backhoe
loader segment
Excavators
Wheeled loaders
Set up operations
in India as a JV
with Escorts
group
Inaugurates
worlds largest
Backhoe loader
manufacturing
facility in Haryana
2014
The company
inaugurated two
manufacturing
facilities in Jaipur
JCB UK acquires
100 per cent stake
Backhoe loaders
1978
2003
2007
2009
2010
2016E
The company
has targeted to
have a revenue
of USD892.6
million
2014
2015
2016
SEPTEMBER
2016
JANUARY 2015
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CONSTRUCTION EQUIPMENT
YAMUNA EXPRESSWAY A PPP SUCCESS STORY
Yamuna Expressway is a 165-km, six-lane, controlledaccess expressway stretching between Greater Noida and
Agra
Yamuna Expressway
Silent features
Speed Limit - 100 kms per hour for cars, 60 kms per hour
for heavy vehicles
Minor Bridges - 41
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CONSTRUCTION EQUIPMENT
USEFUL INFORMATION
SEPTEMBER 2016
CONSTRUCTION EQUIPMENT
INDUSTRY ASSOCIATIONS
Indian Earthmoving & Construction Industry Association Ltd
(IECIAL)
C/O Confederation of Indian Industry
The Mantosh Sondhi Centre
23 Institutional Area, Lodhi Road
New Delhi 110 003
Tel: 011- 24629994-7, 011-45772032
Email: s.g.roy@cii.in
SEPTEMBER
2016
JANUARY 2015
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CONSTRUCTION EQUIPMENT
GLOSSARY
FY: Indian Financial Year (April to March) So FY11 implies April 2010 to March 2011
USD: US Dollar Conversion rate used: USD1= INR54.43
FDI: Foreign Direct Investment
CAGR: Compounded Annual Growth Rate
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CONSTRUCTION EQUIPMENT
EXCHANGE RATES
Exchange rates (Fiscal Year)
Year
Year
200405
44.81
2005
43.98
200506
44.14
2006
45.18
200607
45.14
2007
41.34
200708
40.27
200809
46.14
2008
43.62
200910
47.42
2009
48.42
201011
45.62
2010
45.72
201112
46.88
2011
46.85
201213
54.31
2012
53.46
201314
60.28
2013
58.44
2014-15
61.06
2014
61.03
2015-16
65.46
2015
64.15
2016-17 (E)
66.95
2016 (Expected)
67.22
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CONSTRUCTION EQUIPMENT
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