Construction Equipment - August 2013
Transcript of Construction Equipment - August 2013
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High revenues and unit
sales
The construction equipment industrys revenues are estimated to reach USD22.7 billion by
2020 from USD5.1 billion in FY12. Unit sale of construction equipment is expected to grow
to 82,000 by 2016 from 61,745 in FY12
Rising infrastructure
investments
The Planning Commission estimates total infrastructure spending to be about 10 per cent
of GDP during the 12th Five-Year Plan (201217), up from 7.6 per cent during the previous
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
Growth in real estate
sector
The real estate market is estimated to grow to USD180 billion by 2020 from USD55.6
billion in 2011, driven by demand mainly from residential sector
Source: Planning Commission, Aranca Research
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The engineering sector is delicensed;100 per cent FDI is allowed in thesector
Due to policy support, there wascumulative FDI of USD14.0 billion intothe sector over April 2000 February2012, making up 8.6 per cent of totalFDI into the country in that period
Growing demand
Source: Off - Highway Research, Department of Heavy Industries (DHI) Annual Report (FY12), Aranca Research
Notes: FY - Indian Financial Year (April - March), E - Estimates. CAGR - Compound Annual Growth Rate, FDI - Foreign Direct Investment
Robust demand
Significant allocation for theinfrastructure sector in the 12thFive-Year Plan is expected tocreate huge demand forconstruction equipment
Demand for construction
equipment is expected to rise toUSD9.9 billion by 2015, a CAGRof 24.1 per cent (from 2011)
Attractive opportunities
Equipment rental and leasingbusiness in India is small relativeto developed markets and has astrong growth potential
The after-sales revenuecomponent in India is currently low
and can be increasedconsiderably
Policy support
The material handling equipmentindustry is de-licensed and 100 per
cent FDI is allowed under the directroute
The government has given approvalto some financial institutions to raisemoney through tax-free bonds
Competitive advantages
Increasing impetus to developinfrastructure in the country is
attracting the major global players There has been cumulative FDI
inflow of USD175.0 million in earthmoving machinery between April2000 and January 2013
2011
Total
revenues:
USD4.2
billion
2020E
Total
revenues:
USD22.7
billion
Advantage
India
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Source: Department of Heavy Industry (DHI),
Aranca Research
ConstructionEquipment
Earthmoving
equipment
Materialhandling
and cranes
Concreteequipment
Roadbuilding
equipment
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Earth moving
equipment
Earth moving equipment is the largest segment of the construction equipment sector in
India; these equipment primarily find use in mining and construction
Equipment include backhoe leaders, excavators, wheeled loaders, dumpers/tippers, skid
steer loaders
Material handling and
cranes
Material handling equipment have four categories: storage and handling equipment,
engineered systems, industrial trucks, and bulk material handling
There are 50 units in the organised sector for the manufacture of material handlingequipment and many units in the small-scale sector as well
Concrete equipment Concrete equipments are used to mix and transport concrete They include equipment such as concrete pumps, aggregate crushers, transit mixers,
asphalt pavers, batching plants
Road building
equipment
Road building equipments are used in the various stages of road construction
Widely used ones are excavators, diggers, loaders, scrapers, bulldozers. etc
Source: DHI Annual Report 2010-11, Aranca Research
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Growth in revenues from construction equipment
(USD billion)
Source: The Boston Consulting Group, Aranca ResearchNote: CAGR - Compounded Annual Growth Rate
FY - Indian Financial Year (April-March), E - Estimate
The construction equipment industrys revenues are
estimated to have reached USD5.1 billion by FY12
Revenues increased at a CAGR of 6.6 per cent during
FY07-12 and is further estimated to rise at a CAGR of 24.8
per cent on rapid infrastructure development undertaken by
the Government of India
3.7 3.94.3 4.6 4.2
5.1
6.4
8.0
9.9
FY07 FY08 FY09 FY10 FY11 FY12E FY13E FY14E FY15E
CAGR: 24.8%
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32.3
48.1
43.3 37.743.0
54.2 61.7
82.0
FY06 FY07 FY08 FY09 FY10 FY11 FY12E FY16E
Total no of units of construction equipment sold
(000)
Source: Off-Highway Research, Aranca ResearchNote: E- Figure represents estimated figure
With infrastructure investment set to go up, demand for
construction equipment will rise further
Equipment sales are estimated to expand at a CAGR of
14.2 per cent to 82,000 units during FY06-16CAGR: 14.2%
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Construction equipment revenue breakdown by
segments FY10
Source: Indian Construction Equipment ManufacturersAssociation,Aranca Research
Based on revenues, earth moving holds the largest share in
the construction equipment industry (62.1 per cent)
62.1%10.9%
9.4%
9.1%
8.5%Earth moving
Concreting
Road Construction
Material Processing
Material Handling
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Source: DHI Annual Report 2010-11, Aranca Research
Notes: R&D - Research and Development
Company Revenue in USD million Products
JCB India Ltd 1,031 (FY11)
Excavators, compactors and tele-handling
equipment, skid steers, wheeled and backhoe
loaders, telescopic handlers, engines
BEML Ltd 657 (FY12)Crawler dozers, wheel dozers, excavators, dump
trucks, loaders, backhoe loaders, pipe layers,
walking draglines, rope shovels and sprinklers
McNally BharatEngineering Co Ltd
432 (FY12)
Crushing, screening and milling equipment,
pressure vessels, material-handling equipment,
steel plant equipment
Greaves Cotton Ltd 365 (FY12)Transit mixers, concrete pumps, heavy tandem
rollers, soil compactors
L&T Komatsu 311 (FY11) Hydraulic excavators, components and hydraulicsystems
Elecon Engineering Co Ltd 277 (FY12)Elevators, conveyors and moving machines,
gears and crushers
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Source: Planning Commission, Aranca Research
Investment in infrastructure is the main growth driver of the construction equipment industry
The Planning Commission estimates total infrastructure spending to be about of 10 per cent of GDP during the 12 th Five-
Year Plan (2012-17), up from 7.6 per cent during the previous plan (2007-12)
Indias investment in infrastructure is estimated to double to about USD1 trillion during the 12th plan (2012-17) compared to
the previous plan
Infrastructure spending as % of GDP Infrastructure spending during 11th and 12th
Five-Year Plan (USD billion)
75.7 69.4
89.5101.6
101.9
157.4
181.2206.0
233.5264.4
FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E FY16E FY17E
5.2%
6.4%
7.2%
7.5%
7.9%
8.4%
7.6%
10.0%
10th Five year plan
FY08
FY09
FY10
FY11
FY12
11th Five year plan
12th Five year plan
12th Plan
11th Plan
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12th Five Year Plan Fund allocation to
Infrastructure sub-segments (USD billion)
Source: Planning Commission, Boston Consulting Group,
Aranca Research
Of total investment of USD1 trillion during the 12 th Five-Year
Plan, over 20 per cent each is estimated to have been
allocated for roads and power sub-segments
For FY14, the Planning Commission has provided an outlay
of USD6.9 billion to develop the roads
India has the worlds second largest road network
spanning 4.7 million kilometers. The Government intends to
increase the paved road to total road ratio and build more
national highways
Such massive investment in infrastructure would boost
demand for construction equipment
356.4
227.8
126.8 119.4
86.3 84.5
Transport Power Others Telecom Irrigation Water supply
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Rising private investments for infrastructure
development
Source: Planning Commission, Aranca Research
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
During the 12th Five-Year Plan, the Planning Commission
targets to achieve 47 per cent of total infrastructure
investments through private funding, up from 25 per cent inthe 10th Five-Year Plan
The Ministry of Roads and Highways of India has
undertaken 68 projects for a total value of USD2.6 billion
through PPPs, of which 34 have been completed
The Power sector accounts for nearly 18 per cent of total
PPP value, with 56 projects accounting for a total value of
USD12.6 billion
75%
65%
53%
25%
35%
47%
10th plan 11th plan 12th plan
Public Private
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Production of coal (million tonnes)
Source: Ministry of Mines, BP Statistical Review of World
Energy - 2013, Coal India Limited, Aranca Research;Note: E - Target for FY12 & FY13; MT - Million Tonnes
Mechanisation of mining operations, a key ingredient behind
rising production, has led to increased demand for mining
equipment
India is worlds third largest coal producer with about 605.8
million tonnes produced in 2012
Coal production in India is estimated to increase at a CAGR
of 4.9 per cent to 575 MT during FY07-13
Coal India Limited (CIL) is undertaking 147 projects for a
total capacity of 437.1 MT per year
For the 12th Five-Year Plan, CIL has approved a capital
expenditure of USD4.4 billion
431
457
493
526533
554575
FY07 FY08 FY09 FY10 FY11 FY12E FY13E
CAGR: 4.9%
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Production of iron ore (million tonnes)
Source: Ministry of Mines, Aranca Research
Notes: MT- Million Tonnes
Production of iron ore in India grew to 208.0 MT in FY11
from 188.0 MT in FY07
Production of iron ore in FY12 was 169.7 MT
A surge in steel production in the country is expected to
boost iron ore demand. Indias steel consumption is
expected to rise from about 70 MT to 122 MT by 2015
The Ministry of Mines aims to reduce export duty on low
grade iron ore to 15 per cent from earlier 30 per cent to
enhance its export
188
213 213
219
208
170
FY07 FY08 FY09 FY10 FY11 FY12
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Concrete Equipments Sales Growth
Source: Article from a key construction equipment website (http://www.nbmcw.com/articles/equipment-
a-machinery/23335-construction-equipment-demand-forecast-2014.html)
Aranca Research, BMI
The burgeoning real estate industry in India gives a fillip to
the demand for concrete and building construction
equipment
The residential real estate demand is driven by
rising population and growing urbanisation
Rising income levels leading to higher demand for
luxury projects
Growing demand for affordable housing to meet the
demand from lower income groups
Commercial real estate demand will be driven by growth in
IT/ITeS sector and organised retail
Real estate market is expected to grow at a CAGR of 17.2per cent over 2011-15 to USD126 billion
Increasingly construction is becoming more oriented toward
mechanisation to reduce project time and control costs leading to higher demand for advanced construction
equipment 2010 2014
1,500
3,6003,800
9,000
1,200
2,800
Unit Sales
24%
CAGR
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FDI inflows in earth moving equipment
Source: Department of Industrial Policy & Promotion (DIPP), Aranca Research
Notes: FDI Foreign Direct Investment; FY11 - Cumulative from April 2000 to March 2011 and so on; FY12* - Data from April 2000 to Jan 2013
Fundamentals for the sector are set to remain strong on the
back of increasing infrastructure investments
Almost all global technology leaders in the construction
equipment sector have a presence in India either as joint
ventures or with their own manufacturing or marketing
companies
Cumulative FDI inflow (since April 2000) into earth moving
equipment reached USD175.0 million as of January 2013
Joint ventures with global majors have provided domestic
companies access to advanced technology and a whole
gamut of project management experience
73.9 75.1
132.0 134.2 134.4 134.4
175.0
FY06 FY07 FY08 FY09 FY10 FY11 FY12*
Joint venture Indian partner Foreign partner
L&T-KomatsuL&T
50%
Komatsu
50%
Ashok Leyland
John Deere
Ashok Leyland
50%
John Deere
50%
Telco Construction
Equipment
Tata Motors
40%
Hitachi
60%
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Mysore Plant
Aurangabad Plant
Source: Company websites
Vadodara Machine Shop
Vallabh Vidhyanagar
Facility
Bengaluru Plant
Kolar Plant
Bengaluru Factory
Gummidipoondi
Plant
Ranipet Plant
3S Integration Facility
Guwahati, Assam
Kumardhubi Factory
JCB India
BEML
Greaves Cotton
Elcon Eng.
Asansol Fabrication Shop
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Gross sales (USD million)
Source: Company Annual Report, Aranca Research
Note: BEML - Bharat Earth Movers Limited
BEML Limited is the first Indian company to start
manufacturing construction equipment in 1964
It is the largest manufacturer of earth moving equipment in
India and the second largest in Asia; it has a (global)
presence in about 56 countries
The company has facilities in Kolar gold fields, Bengaluru,
Mysore and Palakkad
The company is a Mini-Ratna (Category 1) company under
the Ministry of Defence; it was listed on Indian bourses in
2003 and raised further funds by a follow on offer in 2007
Revenue has grown at a CAGR of 6.8 per cent over FY07-
FY12 to USD753.3 million
542 565.3627.8
741.2 754.9 753.3
FY07 FY08 FY09 FY10 FY11 FY12
CAGR: 6.8%
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Source: Department of Heavy Industry (DHI), Aranca Research
Notes: EMU - Electrical Multiple Unit
Forms a joint
venture to enter
contract mining of
coal
Begins operations at its
4th manufacturing
complex in Palakkad,Kerala
Forays into Thailandfor export of mining
equipments
BEML supplied
nations first stainless
steel EMUs to Indian
Railways
2009
2010
2011
2012
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Yamuna Expressway
Source: Jaypee, Yamunaexpressway, Aranca Research
Yamuna Expressway is a 165-km, six-lane, controlled-
access expressway stretching between Greater Noida and
Agra
It is Indias longest controlled-access expressway,
developed by Jaypee Group under Public Private
Partnership (BOT model) for a total value of USD2.3 billion
The expressway became operational in August 2012
SILENT FEATURES
Length - 165.5 kms
Number of Lanes - Six lanes extendable to eight
Design speed - 120 kms per hour
Speed Limit - 100 kms per hour for cars, 60 kms per
hour for heavy vehicles
Main Toll Plazas - 4
Minor Bridges - 41
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Source: Indian Earthmoving & Construction Industry Association Ltd (IECIAL),
Indian Brand Equity Foundation (IBEF), Aranca Research
Renting and leasing of
equipmentAfter-sales services Exports
The equipment rental and leasing
business in India is smaller compared
to Japan, USA and China
Demand for rental equipment is set to
witness strong growth in the medium
term due to large investments in
infrastructure
New players can also explore
opportunities in the equipment
finance business
Revenues from after-sales service in
India are 28 per cent, lower than the
global average of 1220 per cent
After-sales market is set to expand to
USD0.5 billion by 2015; players can
offer maintenance contracts with
improved pricing and execution
While these services contribute only
modestly to revenues, they are
counter-cyclical and can also boost
spare part sales
Export opportunities are abound
both in developed and emerging
economies
Components and aggregates export
is a USD1 billion opportunity; local
suppliers can gain a decent share of
this by exporting engineering-
intensive and basic material based
components
Opportunities in engineering and
design off shoring and equipment
exports may arise in the future
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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: [email protected]
Engineering Export Promotion Council (EEPC)
Vanijya Bhawan, 1st Floor
International Trade Facilitation Centre,
1/1, Wood Street,
Kolkata, West Bengal700016.
Phone: 91-33-22890651, 22890652
E-mail: [email protected]
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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
GOI: Government of India
IECIAL: Indian Earthmoving & Construction Industry Association Ltd
DHI: Department of Heavy Industries
R&D: Research and Development
JV: Joint Venture
SEZ: Special Economic Zone
IBEF: Indian brand Equity Foundation
Wherever applicable, numbers have been rounded off to the nearest whole number
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