RESEARCH ON CONSTRUCTION EQUIPMENT INDUSTRY IN INDIA

SUBMITTED BY: DEEPAK TALREJA DEVANANDAN K.V. JAITRA AGNIHOTRI KOPAL JAIN RITESH CHOWDHARY SUDHIR K. MOHAN

INDUSTRY PROFILE SECTOR CONTRIBUTION PRODUCT PROFILE COMPETITOR ANALYSIS FIVE FORCES MODEL CONCLUSION

The Indian Construction Equipment sector has an estimated market size of US$ 2.4 2.6 billion for the year 2007.
The industry has been growing due to the large investments made by the Government and the private sector infrastructure developments.

The prospects of the construction equipment industry look attractive with a projected investment of US$ 320 billion in the infrastructure sector over the next few years.

The imports market is estimated around US$ 375 million. Of these, the earthmoving, excavation and hauling equipment categories command around 25 per cent. Imported used equipments, which include high-end hydraulic mobile cranes, excavators, motor graders, vibratory compactors comprise a negligible 0.4 per cent of the total construction equipment market.

Product consumption constitutes the bulk of the segment with around 56 per cent

While the un organized sector contributes to around 15 per cent. Unorganized players are more prevalent in the relatively less technology intensive material handling, material preparation and concrete equipment segments.

Spare parts revenues range anywhere from 2029 per cent of the total sales

Services revenues have been higher for global players at around 1120 per cent

The construction equipment industry in India has more than 200 players; the top 6 players occupy about 60 per cent of the market.

% Split
2% 6% 15%
Products Spare Parts Unorganised Sector Services

56%

21%

Exports

India produces the entire range of construction equipment for different applications. The industry can be broadly classified under the following categories: Earthmoving equipment

Road construction equipment

Material handling equipment

Tunneling and Drilling equipment

6% 7%

5%

Earth Moving Equipment Material Handling Tunnelling & Drilling for mining Road Construction Equipment Concrete Equipment Concrete Preparations

12% 57% 13%

Excavators

Wheel loaders

Spare parts for building constructio n equipment

Bulldozer equipment s

Road surface equipment

Concrete equipment

The earthmoving equipment market in India is estimated at about US$ 1.4 billion The prime driver for earthmoving equipment is mining activities and construction industry. The key demand drivers going forward are likely to be road construction, urban infrastructure, irrigation, real estate

18% 5% 51%
Excavators Backhoes

Loaders
Others

26%

50t and above

22-50t

18-22t

6-18t
CAGR 30%

EXCAVATOR MARKET
0% 5% 10% 15% 20% 25% 30% 35% 40%

The backhoe loader, consisting of a tractor, front shovel/bucket and small backhoe in the rear A backhoe can duplicate the work of a bulldozer, front end loader and excavator. India is the second largest market for backhoe loaders in the world with a market size of approximately US$ 358 million.

2005-06

9590

2004-05

6303

2003-04

4300

2002-03

3725

CAGR 37%

JCB came to India in 1979

The company has a turnover of US$ 335 million The company is growing by 2530% annually JCB India is a subsidiary of JC Bamford Excavators Ltd. (JCB) The products range from backhoe loaders, wheeled loaders to excavators and skid steer loaders

The Company has a 70% market share in the backhoe loader segment and around 13% market share in the overall Indian CE industry

It has facilities at Ballabgarh in Haryana and Pune in Maharastra

It has 38 dealers and 206 outlets

It has a dedicated parts centre in Ballabgarh and parts distribution depots in Chennai, Pune and Kolkatta

BEML is its largest player in earthmoving equipment sector

The Company turnover is around US$ 484 million

The mining and construction equipment segment is around US$ 306.6 million;

Defence segment is about US$ 154.2 million; and railways around US$ 23 million
The company is the largest public sector undertaking in this industry

Some of its customers are Delhi Metro Rail Corporation, Coal India and Jessop Co. Ltd. (Railways)

The Company has facilities established in Bangalore, Kolar Gold Fields and Mysore in Karnataka

It has a 70% market share in the domestic earthmover industry and 12% in the overall construction equipment industry

It has 33 marketing offices and has a strong foothold in the government sector

The companies together have a turnover of US$ 156 million, with majority coming from L&T Komatsu.

Both these companies are subsidiaries of L&T Ltd.

They are joint ventures with CNH American LLC and Komatsu Asia Pacific Pvt. Ltd., Singapore, respectively L&T Case manufactures loaders backhoes and vibratory compactors; while L&T Komatsu manufactures hydraulic excavators

L&T Case hold 21% market share in vibratory compactors L&T Komatsu holds 20% market share in excavators L&T Case has its facilities in Pithampur,Madhya Pradesh L&T Komatsu has it operations in Bellary Road in Karnataka

The company is a market leader in excavators and collaborates with Hitachi Construction Machinery Company, Japan, for hydraulic excavator and cranes; John Deere, USA, for backhoe loader technology; CESAN, Turkey, for asphalt plants. It is a subsidiary of Tata Motors and has a turnover of US$ 283 million.

Their major products:

Excavators Loaders mechanical shovels high tonnage crawler cranes etc.

Action Construction Equipment Ltd. (ACE) The public limited company has a turnover of US$ 363.3 million Its product range includes hydraulic mobile pick-n-move cranes, forklift trucks, loaders, tower cranes, aerial work platforms, lifts, lorry loaders/truck mounted cranes, etc. It has a 41% share in Pick & Carry cranes segment It has facilities installed in Faridabad in Haryana There are 8 ACE offices and 33 dealer locations The turnover of the company has grown at a CAGR of approximately 96% in the last 4 years.

The company has plans of diversifying its product portfolio to

Include truck mounted cranes, forklifts and backhoes

CATERPIL LAR JCB BEML

TELCON

ESCORTS

VOLVO L& T(Larson & Turbo)

Hindustan Motors

Manufacture of excavators

Manufacture of road surface equipment

Manufacture of concrete equipment

Manufacture of bulldozer equipment Manufacture of construction machinery spare parts

The Indian construction industry is worth US$ 145 billion. The sector represents the second largest economic activity Construction investments account for 11 per cent of GDP Construction equipment accounts for around 5 24 per cent of the total cost incurred in any construction project. The construction industry is a primary demand driver for earthmoving and road construction equipment

20

40

60

80

100

120

140

160

180

200

2006-08

112

48.9

21.3 Real Estate Infrastructure Industrial

2003-05

98.8

37.8

9.1

2009-10

8116

2008-09

8858

2007-08

9125

2006-07

8667

2005-06

8329
7800 8000 8200 8400 8600 8800 9000 9200 9400

7600

2009-10

6156

2008-09

6012

2007-08

5293

2006-07

4731

2005-06

4392
0 1000 2000 3000 4000 5000 6000 7000

2009-10

5199

2008-09

6509

2007-08

6462

2006-07

5702

2005-06

4396
0 1000 2000 3000 4000 5000 6000 7000

2009-10

2849

2008-09

3017

2007-08

2550

2006-07

2247

2005-06
0 500 1000 1500

1924
2000 2500 3000 3500

2009-10

4019

2008-09

4109

2007-08

4209

2006-07

4137

2005-06
0 500 1000 1500 2000 2500 3000

3344
3500 4000 4500

2009-10

7711

2008-09

8413

2007-08

8548

2006-07

8232

2005-06

7919
7200 7400 7600 7800 8000 8200 8400 8600 8800

2009-10

5857

2008-09

6019

2007-08

5037

2006-07

4495

2005-06
0 1000 2000 3000 4000

4171
5000 6000 7000

2009-10

4937

2008-09

6191

2007-08

6183

2006-07

5415

2005-06
0 1000 2000 3000 4000

4699
5000 6000 7000

2009-10

2786

2008-09

2955

2007-08

2506

2006-07

2193

2005-06
0 500 1000 1500

1945
2000 2500 3000 3500

SALES VOLUME
2009-10

2008-09

2007-08

SALES VOLUME

2006-07

2005-06

500

1000

1500

2000

2500

3000

3500

4000

4500

853

855 841

792

771

2005-06

2006-07

2007-08

2008-09

2009-10

792

601 503 450

585

2005-06

2006-07

2007-08

2008-09

2009-10

CONSOLIDATED SALES VALUE FOR TELCON

618 541 470

619

494

2005-06

2006-07

2007-08

2008-09

2009-10

CONSOLIDATED SALES VALUE FOR BEML

295 278 250 219 194

2005-06

2006-07

2007-08

2008-09

2009-10

CONSOLIDATED SALES VALUE FOR ACE

392

399

391

382

318

2005-06

2006-07

2007-08

2008-09

2009-10

Threat of New Entrants

Fragmented market, dominated by a few large players

High potential growth

New players will need the right technology and product

Supplier Power

Import of some critical components

Volatility of steel prices impacting production costs

Inadequate supplier base to meet demand

Competitive Rivalry

Price & Service are the differentiators

Lack in sharp differentiation leading to competition in price

Customer Power

Strong increase in demand

Price sensitive market

Customers need to be trained in technology, equipment usage

Threat of Substitutes

Complete substitution may not happen in near future

Product replacement or enhancement is possible