Reliance capital limited presentation on valuations of construction and mining equipments

VALUATION OF CONSTRUCTION AND MINING EQUIPMENTS AN INDIAN PERSPECTIVE

PRESENTED BY:INDRANIL AICH

Reliance Capital Limited

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• Valuations overview-Key references ,need and concepts .

• Valuation's Indian scenario - types of valuers, qualifications, apex bodies

• global and Indian.IP valuations in India

• Overview of International valuations standards (IVSC)

• Role of IBA and nodal agencies in India

• Valuation of mobile assets - Plant & Machinery - classification and overview• CE financing in India patterns issues risks • Evolution technology trends in construction equipment industry • Construction equipments classification and valuation • Backhoe loaders and excavators valuations value factors over value

risks

MODULES OF PRESENTATION

VALUATIONS OVERVIEW – WHAT IS VALUE?

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• Depends on who is asking and why• Generally an economic concept where what a buyer is willing to pay and what aseller is willing to take overlap.– Implies transferability.– Implies agreeable to both parties.• In the real world it is a range, not a point

VALUATIONS OVERVIEW- DEFINITION OF VALUATION

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• VALUATION DEFINED• A quantitative representation of monetary values inherent in a• business / entity, built by the past efforts, capable of• generating economic benefits in the future.• Enterprise value is the value of the financial instruments• representing the ownership interests in an entity plus net• financial debt of the entity.• Fair value is an amount for which an asset could be• exchanged between willing and knowledgeable parties in an• arms length transaction.• Value of an entity is a sum of parts of a business together adding up• resulting the streams if economic returns and value of an enterprise

can be more than sum of parts

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• Immovable Assets• Classification• •Non marketable assets – hospital ,• college, university ,monument• •Marketable – nondynamic – flats• ,bunglow, residencia l houses.• •Marketable – dynamic – service• apartments ,hotels malls, resorts

VALUATIONS INDIAN SCENARIO – REGISTRATION ASVALUER

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• • Application for registration as valuer in Govt of India.• • An application for registration as a valuer under section 34AB shall be in

FormN and shall be verified in the manner specified therein and shall beaccompanied by a fee of Rs.1000 which shall not be refunded if the application

• is rejected.• • No person in service is allowed to obtain the registration in the above• form in India.• • For details vide – www.laws4india.com/tax

• • More on Hand book of on Policy, Standards and Procedures for Real EstateValuation by Banks and HFIs in India copy circulated youpublished by the

Indian Bankers Association .

VALUATION INDIAN PERSPECTIVE

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• IBA Hand book specifies -• • It shall be necessary that• • Every valuer empanelled by banks / HFIs in India be a member of• • any one of the undermentioned associations namely :• • - Institution of Valuers ( IOV )• • - Institution of Surveyors ( Valuation Branch ) ( IOS )• • - Institution of Government Approved Valuers ( IGAV )• • - Practicing Valuers Association of India ( PVAI )• • - Centre for Valuation Studies, Research and Training ( CVSRT )• • - Royal Institute of Chartered Surveyors, India Chapter ( RICS )• • - American Society of Appraisers, USA ( ASA )

• • - Appraisal Institute, USA ( AI )

VALUATION INDIAN OVERVIEW – EDUCATION IN INDIA

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• Indian institute of loss surveyors & insurance surveyors – membership thruexamination . Vide www.iiisla.org (post graduation )

• • IRDA – Insurance Regulatory Development Authority – Membership thru examination.vide website – www.irda.org( post graduation)

• Valuers in India go for these qualifications to enhance the work sphere but are actually survey related

• UPCOMING - International Institute of Marine Surveyors UK LONDON for Marine survey

• and valuations opened chapter in India• Short term courses by ICSI ,ICAI on valuations

VALUATION INDIAN OVERVIEW – VALUERS SPREAD ININDIA

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• Total of 22000 valuers in India who are registered ( wealth tax , IOV,PVAI put together).

• • Market type – unorganised local players mainly in district level except a few

• companies .• • Very few have all services under one roof .• • Companies bill to give an enormous impetuous in India .• • Spread of valuers in India• • 80 % of valuers in india are from real estate sector• • 10 % of valuers in Plant and machinery• • 10 % others

VALUATION INDIAN OVERVIEW – REVENUE STRUCTURE FOR VALUERS

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• Total market size approx. Rs 1000 crores expected to reach Rs 5000 crores inby• 2016 .• • Source of data institute of valuers, personal interviews with the officials of IOV

,PVAI• ,company officials.( conservative estimate )• • No organized publication on the revenue generated available in INDIA. The

data is• basis the income tax deptt estimate on the returns filed &cross checked.• • Fees grid suggested by IT department prevalent with Banks and Financial

institutions .

VALUATIONS SEGMENTWISE MOVABLE ASSETSREVENUE MODEL

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• Valuation fees of mobile fuel driven assets – high volume low price realization model-non cyclic ,voluminous , strong local network and presence required.

• Valuation fees of plant machinery , hi tech machinery low volume and medium price realisation. Model – cyclic , high job content in each job

and local presence not much required.• Movable Properties /Assets Valuations revenue generating agencies• Mainly borne by banks, business through banks ,NBFC’s & ABL’s.• Valuations required for Refinance , Repo assets , top up loans ,

additional loans to industries , sell off , auctions mainly.

VALUATION INDIAN OVERVIEW – IP VALUATIONS ININDIA

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• Sunrise segment in India

• Mostly dominated by BIG 4 firms

• In India valuation mostly restricted to software firms

• Non cyclic intermittent business pattern

• Scalable but not regular flow business – slow

• Economic downturn a catalyst to the business

• High calibre manpower requirements high cost too !

VALUATION INDIAN OVERVIEW – IP VALUATIONS ININDIA- LIST OF ASSETS

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• Stock & bond instruments• Subscription lists• Supplier contracts• Technical & specialty Libraries• Technical documentation• Technology sharing agreements• Title plants• Trade secrets• Trained & assembles workforce• Trademark and trade names• Training manuals• Use rights – air, water, land

Proposals outstanding• Proprietary computer software• Proprietary processes• Proprietary products• Proprietary technology• Publications• Retail shelf space• Royalty agreements• Schematics & diagrams• Securities portfolios• Security interests• Shareholder agreements• Solicitation rights

INTERNATIONAL VALUATION STANDARDSCOUNCIL

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• ENCOMPASSES THE KEY STANDARDS OF• VALUATION• • IVS FRAME WORK• • GENERAL STANDARDS• • IVS 101- SCOPE OF WORK –General principle• requirements ,changes to scope of work.effective date .• • IVS-102- IMPLEMENTATION –Investigations, Valuation• Approaches, Valuation record ,Effective Date .• • IVS – 103 REPORTING – guidelines , contents & date• • ASSET STANDARDS• • IVS 200- Businesses and Business interests –Business info• ,ownership rights ,valuation approaches ,market approach• ,income approach.• • IVS210- Intangible assets ,characteristics ,relief from royalty• method,premium profits method,Excess earnings method .• • IVS 220 -plant and equipment ownership rights ,valuation• approaches ,market approach ,income approach.


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• WEBSITE: WWW.IVSC.ORG• • EMAIL: [email protected]• • INTERNATIONAL VALUATION STANDARDS BOARD• (IVSB)• • IVSC STANDARDS 2007 SUPERSEDED BY IVSC• STANDARDS 2011 ELIMINATING REPITITIONS .• • BASIS OF THESE STANDARDS ARE ON IFRS 3 .• • ALL FIELDS OF VALUATIONS COVERED UNDER THE

• IVSC STANDARDS 2011.


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• • IVS 230- real property interests• • IVS 233 - Investment property valuations under• constructions• • IVS 250- Financial instruments• • VALUATIONS APPLICATIONS –• • IVS 300 – Valuations for financial reporting• • IVS 310 - Valuations of real property Interests for secure• lending

ROLE OF IBA AND NODAL AGENCIES

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• IBA HAND BOOK SPECIFIES THE FOLLOWING• • Purpose of Valuation and Appointment of Valuers• • 1.2 Criteria for Empanelment of Valuers• • a) Educational Qualifications and Previous Work Experience• • b) Minimum Age Requirement• • c) Membership of Professional Bodies• • d) Categories of Valuers• • e) Registration with Government• • f) References• • g) Other Conditions• • 1.3 Duration of Empanelment• • 1.4 Removal• • 1.5 Re-Empanelment• • 1.6 Professional Fees• • 1.7 Compliance of Standards and Procedures

ROLE OF IBA AND NODAL AGENCIES

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• 1.8 Independence and Objectivity• 1.9 Obligations of Banks and HFIs• 1.10 Continuing Education• 1.11 Date of Effect

• RICS RED BOOK - Copy circulated

VALUATION OF PLANT AND MACHINERY

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• • GAMUT IS LARGE WE RESTRICT OURSELVES TO AN• INTERESTING AND FASTEST GROWING MACHINERY• SEGMENT IN INDIA .• • MOBILE ASSETS - CONSTRUCTION AND MINING• EQUIPMENTS INDUSTRY

• • The Indian Construction sector growing at an average• rate of 7% per annum despite recession• • Accounts for 6% of the GDP.• • Is the Second largest Employer.• • Major employment generators in the rural areas• • Absorbs Skilled, Semi-Skilled and Unskilled workers.• • Construction accounts for 60-70% of the infrastructure• project cost.

VALUATION OF PLANT AND MACHINERY

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• IMMOVABLE AND MOBILE PLANT AND MACHINERY VALUATIONS• Key components• • Domain expertise desired• • Mere financial valuation a pitfall.• • Visual evidence asset inspection by an expert a must• • Brand value• • Mostly market approach but cost approach and• income approach on non standard assets• • Gamut- includes mechanical, chemical ,electro mechanical and a combined

knowledge of all branches of engineering including electronics and computer science .

CONSTRUCTION EQUIPMENT INDUSTRY IN INDIA

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• The present size of the market is approx $ 2.3 billion• •Expected to grow to annual sales of $ 6.2 billion in 2014• •IBEF ICE report, March 2013- Copy enclosed • •In FY 2013, most financiers have reported 20% de-growth

Market de-growth of Backhoe loaders industry in India

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BHL JAN-SEPT APR-SEPTMANUFACTURER 2012 2013 % 2012 2013 %

JCB 16092 13996 -13% 9427 8210 -13%

CNH 2236 1869 -16% 1329 1112 -16%

TEREX 1107 834 -25% 679 514 -24%

TELCON 965 657 -32% 542 390 -28%

ESCORTS 830 651 -22% 457 369 -19%

CAT 1136 1081 -5% 735 653 -11%

M&M 666 725 9% 345 478 39%

ACE 291 213 -27% 127 117 -8%

ALJD 448 830 85% 302 486 61%

Market de-growthofExcavators industry in India

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EXCAVATOR JAN-SEPT APR-SEPT

MANUFACTURER 2012 2013 % 2012 2013 %

TELCON 3582 2670 -25% 1972 1566 -21%

L&T KOMATSU 2346 1358 -42% 1374 695 -49%

HYUNDAI 1845 1349 -27% 1204 881 -27%

JCB 982 1011 3% 609 623 2%

VOLVO 788 564 -28% 520 346 -33%

KOBELCO 643 571 -11% 399 371 -7%

DOOSAN 200 197 -2% 113 141 25%

CAT 121 101 -17% 64 80 25%

SANY 158 190 20% 101 136 35%

CONSTRUCTION EQUIPMENT FINANCING PLAYERS – DEGROWTH

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Fy(fig in Cr) 2009-10Market Share 2010-11

Market Share 2011-12

Market Share 12-13 (HI)

Market Share

SREI BNP 5500 32% 7824 33% 29% 2246 27%

HDFC 2350 14% 3000 13% 13% 896 11%

L&T 1450 9% 1900 8% 9% 496 6%TATA CAPITAL 1425 8% 1800 8% 7% 781 9%

MAGMA 1415 8% 1200 5% 6% 481 6%

KOTAK 675 4% 1250 5% 4% 158 2%

INDUSIND 575 3% 1150 5% 9% 707 8%

RELIANCE 450 3% 600 3% 2% 267 3%

CITI 400 2% 300 1% 3% 4%

RELIGARE 300 2% 500 2%

SHRIRAM 700 3% 8% 9%

BAJAJ 700 3% 2% 1%

ICICI 750 3% 4% 5%

SUNDARAM 3% 6%

HDB 3%

OTHERS 15% 8%

Acquiring construction equipment basics in India

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• Owning option• Own with equity• CE business is capital intensive– substantial investment needed in both

fixed assets and working capital• Ifequityisinvested,equityquicklygetsblockedinbusiness,leavingbusinessdryof

working capital• Hence, leverage iswell accepted norm in the business use borrowed capital for

(an investment), expecting the profits made to be greater than the interest payable.

• Borrowing option• •Medium term rental option• •Short term rental option• •Leasing option

Key features of construction equipment financing needs

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• Medium term financing• pay-backperiodformostequipmentwouldbe3-5years• Generally speaking, an operator earns from the asset to pay for it• Asset-

backedfinancingwithcashoutflowsconnectedwithcashflowsfromtheassetisthenorminthebusiness

• Disposal ofassets after a few years• In case of small operators,advisory support on choice of equipment may also

be necessary

Providers of CE financing

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• •Banks• •NBFCs• Asset finance companies• Infrastructurefinancecompanies• Leasingcompanies• Equipmentrenting companies• Externalcommercial lenders• Supplier’scredit• Buyer’scredit• ECB• Crossborder leasing option• Operatingl ease from out of India

• Financial leasefromoutofIndia

Forms of financing

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• End-to-end solution providers• Fromacquisition,toprovision,totraining,tomaintenance,tobuybackofuse

dequipment• ▫Ideal forleadingsuppliers/vendors• •Terml oan• •Hirepurchase• •Financial lease• •Operating lease• •Conditional sale• •Equipment rental• Presentlyonlyabout2-5%ofthemarket,butexpectedtogrowsignificantly• Lots ofsmall andmediumplayers inequipmentrentalmarket• •Supplier’s credit• •Buyer’s credit

Devising a proper funding plan

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• Do understand that default is very costly• •Therefore,thefundingplanshouldensurethecashflowsfromtheassetwill

besufficienttopaytheinstalments• •Other free cashflowsisoftenamyth• ▫Hence, cashflowsf romtheassetmostrelenvant• •Two important parametersforeveryfunding plan• ▫LTVratio• Yes,itisimportanttoconserveequity,butahigherLTVratiomeansmoreE

MIs,puttingburdenontheDSCRratio• Debtservicecoverageratio• Functionof• LTVratio• Fundingtenure• Don’tagreetoaggressivepaybackperiods–ensureatleastaDSCRof1.33-

1.25

Typical structure of a loan product

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• Downpayment10-20%• •Tenure3-4years• •Full payout product• •Problems ina typical full payout loan contract:• ▫EMIsaretoohighforthepresentmarketscenario• ▫Collateraldeficitintheinitialfewmonths;collateralsurplusinthelaterparto

fthecontract

Major risks in Asset valuations

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• CREDIT RISK – BORROWER ,PEST ANALYSIS • RV RISK RESIDUAL RISK - VALUATION OF USED ASSET PLAYS

A MAJOR ROLE • UNBUNDLING THE TWO IS IMPORTANT ,THEN TAKING AN

EXPOSURE ON THE ASSET VALUES NOT A PROBLEM.

PART C DOSSIER ON CONSTRUCTION EQUIPMENT S IN INDIA

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• OVERVIEW • EVOLUTION

INDIAN CONSTRUCTION SECTOR SCENARIO

• The Indian Construction sector growing at an average rate of 7% per annum.

• Accounts for 6% of the GDP.

• Is the Second largest Employer.

• Major employment generators in the rural areas

• Absorbs Skilled, Semi-Skilled and Unskilled workers.

• Construction accounts for 60-70% of the infrastructure project cost.

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OVERVIEW,EVOLUTION

• India is the only Developing Country, which is totally Self-Reliant in such highly sophisticated equipment.

• India has only a few, mainly medium and large companies in the organized sector who manufacture these.

• SME’s is restricted to manufacture of components and some sub-assemblies.

• Before 1960s, domestic requirements of mining and construction equipment were entirely met by imports.

• Domestic production began in 1964 with the setting up of Bharat Earthmovers Ltd (BEML).

• In the private sector, the Hindustan Motors’ Earthmoving Equipment Division, was established in 1969.

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Small/Non Existent. Government as Producer/Buyers

Public SectorPlayer Created by Government

Dozer, Dump Truck, Mechanical Excavator, Cranes

1960 & 1970s

Market

Industry Trends

Products

Growth of Market from Mining/Infrastructure Activities

Serious Private Sector Participants(L & T ,Telco)

Hydraulic Excavator, Mining Equipment

1980s

Opening of economy increase in construction activities

Advent of Foreign Player

Specialised Equipment

1990s 2000s

Rapid Increase in infrastructure Investment

Capacity Enhancement

Advent of Larger Equipment

Initiative to strengthen the Industry

Consolidation of Players , Export led Growth

Design/Develop products for Global Market

Future

EVOLUTION OF CONSTRUCTION AND MINING MACHINERY INDUSTRY

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INDIAN EARTHMOVING & CONSTRUCTION EQUIPMENT INDUSTRY : CURRENT STATUS

• Expanding at Compounded Annual Growth Rate(CAGR) of 40% in last three years.

• Having Market of US$2.3 Billion

• Organized sector accounts for 55% of the Earthmoving and Construction Equipment.

• About 71% of this industry comprises of public limited companies and 29% lies in private limited.

• Indian Operation can be used to fulfill the demand of South Asia and South East Asia.

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TECHNOLOGY STATUS IN INDIA

• Construction Equipment , technology leaders are: Komatsu, Caterpillar, Hitachi, Volvo, JCB and many more.

• Mining Equipment, technology leaders are: Atlas Copco, Liebhrr, Joy Mining Machinery, Hitachi

• Construction Equipment Sector is in intermediate stage of development.

• Advancement in technology have also increased the size of haul truck and rope shovel.

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GROWTH PROSPECT IN INDIA

• New techniques and technology in various construction projects .

• Key Infrastructure Projects are Road & Highways, Bridges & Urban Construction, Power Projects, Railways, Airport-Modernization, Real Estate development.

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TRENDS ARE DRIVING CONSTRUCTION EQUIPMENT EVOLUTION 1. Unprecedented Infrastructure – Estimates indicate planned investment of

approximately US$ 1 trillion over next 8 years in infrastructure.

2. Continued Dominance of Price Focused and Value Focused Customers: 70% – 80% of customer in India are price and value focused. Dominance is likely to continue even up to 2020

3. Expanding Presence and Engagement of Global OEM’s in India: OEM’s are attracted by one of the world’s fastest growing construction equipment market.

4. Increasing export opportunities: Sourcing of components, aggregates and equipment is likely to accelerate due to increasing cost pressures in developed markets.

5. The off-shoring of engineering and design (E&D) services

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DOSSIER OF CONSTRUCTION AND MINING EQUIPMENTS

and Equipment

1. Power Shovels

2. Cranes

3. Concrete Mixers

4. Dredging Machinery

5. Articulated Dump Trucks

6. Asphalt Finishers

7. Backhoe Loaders

8. Crawler Dozers

9. Crawler Excavators

10. Wheel Excavators

11. Scrapers

12. Earth Moving Compactors

13. Skid Steer Loaders

• Mining Machinery

1. Excavators

2. Drills

3. Feeder Breakers

4. Crushers

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PRODUCTIVITY MACHINES (AVERAGE WORKING HRS/DAY 10-15 HOURS)

Equipment Functions Average Economic Life Refinancing Cycle

Backhoe Loader Earth cutting, Road, Earthmoving

10 years Max twice in life time

Wheel Loader Loading 10 years Once in life cycle

Excavators Earth cutting, removal 15-20 years Twice in life cycle

Compactors (Soil and Asphalt)

Soil and Asphalt compaction 15-20 years Twice in life cycle

Skid Steer Loaders Multiple applications 10 years Once

Dumpers Loading/unloading 10-12 years Two–Three times

Tippers Loading/unloading 10-12years Two–Three times

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SUPPORT MACHINES / EQUIPMENTS (AVERAGE WORKING HRS/DAY 4 HOURS)

Equipment Functions Average Economic Life

Refinancing Cycle

Graders / Dozers Grading of Earth Haul 10-20 years Twice in life cycle

Cranesa) Mobile Hydraulic Crane (10T – 80T)

Site Work, Heavy components lifting

30-35 years 4 times in a life cycle within refurbishment

b) Crawler Crane (30 T – 80 T) – Mechanical & Hydraulic

Site Work, Heavy Components lifting

30-35 years 4 times in a life cycle within refurbishment

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GENERAL TECHNICAL ANALYSIS WHILE VALUING A CE ASSET

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• While valuing an equipment the health of each components / sub-assembly / assembly needs to be checked in operational conditions.

• Pre – requisite of valuation exercise includes:

1. Site Visit: It is mandatory that a site visit be made where the equipment is parked with chassis imprints on newspaper as documentary evidence in daytime

2. Photography: At least 3 to 4 photographs at various angles needs to be taken. Digitally encrypted photos with GPS date and time

3. Maintenance Log Book: Regular maintenance schedules, preventive maintenance chart, oil changes need to be noted down. Accidental history needs a noting down

GENERAL TECHNICAL ANALYSIS WHILE VALUING A CE ASSET

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• After pre – requisite exercise we have to cover the technical aspect. It include following points to be considered:

1. Operator Cabin / Monitor, control lever

2. Engine / Auto-Electric System

3. Other aspects which we consider for machines is given in the slides further.

COMMERCIAL DOCUMENTATION FOR VALUATION

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1. Invoice

2. Engine Imprint

3. Road Tax Form

4. The title of equipment5. A vahan status incase of a registered asset 6. Import documents - more relevant to cranes pavers - B/L, TR6

CHALLAN ,CE CERTIFICATE OF COUNTRY OF ORIGIN LOAD TEST CERTIFICATE IN CASE OF CRANES

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The valuer should be careful and should not succumb under any pressure in valuation of the finance company. The point to be given importance at the time of valuation are:

1.Equipment non operative: An equipment for refinance should be and must be in operative condition.

2.Under maintenance or refurbishment: Asset need to valued twice.

3.Photography prohibition: In absence of the photography the valuers observation is final. AIRPORTS ,PORT RESTRICTED AREAS

4.ABL’s need the report yesterday: A hurried report gives huge chances of errors.

5.Technology obsolescence: Valuer should be well informed about the technology and the degradation of the value therein.

PITFALLS OF VALUATION OF CONSTRUCTION AND MINING MACHINERY

KEY POINTS OF VALUATION OF CONSTRUCTION AND MINING MACHINERY

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• EVERY ASSET IS DIFERRENT APPROACH SHOULD BE DIFFERENT• APLICATION STUDY • USAGE PATTERN NO OF HOURS OF ACTUAL USAGE PER MANDAY • HISTORY OF O&M • BRAND VALUE • CURRENT MARKET VALUE • COST OF SPARE PARTS • REFURBISHMENT COST • DISTRESS SALE VALUE • AUCTION /NEGOTIATED SALE VALUE

BACKHOE LOADER

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A backhoe, also called a rear actor or back actor, is a piece of excavating equipment or digger consisting of a digging bucket on the end of a two-part articulated arm. They are typically mounted on the back of a tractor or front loader.

BACKHOE LOADERS APPLICATIONS AND ASSET HEALTH FOR VALUATION

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Applications Study •It is the most suitable machine for digging below the machine level, such as, trenches, footings, basements etc.•It can be efficiently used to dress or trim the surface avoiding the use of manual effort for dressing the excavated the surface. •Rentals FOR EARTH MOVING •Asset health•Brand name •Hours of work per day •O&M cost - 5 to 7 percent for JCB In the first year •Swing cylinder life most important •Engine condition blow by

BACKHOE LOADER VALUATION CHECKLIST FOR VALUE AND OVER VALUE

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• Application usage – bucket life , cylinder life ,engine life - corosiove environment , abrasive application – sea shore , chemical fertilizer plant ,coke handling, rock quartzite application

• Number of working hours per day - Rentals 15 18 HOURS • Brands - JCB, TELCON JD, CASE , ECEL, ACE TEREX • NEW TO USED RATIO SALES - 20 TO 1 • O&M COST YEAR ONE 5 TO 7 PERCENT OF THE EQUIPMENT

COST YEAR THREE 12 TO 15 % OF EQUIPCOST • FUEL CONSUMPTION HISTORY - HP/13• Normal depreciation 10 to 12 percent high usage 20 % per annum • Max refinance two turns / cycle • Value addition calculation - engine overhaul replacement , pumps

cylinders • Localized market pull and support structure with non uniform

value

BACKHOE LOADER VALUATION CHECKLIST

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• VALUE VS OVER VALUE IN A BACKHOE LOADER- INSURANCE AND IDV TRAP

• WDV ,SLM OR GRID A LAZY CREDIT MANAGERS TOOLS • WEIGHTAGE OF VINTAGE ,BRAND PULL & ASSET CONDITION • WEIGHTAGE BRAND PULL(INCLUDING AFTERMARKET SUPPORT )

25%• ASSET CONDITION 45%• USAGE 10 %• APPLICATION 10%• LOCAL MARKET PULL 5%• OTHER FACTORS 5%• BUY BACK GURANTEE A DERISKER

EXCAVATORS

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Excavators are heavy construction equipment consisting of a boom, stick, bucket and cab on a rotating platform (known as the "house").

The house sits atop an undercarriage with tracks or wheels.

The classification is on tonnage

>30 tonne class for mining application

APPLICATIONS OF EXCAVATORS AND ASSET HEALTH FOR VALUATION

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• Excavators are used in many ways:– Digging of trenches, holes, foundations– Material handling– Brush cutting with hydraulic attachments– Forestry work– Demolition– General grading/landscaping– Heavy lift, e.g. lifting and placing of pipes– Mining, especially, but not only open-pit mining– River dredging– Driving piles, in conjunction with a pile driver

Excavator Final Drive Line

EXCAVATOR ASSET HEALTH FOR VALUATION

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1. Excavator Boom and Stick Arm & Bucket Condition

2. Undercarriage Track pads

3. Turn Table OR SLEW RING

4. ENGINE health

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EXCAVATOR VALUATION CHECKLIST FOR VALUE AND OVER VALUE

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•Number of working hours per day - Rentals 15 18 HOURS Brands - JCB, TELCON JD, CASE , ECEL, ACE NEW TO USED RATIO SALES - 30 TO 1 O&M COST YEAR ONE 7 TO 10 PERCENT OF THE EQUIPMENT COST YEAR THREE 15 TO 21 % OF EQUIPCOST FUEL CONSUMPTION HISTORY - HP/13Normal depreciation 10 to 12 percent high usage 22 % per annum Max refinance three turns / cycle Value addition calculation - engine overhaul replacement , pumps cylinders Localized market pull and support structure with uniform value

VALUATION EXCAVATORS CHECKLIST FOR VALUE AND OVER VALUE

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• VALUE VS OVER VALUE IN A EXCAVATOR - INSURANCE AND IDV TRAP

• WEIGHTAGE OF VINTAGE ,BRAND PULL & ASSET CONDITION • WEIGHTAGE BRAND PULL(INCLUDING AFTERMARKET SUPPORT )

25%• ASSET CONDITION 35%• USAGE 10 %• APPLICATION 15%• LOCAL MARKET PULL 3%• OTHER FACTORS 5%• BUY BACK A DERISKER

WE VALUE EVERYTHING UNDER THE SUN 10/14/2013 44

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• AICH APPRAISERSAUCTIONERS AND VALUERSWe value every thing under the sun

• Partnership firm Started in August 2009•Valuation Services for Movable And Immovable Assets Constructionand Mining ,Medical Equipments for asset based lenders banks andfinancial institutions•Consulting Partnership With American Appraisals Pvt. Ltd.•Over 6000 assets valued in three years with a value of around3000crores INR•MEMBER COMPANY OF CII ,BNCCI AIMA &IGCC


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AICH APPRAISERSAUCTIONERS AND VALUERSWe value every thing under the sun

•EMPANELMENTS

WE VALUE EVERYTHING UNDER THE SUN 47

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AICH APPRAISERSAUCTIONERS AND VALUERSWe value every thing under the sun

EMPANELMENTS


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•200% Year on year Growthbothbottomline and topline

•Strong credit rating

•Qualtrics Rated top 3 in India in ValuationServices

•Finalist forAIMA -Dr J.S Juneja Award forInnovation and creativity for MSME

enterprises for 2012 -2013 and ICICI -CNBC India Emerging India Awards 2013

LUE EVERYTHING UNDER THE SUN 10/14/2013 48

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AICH APPRAISERSAUCTIONERS AND VALUERS


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• KATAICH INFRACORE ENGINEERING PVT. LTD.

•Started with Changling construction machinery distribution and Nawacrushers

•Year on year growth 200%•Revenue of ½ million USD in 2011-2012

•Shantui heavy machinery dealership•Spare parts supplier company

•Started as the flagship company and diversified


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•

AICH MINING RESOURCES PVT. LTD.Opencast & Underground Mining of ferrous & non ferrous metal & non

metal mines concept to commisioning projects

•Opencast & Underground Equipment Selection, installation

•Concept to commissioning Technical Consulting & Mining Consulting

•Coal Washers Consulting

•CHF Concept to Concept to commissioning projects


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•

AICH MINING RESOURCES PVT. LTD.Opencast & Underground Mining of ferrous & non ferrous metal & non

metal mines concept to commisioning projects

•Opencast & Underground Equipment Selection, installation

•Concept to commissioning Technical Consulting & Mining Consulting

•Coal Washers Consulting

•CHF Concept to Concept to commissioning projects


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A BREIF PROFILE OF INDRANILAICH F ABOUT INDRANIL AICH

Chequered career of 18+ years in the industry out of which 14 yearsin multinationals of repute

Worked in Titagarh Wagons Ltd GoIndustry - Dovebid (FormerlyHenry Butcher) ,UT Limited (JV between Usha Group and

Telehoist of U.K.) Ingersoll Rand India Ltd,TIL (Tractors IndiaLimited) -Jayashree Textiles, Indian Rayon Group -Rishra.

Award winning Production engineer with MBA from IIFT kolkata .

Publications and teaching assignments in several institutions ofrepute .


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A BRIEF ABOUT INDRANIL AICH

PROFESSIONAL MEMBERSHIPSInternational Memberships

Honorary Life member of Royal Institute of Chartered Surveyors (RICS),London.

Life member American Society of Mechnical Engineers USALife member of the Mining ,geological and metallurgical Society of India .Life Member of Operational Society of India, Quality Circle Forum of India,

Systems Dynamics Society of IndiaLife Member of Institution of Engineers (Membership No.M-132302-9) and

Chartered Engineer from Institution of Engineers (AM 092132-5).Approved valuer (Registration No.18328) Category - Production & Industrial

Engineering and Fellow and Life Member of Institution of Valuers.Member of Indian Council of Arbitration, New Delhi an organization of FICCI

and Ministry of Commerce.Member of Practicing Valuers Association of India


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A BRIEF ABOUT INDRANIL AICH

A BRIEF ABOUT INDRANIL AICHINDUSTRY CHAMBER MEMBERSHIPSMember of Confederation of India Industry Eastern RegionMember of MSME National council CIIMember of West bengal state councilMember of the economic affairs ,taxation and finance subcommitteeMember of the Safety subcommitteeMember of the MSME subcommittee


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You can reach me @ • [email protected] • [email protected] • Mobile

+919831088204/+919038088204

Friday, December 12, 2014 72

DREAM>BELIEVE>PURSUE

mailto:[email protected]

mailto:[email protected]

Reliance capital limited presentation on valuations of construction and mining equipments

Economy & Finance

Transcript of Reliance capital limited presentation on valuations of construction and mining equipments