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The Indian construction sector, once supplied totally by imports, is turning to local manufacturers as they offer quality products at competitive prices. Niranjan Mudholkar looks at the latest technological developments
Economic liberalisation forced the Indian construction industry to adopt a pace it had never before seen.
Terms like targets and deadlines became a norm at construction sites and what followed was rapid mechanisation.
The construction industry took to equipment and machinery like a vehicle takes to fuel. “The future prospects of the equipment industry are directly linked to the growth of the Indian economy,” says VG Sakthikumar, COO, Schwing Stetter India Pvt Ltd, market leader in concreting equipment.
Compared to its global counterpart, the Indian market has a long way to go and this in itself represents great growth potential. “The Indian construction equipment sector is currently estimated at US$2.25 billion, a fraction of the global market which is over $75 billion,” says Sakthikumar. But the Indian industry has been growing at a healthy rate of 30% on an average, year on year, he adds.
More the investments in the infrastructure sector, higher is the growth for equipment. “Key infra sectors like electricity, roads, telecom, railway, irrigation, water supply, seaports and gas pipelines can expect investments of almost Rs4 lakh crore in 2009-10 and almost Rs6 lakh crore in 2011-12,” says KK Taparia, executive director, Universal Construction Machinery & Equipment Ltd (UCM), a major manufacturer of concreting and material handling equipment. In other words, it is such investments that will fuel the industry.
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Currently, however, this industry too is fighting the financial blues. “The rough phase has taken a toll on the ready-mix concrete (RMC) equipment business segment, as there has been a significant fall in demand. We expect the RMC equipment industry to lag by 15-20% this year,” says Sakthikumar.
Compared with this, the companies catering to the infra business are better placed. “We haven’t seen much reduction in business. As long as there is a healthy order book, which is the number of orders bagged versus those under execution, we are on safe turf. A redeeming factor for us has been our little exposure to the realty sector, which is affected the most,” says Rajiv Sethi, MD, Gemini Equipment and Rentals Pvt Ltd (Gear), an emerging player in the construction equipment rentals sector.
A hopeful industry
Nevertheless, there is a feeling that the crisis is not here to stay. Taparia appears positive when he says: “Combined efforts made across economies will lead to a strong world economy soon.” Rajesh Kawoor, GM (product development), Sany Heavy Industry India Pvt Ltd, a leading supplier of a range of products such as concreting machinery, cranes and drilling equipment, sees the picture changing in the near future. “We are hopeful that the next couple of months will see the construction industry bounce back and continue growing as in the last few years.”
Kawoor adds that the growth will continue for the next five to eight years.
Suvendu Moitra, head, marketing at Hyundai Construction Equipment in India is confident about a turnaround of the current situation, especially when seen in the light that the company is focussing on being market leader in the hydraulic excavator segment.
Hyundai Construction Equipment, a major manufacturer of excavators and loaders, has invested Rs300 crore in setting up a plant in Chakan near Pune and begun production and distribution of 20T machines.
Moitra says his company has achieved top position in the Chinese market with 20% share and is looking to emulate the same in India. “We have an all India projection of 40,000 excavators by 2012 and are looking for fast growth. At this stage we can only say we are on target,” he adds.
Notwithstanding the economic slowdown and going by the current demand, Hyundai’s vision of 40,000 excavators hardly seems unrealistic as growth for most companies in this gloom period has come from the domestic market.
As Sethi of Gear says, the Indian market itself is so huge that the export market is not even considered by most players.
Schwing Stetter India, for example, derives 95% of its revenues locally.
“Demand is so high here that sometimes it is difficult to fulfil local requirements. But we have exported to New Zealand, Bangladesh, Sri Lanka, Senegal, Maldives and to our parent company in Germany and the USA,” says Sakthikumar. There certainly is scope for the exports market due to the now well known aspects of Indian manufacturing.
“The potential for export is tremendous as India is being recognised as a quality manufacturer not to mention the low cost,” says Sakthikumar.
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