Hoisting big dreams
Crane manufacturer ElectroMech is doubling the capacity at its Pirangut plant this year. Niranjan Mudholkar visits the plant and talks to Tushar Mehendale, the firm’s MD, to find out what’s driving this growth
When Tushar Mehendale took over ElectroMech in 2000 at the age of 24, it was a Rs2.5 crore company. In a short span of eight years, the company is all set to cross the Rs150 crore mark.
What triggered this growth? Mehendale says: “We preferred to look at ourselves not as a manufacturing company but as a solutions provider. I believe that is the only way in which you can empathise with your client and understand what the client wants. The idea is not to sell a product but provide what the client wants in the most economical and technologically efficient manner.”
Mehendale, who has been educated at prestigious institutes like the Government College of Engineering (Pune), University of Wisconsin (USA), Indian School of Business (Hyderabad) and Indian Institute of Management (Ahmedabad), knows what he is talking about as he ensures that his work philosophy is directly reflected on the shop floor.
For a company like ElectroMech, the scope starts right from the pre-sale stage to being with the client even after the sale. It is through this approach that the company has supplied thousands of cranes not just in different corners of India but also overseas.
Engineering seems to be in the DNA of this company that was started by the late Vinayak Mehendale (current MD’s father) way back in 1979 along with a group of engineers who had worked for the leading crane manufacturing companies in their time. Twenty nine years later, the company is on a phenomenal growth path.
Today it designs, manufactures and services a range of products including industrial cranes, overhead cranes, gantry cranes, electric wire rope hoists and customised material handling solutions. “We consult clients on all aspects from structural design to special attachments to creating well-engineered hoisting and moving solutions,” Mehendale adds.
The market size for the crane industry in India is around Rs2000 crore and ElectroMech is the leader in terms of volumes. “This year we will be producing almost 750 cranes. No one manufactures as many cranes as we do annually,” Mehendale says. Yet, surprisingly, ElectroMech’s market share is only about Rs150 crore. That’s just about 6-6.5%; it is rather a small figure for the largest manufacturer.
“Usually, in a mature market, the largest manufacturer would typically have a share of 25-30%. That indicates the fragmentation in the market,” Mehendale explains.
“The crane market in India is fragmented geographically; it is fragmented between private and public sector and between the organised and unorganised sector,” Mehendale adds.
Geographical fragmentation is reflected through small players who cater to local industries and big players who are active at the national level.
The difference between private and public sector is easy to understand, particularly in India. “Due to the hangover of the socialistic era, India still has many public sector companies that are white elephants. Even if their orders are large, we prefer not to work with them as they operate in a very lethargic and bureaucratic manner,” Mehendale says.
“Organised players exclusively manufacture cranes while unorganised players are typically fabricators or companies who are small time contractors. They do not necessarily have the expertise to manufacture,” Mehendale says.
So why is India a unique market where such disparity exists? He says: “That’s because, as of now, there are no regulations governing this segment. Government still hasn’t set regulations from the safety point of view or certification point of view for the cranes.”
If not handled properly, these equipment can lead to accidents because you are lifting loads against gravity. “Precaution is essential in the design of the equipment, in selecting its components, the way it is handled and serviced,” he adds. These precautions need to be made mandatory through regulations.
“In the selfish interest, lack of regulations can be good but ElectroMech is a manufacturer with a conscience and we believe that regulations should be in place. Sadly, there is no association for crane manufacturers that can take this up,” Mehendale says.
Regulations or no regulations, the market is heating up with competition but Mehendale does not believe in price competition. “Price competition is for immature players. I believe in being a value competitor and I like it as it encourages innovation and improvement,” he says. He explains the logic.
He says: “Cranes are technologically intense and not price driven. The amount of money that a customer can save by buying a low cost product may immediately be eaten up when the crane shuts down and production is stopped for a day or two. For a Rs200 crore company if production stops for even a day then the loss is almost about Rs60 lakh worth of production. At 15% profit, that’s a straight loss of Rs9lakh per day. So it doesn’t make sense in going for a low-cost low-quality product,” Mehendale says.
The reason why he isn’t counting competition from Chinese manufacturers. “The general experience has been that Chinese products don’t stand up to European levels or even Indian levels for that matter. Of course, it is up to the customer to make a choice,” he says.
Although ElectroMech leads in terms of volumes, there are companies that are bigger because they deal in heavy cranes. Other leading names in the Indian crane industry are Mukand Ltd, Demag Cranes & Components, Kone Cranes (global leader in terms of sales), Stahl Crane Systems and Street Cranes. “We chose to be present only in the workshop duty cranes segment. The range of our cranes is between 250 kg and 120 tonnes,” Mehendale says.
Although ElectroMech manufactured a wide range of cranes, majority of its cranes are between two tonnes and 50 tonnes.
“Higher capacity crane manufacturing calls for a different work model. Here, we despatch about 2-3 cranes on a daily basis. With bigger cranes the rate could be 2-4 cranes on a monthly basis,” Mehendale says.
But ElectroMech definitely has intentions of venturing into higher capacity cranes. “Perhaps we can do that through some consolidation activity. Given the current scenario, it can open up new opportunities for consolidation through acquisitions. We are in fact looking out for companies,” Mehendale says.
ElectroMech has also partnered with Abus, a leading German crane manufacturer. Founded in 1963, Abus is one of the largest manufacturers of standard industrial cranes and produces about 5,000-6,000 cranes annually. It also produces about 18,000-20,000 crane kits per year. Abus sells these kits to its different partners all over the world.
“As exclusive representatives of Abus in India, we buy crane kits from them and assemble and test them here. Today, Abus is a well known brand in India because of our sustained brand building activities,” Mehendale says. ElectroMech has sold more than 500 Abus cranes in the country in a span of nearly four years.
The company has been catering to a wide range of industries like general engineering, automotive, paper, steel, glass, power, cement, equipment manufacturing and of course, construction & infrastructure. In fact, it has been actively involved with the construction and infrastructure industry.
“Each and every application we have done for the construction industry has been customised. We count among our clients all the top names in this industry like L&T ECC, HCC, Sobha Enterprises, Gammon India, Jayprakash Group, IVRCL, and Patel Engineering,” Mehendale says.
So how customised are the solutions he sells to the construction industry? He explains: “When Gammon India was constructing the bridges for the Delhi Metro it wanted a unique hoist which could fit within the launching girders for lifting the precast segments. They were considering buying from Japan but it was going to be quite expensive. So we developed the hoist for them within the specific geometrical and operational constraints.”
ElectroMech has also provided tunnel mucking systems to many infrastructure companies building tunnels on the projects they have bagged. “For example, the Koyna Lake tapping stage-IV project has been done using mostly our cranes,” Mehendale says.
He expects the share from the construction and infrastructure industry to actually go up this year – despite the slowdown. “I am still confident about India. Last November-December, all the mutual funds and economists were talking about the great economic demography that India has. The demography stills exist so what’s there to worry about?” he remarks.
The reason is simple. The construction and infrastructure industry has seen rapid mechanisation in the last decade or so as companies are realising the long term benefits of using technology. And currently huge infrastructure development is happening across the country.
“There is a huge disparity between the global standards of infrastructure and ours. For an emerging economy, this represents huge potential for growth,” Mehendale points out.
He explains his point by giving a classic example. He says: “When the United States was going through a recession in the 1960s, Eisenhower decided to build the inter-state highway project to kick-start the economy. Once the project started, it fuelled the entire economy.” His point – infrastructure can help India come out of the recession. “I have seen it happen. In 2001-2002 when there was a slump in the industry, we as a company survived solely on the construction and infrastructure industry,” he adds.
Mehendale is certainly not discounting the financial downturn but feels that too much has been made of it. He admits that even some of his orders are getting delayed. “But that’s because decisions are being delayed. The global crisis has had a sentimental impact on the Indian market. People are now scared to take decisions. Even if they have money and plans, they are risk-averse right now. And it has more to do with the stock market falling,” he says. His logic holds good as there is a huge domestic requirement in India. “I feel people should maintain sanity instead of being carried away by the stock market,” he adds.
Mehendale’s opinion is shared by AVR Murty, a senior industry professional who recently joined ElectroMech from Sandwik India. Murty has taken charge as CEO of ElectroMech is anticipating the floodgates of orders to open up soon. “It is just a matter of time and we are preparing ourselves for it,” he says.
Mehendale looks at the crisis as an opportunity. “I am putting my money where my mouth is. I am expanding my factory this year,” he says.
The company’s Pirangut facility in Pune that’s spread over 70,000 sq m has a covered area of 10,000 sq m where the actual work takes place. ElectroMech is expanding this plant to add another 8,500 sq m of working space.
“We have been growing at a CAGR of more than 55-60%. In order to sustain that growth, we will need higher market penetration to gain a bigger market share. Our production capacity has to be in sync with our market strategy and that is why we are expanding. Currently, we have a capacity to manufacture about a 1,000 cranes per year and we want to enhance this to 2,000,” Mehendale informs.
ElectroMech is investing Rs30 crore on R&D as well as the expansion.
Besides the Pirangut plant, ElectroMech will soon have another facility in Chennai. The plant will accrue an investment of Rs10 crore, with a capacity to manufacture 200 cranes per year which can be upgraded to 500. The project is scheduled to be completed in February 2009.
“We want to deliver better and durable equipment faster,” Mehendale says again underlining that quality is as important as increasing capacity. “I want to ensure that whatever products are going in the market will reinforce the company’s image as a responsible and quality manufacturer. When I go on the shop floor, I ask my workers to put themselves in the shoes of the customers and deliver the product accordingly,” he says.
Winner of an award for export excellence from Engineering Export Promotion Council, Mehendale is a true representative of the new Indian entrepreneur. “The challenge for Indian home grown construction equipment companies is to design their products from the global perspective. It has to be much more robust and must have maximum uptime. We can win the game only if we start thinking and delivering with this approach,” he says.
Mehendale is hoisting big dreams as he sets global standards for his firm. He says: “We have to benchmark ourselves with global leaders. That is what the entire Indian equipment industry needs to do.”