CII - Valcon Report on Engineering Industry in Punjab 2012
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“CII-Valcon report on Engineering Industry in Punjab - making the big leap forward” was released at the event 'Destination Punjab 2012', Ludhiana, held from 1-3 Nov at Ludhiana, Punjab (India). The......

“CII-Valcon report on Engineering Industry in Punjab - making the big leap forward” was released at the event 'Destination Punjab 2012', Ludhiana, held from 1-3 Nov at Ludhiana, Punjab (India). The report focuses on the emerging opportunities in the sunrise engineering sectors and also an assessment of how Punjab’s companies can gain from this.

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  • 1. Engineering Industry in Punjabmaking the big leap forward2012CII – Valcon Report
  • 2. Message by Mrs Kamna Raj Aggarwalla Chairperson, CII Destination Punjab 2012 It is my proud privilege to present CII Valcon report on “Engineering Industry in Punjab – Taking the Big Leap Forward” at the 2nd Edition of Destination Punjab – An Industrial & Engineering exposition. The report and this event is part of our endeavour to showcase to the world, the tremendous potential & promise that engineering sector in Punjab holds. CII and Valcon through this report have tried to come up with a holistic approach and practicable solutions which would help create capacity and also bring in concepts of competitiveness & automation that will help engineering sector gain momentum to become the true growth driver of our economy. While Destination Punjab 2012 seeks to provide a rare perfect platform to the engineering sector in Punjab to explore boundless opportunities which will help foster new partnerships & engineer profits. I would like to convey my sincere gratitude to Government of Punjab, ValconMrs Kamna Raj Aggarwalla Management Consulting and my dear friends from Industry as also ourChairperson, CII Destination exhibitors, buyers, sponsors and other stakeholders, who have supported us inPunjab 2012 this endeavour of reenergizing the engineering sector in the state. Wishing everyone a meaningful and productive Destination Punjab.2
  • 3. CII – Valcon ReportMessage by Ms Sandeep RiatChairperson, CII Ludhiana Zonal CouncilIt is a matter of great privilege for me to extend a very warm welcome to all thestakeholders & participants of the 2nd edition of Destination Punjab beingorganized at Ludhiana.Our focus in this years’ edition is to revive & reenergize the engineering sectorin the state by showcasing the potential and opportunities existing in this sectorto our business fraternity across the country & globe.As Ludhiana has traditionally been known as the hub of engineeringentrepreneurship in this region & country, through Destination Punjab 2012 wehave also endeavored to expose local entrepreneur to newer clients, latesttechnologies & practices through a focused exposition and concurrent sessionswith experts and leaders from industry.Besides these, CII & Valcon Management Consultants have together compiled areport which highlights the tremendous opportunities waiting to be tapped in Ms Sandeep Riatengineering sector in the state. I am sure our stakeholders will find this report Chairperson, CII Ludhiana Zonalinformative & useful. CouncilI would also take this opportunity to thank the state Government and otherstakeholders who have put in their sustained efforts and helped us in building asuccessful Destination Punjab 2012.Wishing everyone a pleasant & fruitful stay at Destination Punjab 2012,Ludhiana. 3
  • 4. Message by Mr Deepak Mittal Chairman, CII Punjab State Council On behalf of CII Punjab State Council, I take this opportunity to personally welcome you all to the 2nd edition of Destination Punjab at Ludhiana. After successfully organizing the 1st edition in Amritsar last year, this time we have adopted a more focused approach to highlight the strengths & opportunities existing in the engineering sector in the state. At Destination Punjab 2012, besides an exposition, an extensive schedule of Knowledge Sessions, Vendor Development Programs and a Conference on Automation have been scheduled over a period of 3 days which I am sure would help our business fraternity to expand its horizons by interacting with their prospective partners besides learning newer concepts, technologies & practices. I am also delighted to share that CII and Valcon Management Consultants have compiled a holistic report which aims to provide a bird’s eye view of the tremendous opportunities that exist for engineering Industry in Punjab as also itMr Deepak Mittal suggests the way forward to realize the full potential of this sector in the state.Chairman, CII Punjab StateCouncil This momentous effort would not have been possible without the unflinching support provided by Government of Punjab, colleagues from Industry and other stakeholders in this endeavour. I thank each and every one for their contribution. Wish you all a very fruitful Destination Punjab 2012.4
  • 5. CII – Valcon ReportMessage by Mr Krishnan NaganathanCEO, Valcon Management ConsultantsThe engineering sector in Punjab is going through a tough phase – challengingbusiness environment coupled with traditional working style is a doublewhammy for many of the home grown companies. Growth – in these conditions– is possible only through a holistic approach of analysing the status quo, takingsteps to consolidate and diversify and leveraging the strengths to tap thepotential in this sector.In this backdrop, I believe that there could not have been a better time than nowto present this report to the industry. This report by Valcon and CII attempts tocreate a holistic view of the current status of Punjab’s engineering industry andits growth vis-a-vis the Indian engineering sector. Further, we have also providedthe possible way forward for Punjab’s engineering industry to make the next bigleap forward.This report also highlights the sunrise sub-sectors in the industry with long termpotential that are likely to emerge as key drivers for the engineering sector. The Mr Krishnan Naganathanpotential of the various sub sectors has been looked into both in terms of CEO, Valcon Managementprofitability and return on investment, thus providing a quantified assessment Consultants Pvt. Ltdfor the reader. The objective has been to make the reader aware of the emergingopportunities and possibly trigger interest for further study and action.We have also tried to identify and understand the strengths of Punjab’scompanies that have helped them survive and fend off challenges as also theirweaknesses that have kept them from growing faster. Our learning has beencomplemented by views of industry experts and by Valcon’s view points onleading practices that needs to be implemented to ride the next curve of growth.As is the case in any study, the views expressed pertain primarily to majority ofthe population studied. We realise that there are a number of companies whostand out from the general and have outperformed others. In many ways, thesecompanies also set examples of the good practices to be emulated by others.With a strong domestic market, untapped export potential and largeinfrastructure investment plans by the government, there is an immense growthopportunity waiting for the companies. I hope that CII and Valcon’s attempt insharing the collective insights benefit the readers and enables the sector todrive long term growth in this sector.In short: Taking you further. 5
  • 6. Table of contents Punjab’s economy 7 Engineering sector and its relevance to growth of Punjab’s economy  8 Opportunities in engineering sector  11 Engineering sector overview in India 11 Classification of engineering sectors 11 Engineering sub-sectors 15 Medical equipment 15 Farm, construction and mining machinery  17 Metal fabrication 21 Industrial equipment and components 23 Auto components 27 Aerospace and defence - Sunrise sector with strong long term potential 32 Overall sector outlook 32 Potential for Punjab’s engineering industry 33 Strengths and weaknesses  33 Capability assessment 38 Skills 40 Marketing capabilities43 SWOT analysis of Punjab’s engineering industry  46 Key success factors for growth 48 Hurdles and roadblocks  49 Valcon’s view  50 Information sources & acknowledgements  52 About CII & About Valcon  536
  • 7. CII – Valcon ReportPunjab’s economyDemographics: Punjab has been one of the richest states in India sinceindependence. With a population of approximately 2.8 crores1 spread over afertile area of 50,362 km2 Punjab today is not only responsible for 15% of India’swheat and rice production2 but also contributes 2.5% of India’s industrial output.Size and growth: The net industrial production in Punjab is nearly INR 30,000crores. While agriculture and allied activities contribute 31% of state’s domesticproduct (2009-10), industrial activities and services contribute nearly 18% and51% respectively. The annualised growth in these sectors for last five years hadbeen 13.1%, 18.7% and 16.3% respectively indicating growing prominence ofindustrial activities in overall economy of Punjab4.Figure 1: Growth trends for components of economy in Punjab 100 State domestic product in Rs 1,000 Cr at current prices 90 80 70 60 50 40 30 20 10 0 2004 - 05 2005 - 06 2006 - 07 2007 - 08 2008 - 09 2009 - 10 Industry Agriculture Services Industry growth trendMajor industrial sectors: Registered factories contribute 56% of theindustrial output in Punjab. They accounted for around INR 17.5 thousand croresof gross value added in 2009-105. The major industry contributing to this outputwas engineering, accounting for 41% of gross value added while textiles,leather and apparels accounting for another 21%.1 Provisional Population Totals at a Glance Figure : 2011: Punjab (Census of India)2 RBI Handbook of Statistics 20113 Annual Survey of Industries 2009-20104 RBI Handbook of Statistics 2011. Growth rates have been calculated on Current Prices5 RBI Handbook of Statistics 2011 and Annual Survey of Industries 2009-10 Average 7
  • 8. Engineering sector and its relevance to growth of Punjab’s economy Figure 2: Share of total output by industry sectors in Punjab 22.9% Engineering 26.4% Textiles & leather Food & beverages Chemicals & pharmaceuticals Others 8.4% 22.4% 20% Source: Annual Survey of Industries 2009-2010 Engineering sector is a major contributor to the economy of Punjab. Over the last decade (2000 to 2010) it has grown at 16.4 % annually (CAGR). Today, while it represents about 23% of total industrial output of Punjab it only forms 2.9% of engineering industry contribution at the national level. This is in contrast with engineering output from neighbouring states like Haryana and Uttarakhand which share some of the same geographical advantages and disadvantages as Punjab but have raced ahead due to supportive industrial policies, availability of suitable infrastructure and better industrial climate in these states. Figure 3: Engineering sector contribution from Indian states 2012 2.4% 2.4% 11.6% 2.9% 3.2% West Bengal 4.7% Rajasthan Punjab 6.9% Andhra Pradesh 21.2% Uttarakhand 7% Karnataka Uttar Pradesh Gujarat 7.9% Haryana Tamil Nadu 17% Maharashtra 12.6% Others Source: Annual Survey of Industries 2009-2010 In the last decade (2000 to 2010) the growth in Punjab’s engineering industry has been behind the national average of 17.0% (CAGR)6. Nevertheless it has 6 CAGR (Compounded Annual Growth Rate) is the constant annually compounded rate of growth which would lead to output in 2010 starting from the respective industrial output in year 2000. These rates have been calculated using data from Annual Survey of Industries 2009-2010.8
  • 9. CII – Valcon Reportbeen responsible for a big proportion of the industrial growth in Punjab in past10 years due to its relative size. ƒƒ While engineering sector accounts for nearly 23% ofMore than 90% of the engineering Industry output from Punjab is from three Punjab’s industrial output,subsectors. Automotive and auto components have the largest contribution with its share is a meagre 2.9%large number of component manufacturers supplying to OEMs around Delhi and amongst all statesin Uttarakhand. Several of the components manufacturers also supply to the ƒƒ Engineering industries inlocal tractor and farm equipment industry (classified under special purpose nearby states like Haryanamachinery). Profitability of the sector is relatively poor with average profits being and Uttarakhand are seen5% of total industrial output. to be doing better than Punjab in their contributionFigure 4: Respective size of engineering related industries in Punjab to national output Aerospace & defence ƒƒ Most of engineering 5.63% 0.78% 4.88% Medical equipment industrial output in Punjab is 2.98% 0% 0.03% Automotive & auto components from low margin industries Castings, forgings & fabrication 38.26% Special purpose machinery 21.71% Industrial equipment & components Consumer electrical & electronic eqpt. including appliances Industrial electrical & electronic eqpt. Heavy vehicles & transportation 25.74%Source: Annual Survey of Industries 2009-2010; Valcon analysisFigure 5: Respective profit contribution of engineering related industries in Punjab 2.11% 0.35% Aerospace & defence 6.82% Medical equipment 2.63% 27.67% Automotive & auto components 0% 0.03% Castings, forgings & fabrication Special purpose machinery Industrial equipment & components Consumer electrical & electronic eqpt. including appliances 41.93% Industrial electrical & electronic eqpt. Heavy vehicles & transportation 18.46%Source: Annual Survey of Industries 2009-2010; Valcon analysisThe second largest engineering subsector is castings, forgings and fabrication.This sector supplies to customers in metal and mineral processing, heavyvehicles and transportation, industrial equipment manufacturing, construction,automotive and other diverse industries. Customers are spread across thecountry as well as several businesses have significant exports. Poor profitability 9
  • 10. (5% of output) in this large sector is due to the low value adding nature of the subsector. The third largest sector, special purpose machinery, is responsible for 23% of Punjab’s engineering sector output and has a high profitability (13% of output). It is responsible for nearly 43% of the profits from Punjab’s engineering sector making it the major source of profitability for Punjab’s engineering industry. This sector includes tractors and other farm equipment; machine tools, metal forming machinery, machinery for mining, quarrying and construction; machinery for processing of food and beverage, textile, apparel, leather, paper, rubber and plastics. Many of the machinery manufacturing businesses are profitable due to local prominence of their customer industries like agriculture; textiles and apparel manufacturing; leather, food, beverage, and rubber processing, etc. Consumer electronics, including household appliances, is the only other notable subsector contributing 7.2% of engineering industry profits in Punjab despite being responsible for less than 4% of output. This is due to high profitability of 13% generated by this sector.* The growth scale has been made linear Figure 6: Status of growth versus profitability of engineering sector in Punjabbetween the lowest and median values andmedian and highest values. The bubble Special purposeposition indicates the relative rank of the 10.0 machinerysub-sector on this scale. The size of the 9.0 Consumer/businessbubble indicates the size of the sub-sector in electrical &terms of its gross output. 8.0 electronics 7.0 Medical equipment Industrial equipment & Automotive & auto 6.0 Castings forgings components components Profitability & fabrication 5.0 4.0 3.0 Heavy vehicles & Industrial electrical & 2.0 transport electronic equipment 1.0 0.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 Growth Source: Annual Survey of Industries Data 2008-2009 and 2009-2010, Valcon analysis In summary, majority of engineering industry output from Punjab has poor profitability and hence there is significant opportunity to improve the sector performance. At this stage, we take a look at the performance of engineering sector in the country and the opportunities for growth available in various sub-sectors of the industry.10
  • 11. CII – Valcon ReportOpportunities in engineering sectorEngineering sector overview in IndiaThe engineering sector is the largest segment of Indian industry and employsmore than 40 lakh1 skilled and semi-skilled workers. It forms a significant part ofthe manufacturing industry and is very diverse in nature.India is also a major exporter of engineered products and services which isestimated to touch ~USD 68 billion (~INR 360 thousand crores) by FY 20152. Thisis primarily due to its comparative advantage of lower design, research & labourcost. The engineering sector is 100 per cent de-licensed and has accounted for8.9% of FDI inflow2 since April 2000.Classification of engineering sectorsThe key engineering sub-sectors which are part of the manufacturing sector inIndia and have been focused upon in this report are:ƒƒ Aerospace and defenceƒƒ Medical equipment and appliancesƒƒ Industrial electrical and electronicsƒƒ Special purpose machinery yy Farm and construction machinery yy Other process equipment yy Metal forming and machine toolsƒƒ Heavy vehicles and transportationƒƒ Industrial equipment and componentsƒƒ Castings, forgings and fabrication yy Castings and forgings yy Metal fabricationƒƒ Automotive and auto componentsƒƒ Consumer and business electrical and electronicsSome of these sub-sectors are inputs to others while some of them cater to theconsumers directly.In terms of the gross output from these engineering industries we find thatautomotive and auto parts and industrial electrical and electronics contributemore than 50% of the output. These sectors are also among the oldest sectorsalong with the castings, forgings and fabrication sectors. Some of the newersectors like aerospace and defence as well as medical equipment andappliances are seeing a lot of impetus from both private and public enterprises. 11
  • 12. Figure 7: All-India engineering industry output by sub-sector in 2009-2010 0% 8% 1% 12% 2% Aerospace & defence 19% Medical equipment & appliances Consumer/business electrical & 33% electronics Automotive & auto parts Castings, forgings & fabrication Industrial equipment & components Industrial electrical & electronics Heavy transport vehicles 10% Special purpose machinery 15% Source: ASI 2009-2010 In order to evaluate the business attractiveness of these sectors we have analysed them on the following business parameters: ƒƒ Net profit profitability ƒƒ Growth ƒƒ eturn on gross fixed asset (only plant and equipment). This measure is a R ratio of net profit to gross value of plant and machinery (RoGFA). ƒƒ Investment requirements. It has been evaluated using the measure of average capital deployed per factory. Evaluating the various sub-sectors for their performance on growth and profit- ability, we find that the following stand out as more attractive than others, in India: ƒƒ Heavy vehicles and transportation ƒƒ Medical equipment ƒƒ Farm and construction machinery ƒƒ Automotive and auto components ƒƒ Metal fabrication12
  • 13. CII – Valcon Report Figure 8: Growth and profitability of engineering sub-sectors in India * The growth scale has been made linear between the lowest and median values and 10.0 median and highest values. The bubble Medical equipment Heavy transport position indicates the relative rank of the 9.0 vehicles sub-sector on this scale. The size of the Industrial equipment & bubble indicates the size of the sub-sector 8.0 components in terms of its gross output. 7.0 Aerospace & defence Consumer electrical & Farm & construction 6.0 electronics machineryProfitability 5.0 Other process equipment 4.0 Metal fabrication Industrial electrical & 3.0 electronics Castings & forgings Automotive & auto 2.0 components 1.0 Metal forming & machine tools 0.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 GrowthIn order to understand the attractiveness in terms of entering certain sub-sectors, we have compared on return on gross fixed assets† vs. average capitalemployed per factory. As can be seen from the graph (see figure {9} the mostattractive sectors where the return on gross fixed assets is high while theaverage capital employed per factory is low are:ƒƒ Farm and construction machineryƒƒ Heavy vehicles and transportationƒƒ Industrial equipment and componentsƒƒ Other process equipmentƒƒ Medical equipmentƒƒ Metal fabrication† It only includes plant and equipment 13
  • 14. * The growth scale has been made linear Figure 9: RoGFA vs. avg. capital deployed per factorybetween the lowest and median values andmedian and highest values. The bubble 10.0position indicates the relative rank of the Heavy transportsub-sector on this scale. The size of the 9.0 vehiclesbubble indicates the size of the sub-sectorin terms of its gross output. 8.0 Automotive & auto Avg. capital deployed per factory components Industrial electrical & 7.0 electronics Industrial equipment & components 6.0 Farm & construction machinery 5.0 Consumer electrical & 4.0 electronics Medical equipment Other process equipment 3.0 Castings & forgings 2.0 Metal fabrication 1.0 Metal forming & machine tools Aerospace & defence 0.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 RoGFA In addition to the above parameters, it is also important to consider the size of the sectors since it indicates more opportunity. Automotive and auto components which is the largest sub-sector under engineering with a strong growth trajectory is an important sector to consider. Considering all the above mentioned parameters simultaneously and giving higher weightage to profitability and RoGFA, we identified the following sub-sectors for detailed study: Avg. capital employed per Sub-sector Growth rate Profitability RoGFA factory Farm & construction High Medium High Medium machinery Heavy vehicles & High Medium Medium-Low Medium-High transportation Medical equipment High High Medium-High Medium-Low Industrial equipment & components Medium Medium-high Medium-High Medium Metal fabrication Medium Medium Medium-High Low Note: Lower avg. capital deployed per factory lowers the entry barriers for firms Some of these sub-sectors such as farm and construction machinery and automotive and auto components have a strong resonance to Punjab’s engineering sector The following section delves deeper into each of these sub-sectors and their typical characteristics.14
  • 15. CII – Valcon ReportEngineering sub-sectorsMedical equipmentIndia’s medical equipment market – valued at $4.9 billion (INR 25.8 thousand An estimated three-quarters of India’s demand for medicalcrores) – is Asia’s fourth-largest (behind Japan, China, and South Korea) and is devices is currently met byprojected to reach $8 billion (INR 42200 crores) by 2015, as health insurance imports, nearly 30% of whichbecomes more widely available and the country’s middle-class consumers are supplied by the Unitedcontinue to demand better healthcare services. States.India’s rapidly growing healthcare market is providing significant tradeopportunities for medical device firms. An estimated three-quarters of India’sdemand for medical devices is currently met by imports, nearly 30% of whichare supplied by the United StatesBy 2050, India is expected to overtake China as the world’s most populatedcountry, with a projected population of 170 crores. By 2025, India’s elderlypopulation (aged 60 and above) is expected to reach nearly 200 million.Figure 10: Medical devices market 6 5 4 US $ billion 3 2 1 0 2006 2009 2012Source: FICCI reportKey segmentsMedical instruments and appliances, orthopaedic and prosthetic appliances arethe key segments in this category with 25.10% and 20% share. Theconsumables such as bandages, medical supplies and syringes contribute closeto 20% to this category. 15
  • 16. Figure 11: Key segments of medical equipment 15.20% 25.10% Medical instruments & appliances X Ray apparatus Bandages & other medical supplies 10.20% Orthopeadic, prosthetic appliances Syringes, needles Electromedical Others 9.5% 12% 7.6% 20% Source: www.aimedindia.com The Indian medical technology industry is highly competitive and fragmented, with domestic firms primarily manufacturing low technology products such as disposables/medical supplies, and MNCs primarily importing high end medical equipment. MNCs seeking to enter the industry typically form joint ventures with local manufacturers, establish subsidiaries or employ local agents to distribute their products. Key growth drivers ƒƒ Faster upgradation of existing technology and global new product innovation ƒƒ Availability of advanced and sophisticated medical technology ƒƒ Medical tourism is being promoted by the government and stimulated by the corporate boom in medical care driving private care providers to upgrade their medical technology infrastructure ƒƒ Increased penetration of health insurance leading to increased coverage of high cost treatment ƒƒ Rising disposable income/purchasing power Key challenges ƒƒ Penetration is very low in rural/towns/smaller towns due to affordability. Rural healthcare providers would want a cheaper and cost effective solution and don’t opt for high end products ƒƒ Unclear government regulation coupled with ambiguous quality standards is also a key challenge faced by this sector Way forward ƒƒ Financial engineering along with product sales can dramatically enlarge the market16
  • 17. CII – Valcon Reportƒƒ se of technology to reduce cost, increase penetration such as telemedicine, U remote monitoring etc. Innovation is the keyƒƒ Sound regulatory framework is a key enabler for the growth of the medical Companies need to innovate technology and invest in R&D to come out with cost effective solutions and think of economies ofFarm, construction and mining machinery scale so that they can reach more customers with the rightThis sub-sector caters to two significant sectors of the Indian economy; pricing.Agriculture and infrastructure which together contribute more than 25% toIndia’s GDP. Currently the farm and construction machinery sub-sector accountsfor only about 4% of the engineering sector output but has seen a growth rateof over 18% over the period FY2009 to FY2010.The farm machinery segment consists of diverse set of products across theagricultural value chain:Fig. 12: Agricultural value chain Weeding Tilling & seeding Post harvest Sowing & plant Harvesting preparation processing protection Tractors Seeders Harrow Harvester Seed extr. Levelers Planters Tiller Thresher Dehusker Ploughs Transplanter Sprayer Reaper Mill Duster DryerAmongst all the products, tractors are the largest segment in India and is alsoone of the main categories of products exported. Several Indian companies likeTractors & Farm Equipment Ltd. (TAFE), Mahindra & Mahindra, Escorts AgriMachinery Group, etc. have built successful business with tractors as their mainproduct category. India is the world’s largest producer of tractors and accountsfor a third of the world’s production. India is a net exporters of tractors, whichhas grown at a CAGR of 17% over the last 5 years. The domestic market hasgrown at a CAGR of ~15% over the last 5 years with North India being thelargest market. 17
  • 18. CII – Valcon report on enginnering industry in Punjab Figure 13: Region wise tractor sale FY 2008 and FY 2009 Increased mechanisation and 9% 13% lower labour availability is driving the domestic demand 18% 21% for farm equipment. In addition, 38% 36% cost pressures in the international markets are forcing global players to 8% source components and assemblies from India in 10% growing volumes. Central 26% Central 19% West West East East South South North North Source: CMIE Prowess The tractor industry is very organised and also fairly consolidated as can be seen from the market share trends below: Sub sector FY 2008 FY 2011 FY 2012 Mahindra & Mahindra Ltd. (M&M Ltd.) 34% 39.6% 39.2% Tractors & Farm Equipment Ltd. (TFEL) 21% 21% 24.0% Escorts Ltd. 13% 12.1% 10.3% John Deere Equipment Pvt. Ltd. 8% 9.8% 9.2% International Tractors Ltd. 8% 8.5% 8.3% Sources: CMIE Prowess, IAS Key drivers ƒƒ Increasing need for mechaniation. The difficulty in getting manual labour due to urbanisation and the need to improve productivity are driving the use of machinery to enable sustainable farming ƒƒ Emergence of corporate sourcing from farmers. This has led to an increase in margins available to the farmer enabling the drive for greater productivity ƒƒ Better financing and credit schemes in rural areas. Government subsidies and also organised money lending by co-operative banks has given avenues to the farmer to procure farm machinery18
  • 19. CII – Valcon ReportThe government has estimated that investment worth INR 40 lakh crores will bemade over the 12th five year plan period in Infrastructure development in the Infrastructure growth hascountry. The key areas of infrastructure are rail, road, power, ports and airports slowed down but it is anwhich contribute about 66% to the construction sector in India while residential imperative if growth in Indiaand commercial account for 27% and 7% respectively. Private participation in needs to be sustained.the infrastructure sector is set to rise to 50% of the total infrastructure Increasing number ofinvestment. This growth is one of the primary drivers for the construction international firms are settingequipment sub-sector. up manufacturing and sourcing operations in India to cater toConstruction and mining equipment consists of machinery such as hydraulic domestic as well asexcavators, backhoe loaders, bull dozers, dump trucks, pavers, wet mix plants, international demand.cranes, fork lifts, dozers, etc. with an estimated market size of INR 14,740crores.A classification of this equipment is as shown below: Construction & mining equipment Material handling Earth moving equipments Other machineries equipments Backhoe loaders Conveyors Concrete mixers Wheeled loaders Forklifts Road rollers Excavators Automated storage Pavers Trenchers Automated guided vehicle Spraying & plastering M/C Bulldozers Cranes & hoists Hot mix plants Dumpers Robots, etc. Crushers Graders Pumps (heavy duty) Compactors Slurry seal machines Scrappers, etc. Tunneling & drilling Machines Tippers, etc.Source: Industry sources, D&B ResearchBackhoe loader is the largest segment in the sector, in terms of volume followedby hydraulic excavators and mobile cranes.The Indian construction and mining equipment industry is estimated to havepresence of about 200 players, though can be considered as organised asplayers in the organised sector are estimated to account for about 80-85% ofthe revenue and the top four player s together account for ~85% of totalmarket share. JCB India Ltd. is the market leader in the Indian construction andmining equipment market, accounting for ~30% of total market share, followedby BEML Ltd (~18%). 19
  • 20. CII – Valcon report on enginnering industry in Punjab Figure 14: Major players 16.3% JCB India Ltd. BEML Ltd. 30.6% Tecpro Systems Ltd. Mcnally Bharat Engg. Co. Ltd. 9.3% L&T Komatsu Ltd. Others 12.1% 18.3% 13.6% Source: Industry Sources, CMIE Prowess, D&B Research Raw material expense is the largest operating expense component in the sector, accounting for ~56.7% of total sales in FY 2012. Iron and steel are the two main raw materials used in the segment. Evaluating the farm and construction equipment sector on some of the operational parameters gives a better perspective of the governing factors for success in this sector. Here we have compared this against auto components to give greater clarity on their relative requirements. As we can see here the farm, construction and mining machinery industry has relatively similar product complexity but has a lower requirement for precision. Also given that on an average this sector has a larger product size it implies a higher value product. Figure 15: Product complexity and product size High High Auto components Product valueadd Farm & construction Precision levels machinery Farm & construction machinery Auto components Low Low Low High Light Heavy Product complexity Product size20
  • 21. CII – Valcon ReportMetal fabricationThis is a highly fragmented and labour intensive sector with medium and smallscale industries heavily dependent on job work. Fabrication applies to thebuilding of machines, structures and other equipment, by cutting, shaping andassembling components made from raw materials by using various mechanicalprocesses such as welding, soldering, forging, brazing, forming, pressing,bending and stress removal. Welding is a major process input in mostfabrication jobs.Since the demand for fabrication sector comes from the engineering sector, Steel availability coupled withespecially capital goods, the growth of fabrication industry largely depends on labour availability enablesthe overall industrial scenario. The fabrication industry caters to many sectors Indian firms to deliversuch as transportation, construction and structures, industrial and heavy fabricated products which areequipment, packaging, consumer products, etc. The major user industry for the competitive globally. Domesticfabrication sector is the general structural fabrication followed by the railway demand for structural steeland shipping, machine building and construction. (on-site and off-site) is driven primarily by the coreRaw material is the primary cost driver of this industry and is easily available in infrastructure segments andIndia, only special steel needs to be imported. However, with prices of steel construction segmentsincreasing on global and domestic level, slowing demand and manufacturers in (residential and commercial).the engineering sector planning a reduction in production capacity, the growthof this industry is likely to undergo a moderation in the near term.Figure 16: Cost structure [%] (2011) 0% 3.1% Increase in stock 2% Raw materials 0% Power generation and distribution Other manufacturing expenses Employee cost 10.4% Selling and administration expenses Miscellaneous expenses Depreciation 7.1% 61.9% Other operational expenses 9.6% 5.8%Source: Ecotrends 21
  • 22. Key drivers ƒƒ roject based – core industry sector plays a major role and effects upstream P and downstream fabricators ƒƒ edium and small scale industries heavily dependent on job work M ƒƒ More power dependant compared to a machining industry ƒƒ rowth also dependent on growth in the engineering sector, especially G capital goods industry ƒƒ Construction industry will drive the demand for small units and also on site fabrication for structural elements Future growth outlook ƒƒ General structural fabrication will continue to grow (example: cement, power, two-wheeler frames, etc.) ƒƒ ousing sector growth will affect performance of small and medium H fabricators ƒƒ lectrical and power projects – major impetus for future success E Evaluating the metal fabrication sector on some of the operational parameters, shows us that the precision requirements are far lower than auto components and also has lower product complexity. On the other hand it is more labour intensive and requires higher skill level since there are more manual intervention as compared to auto components. This gives a fair indication of the cost drivers and importance of skilled labour in this sector. Figure 17: Product complexity and operator skills High High Metal fabrication Auto components Labour intensiveness Precision levels Auto components Metal fabrication Low Low Low High Light Heavy Product complexity Operator skills22
  • 23. CII – Valcon ReportIndustrial equipment and componentsThis sector consists of varied set of equipment with application across all majorindustries including power, automotive, construction, capital goods, etc. Thevarious categories which form this sub-sector are as shown below with enginesand turbines (33%) forming the largest category. Refrigeration, air-conditioningequipment (19%), pumps and compressors (14%) and bearings and gears (13%)constitutes the other key categories.Figure 18: Revenue share by segment Engines & turbines 19% Hydraulics & pneumatics 33% Pumps, compressions & valves 0% Bearings & gears Heating equipment 10% Lifting & handling equipment Power driven hand tools 3% Refrigeration, air-conditioning, fire extinguishers & weighing machinery 8% 13% 14%In terms of their profit contribution to the sector the main segments are enginesand turbines, pumps, compressor and valves and refrigeration and airconditioning.Figure 19: Profit share by segment 11% 0% Engines & turbines 50% Fluid power equipment 7% Pumps, compressions & valves 2% Bearings & gears Heating equipment 10% Lifting & handling equipment Power driven hand tools Refrigeration, air-conditioning, fire extinguishers & weighing machinery 14% 6% 23
  • 24. Engines and turbines The main sector that this segment caters to is the power generation sector and generally grouped under the boiler-turbine-generator (BTG) segment. Figure 20: Revenue share by segment 10% Boilers Turbines Generators 27% 63% Source: IBEF Report on Elecrical Machinery It is expected that about 40% increase in thermal power capacity will be seen in the 12th five-year plan period. Most of the equipment for the projects under execution is being supplied by Chinese OEM’s with BHEL and L&T MHI being the other significant player. Figure 21: Share of OEMs for super-critical projects under execution 12% China-based OEMs BHEL L&T-MHI 15% Others 57% 16% Source: ICRA Research With many bilateral nuclear agreements in place, India is expected to become a major hub for manufacturing nuclear reactors and associated components. The Indian Government proposes to add 3,380 MW of nuclear power capacity by 2012.There is a huge opportunity for players to re-orient and focus their efforts to develop technology for higher capacity thermal units and nuclear reactors.24
  • 25. CII – Valcon ReportThe key challenge facing the sector is the delay in project execution whichimpacts the order flow and cash flow. Also transport of this equipment facesmajor issues due to the absence of good quality infrastructure.Raw material is the primary cost driver followed by employee cost.Figure 22: Cost structure [%] (2011) 0.1% 2.2% 2.9% 5.5% Increase in stock Raw materials 12.7% 0% Power generation and distribution Other manufacturing expenses Employee cost 5.4% Selling and administration expenses Miscellaneous expenses 1.1% Depreciation 70.2% Other operational expensesSource: EcotrendsKey driversƒƒ Increasing demand for energy and large investments in the energy sector The BTG as well as pumps andƒƒ Civilian nuclear deals between India and other nations will encourage compressor segments are growth in the nuclear power generation sector driven by the growth in power and oil and gas sectors.Pumps, compressors and valves Technology capabilities play an important role in the highThis category of products is used across multiple sectors like oil and gas and value/performance sectorsagriculture and power generation. Pumps and valves comprise of more than Table 10 Pumps valves compressors and there is a need fortwo-thirds of this INR 12,000-14,000 crore sector while compressors is the domestic companies to investother category. in R&D to build more profitableSome of the major players in the Indian market are: businesses. Pumps Valves Compressors Kirloskar Brothers Ltd. Flowserve Corporation BHEL CRI Pumps Tyco Flow Siemens Crompton Greaves L&T Audco Ingersoll Rand KSB Fisher Sanmar Atlas Copco Bharat Bijlee BHEL Dresser Rand 25
  • 26. Compressor design complexity implies a fewer number of domestic manufacturers while pumps and valves market has a significant unorganised segment. In India the Rotary compressors dominate the market with 85% share. Figure 23: Pumps market share - organised vs unorganised Organised retail and processed food sectors will Unorganised drive a wave of growth in the Organised cold chain infrastructure across the country. A large number of domestic and 56% 44% international players are gearing up for it. Source: Netscribes – Pumps Market 2011 Key drivers ƒƒ Growth in oil and gas sector with large number of projects ƒƒ Irrigation projects with the government’s increased focus on agriculture Refrigeration and air conditioning equipment This sector is seeing a boost in its growth with increased need for cold chains to be established. The process of storing, transporting and displaying food at appropriate temperatures will gain more significance. Refrigeration segment is expected to grow at about 10-15% over the next 3 years while the air conditioning segment is poised for a 15-20% growth over the same period. Figure 24: Market share by segment 8% Air conditioning systems Commercial refrigeration 14% AC&R servicing 78% Source: AIACRA26
  • 27. CII – Valcon ReportThere are large number of Indian and international firms which have a strongpresence in this sector such as Blue Star, Carrier, Haier, Voltas. The keycomponent of refrigeration and air conditioning systems are compressorwhich has been described in the previous section.Key driversƒƒ Growth in organised retailƒƒ Growth in processed food sectorƒƒ Increased need for air conditioned commercial establishmentsAuto componentsGrowth in automobile sector has been one of the key drivers of the economicgrowth of the country. However, Indian auto components industry has beenwitnessing a moderation in its revenue growth to 16% in FY 2012 as comparedto the average growth of above 30% in previous two fiscal on the back ofslowing automobile sales.Figure 25: Comprehensive product range 7% 9% Electrical parts 10% Equipment Suspension & braking parts Body & chassis 31% Drive transmission & steering parts 12% Engine parts Others 12% 19%Source: www.acmainfo.comAs compared to the auto component market overseas, India focuses primarily onthe ancillary and equipment segments rather than engine and suspension parts,due to its developing R&D capabilities. Contribution of suspension and brakingparts and Equipment is going to improve in the years to come due to use of 4wheel drive and increase in replacement market.India is one of the largest auto components market with a production turnover ofINR 226 thousand crores in FY 2012. It has grown at a CAGR of ~18.7% over FY2008-12. Growth in domestic auto industry and demand from export market ledto the growth of auto component industry. 27
  • 28. Figure 26: Growth of Indian auto components industry Indian auto component industry comprises of round 7000 600 companies in the E % 5876 6000 13 organised sector which wt h gro account 85% of the production ted 5000 tima whereas more than 6,000 Es INR (billion) companies involved in the 4000 3447.6 unorganised market. 3000 2262 2074.8 2000 1565.2 1378 1196 1000 0 2007 - 08 2008 - 09 2009 - 10 2010 - 11 2011 - 12 2015 - 16(E) 2020 - 21(E) Year Source: www.acmainfo.com As per industry estimates, out of the total turnover of the Indian auto components industry, around 60% is derived from sales to domestic OEMs, around 25% comes from sales to the domestic replacement market and around 15% is derived from exports Competitive scenario Indian auto components industry apart from being categorised into OEMs and replacements market is organised but highly fragmented in nature. Table 11 Competitive scenario Indian auto component industry comprises of round 600 companies in the organised sector which account 85% of the production whereas more than 6,000 companies involved in the unorganised market. Company Number of companies Turnover range (INR Bn) classification in organised sector Medium > 10 14 Small 2.50 - 10 85 Mini 0.50 - 2.50 200 Micro < 0.50 30528
  • 29. CII – Valcon ReportAltogether top five players account for ~9.24% of the market while top tencompanies corner ~11.93% of the market. Low share of leading companiesindicate the fragmented nature of the industry.India has been a net importer of auto components during FY 2008-12 and whileimports continue to grow at 25%. However, exports continue to be the beaconof hope despite the slow-down in the global economy.Export-import dynamicsExports to European region accounted for highest share in auto component India remained a net importerexports from India of 39% in FY 2012, followed by America region (30%), Asia of auto components during FY(19%). However, the exports to Africa region recorded highest y-o-y growth of 2008-12. Imports continued toabout 55% followed by over 39% growth in exports to European region during grow at 25%, exceeding USDthe similar period. 10.5 billion compared to USD 8.5 billion in the previous yearFigure 27: Growth of exports vs imports as compared to growth of exports at 18%. 28 Exports 334 FY 2012 14 514.4 Imports 237.1 FY 2011 387.6 160 FY 2010 306.8 184 FY 2009 312.8 159.6 FY 2008 260.4 0 100 200 300 400 500 600Source: crisil.com & www.acmainfo.com 50Key driversƒƒ The performance of auto component industry is totally dependent on the performance of automobile sector. The future outlook is still better with auto component mirroring the auto industry growth at a rate of 13-15%ƒƒ Increasing focus on localisation of vendor baseƒƒ Sourcing of auto components by international automobile companies to cut costsƒƒ Increasing focus towards quality certification which has now led to increased purchase of parts from the organised market 29
  • 30. Figure 28: Growth of auto components relative to growth of auto industry 40% % growth 20% 0 0 1 2 .. .. -1 -1 -1 -. -. 15 20 09 10 11 20 20 20 20 20 Auto component Auto industry Source: CMIE IAS Key challegens Though in the long term, auto component’s growth prospects are strong, it is facing challenges and bottlenecks to growth: ƒƒ Financial viability in face of ever increasing cost pressures ƒƒ Tier 2/3 companies also face challenges of low return on investment which prevents scaling up of operations ƒƒ Economic condition. High interest rates coupled with inflation and weakening of the rupee ƒƒ Work force management ƒƒ Government’s move to push for more multilateral and bilateral trade Government initiatives to promote growth and innovation ƒƒ The government has proposed to formulate a sequel of AMP II (2018-27) to put in place a framework for the long term growth trajectory for auto and auto ancillary sector ƒƒ Creation of Technology Up-gradation & Development Scheme (TUDS) for auto components and setting up of Auto Component Technology Development Fund (ATDF) which will help auto component companies in accessing loans at reduced rates of interest for research and development activities, upgradation of process and technology acquisition ƒƒ Auto Component Manufacturers Association (ACMA) has identified the long term investment requirement by auto component industry during 2012-16 of about ~INR 15,000 crores of which ~INR 7,500 crores are proposed to be financed through soft loans with interest subvention30
  • 31. CII – Valcon Reportƒƒ The government has allowed 100% foreign equity investment in the sector, through the automatic route, without any minimum investment criteria The auto components industry in India is around two-thirdsFuture growth outlook the size of the OEM segment.There is no doubt the medium to long-term growth story of India remains intact, This proportion is around onehowever auto component industry will have to get used to such transient to two times in mature marketsups-and-downs arising from the difficult economic situation. Significant of Europe, America and Japan.opportunities exist to enhance share in the global automotive market. Industriesneed to invest in design and development to move up the value chain.Currently, the auto components industry in India is around two-thirds the size ofthe OEM segment. This proportion is around one to two times in mature marketsof Europe, America and Japan. This indicates:ƒƒ Higher proportion of imports of auto components in India by OEMs andƒƒ Lower replacement market salesOther sub-sectorsThe following sub-sectors also appear to have a larger scope for businessgrowth over the medium term:Electronics (engine-side and body-side) – The localisation proportion ofelectronic components in Indian cars remains low as of now. Given the growingneed to offer driver information systems, engine management systems andemission control systems in cars to meet the advancing safety and emissionregulations, the use of electronics in Indian cars is likely to see a proliferation inthe times to come. This should translate into strong growth for auto ancillarieshaving capabilities in this segment.Plastics – Although this segment is already quite competition intensive,considering OEMs’ focus on adopting light-weighting technologies and alreadyseveral instances where material of components has been changed by OEMsfrom sheet metal to plastic; it augurs well for auto component manufacturershaving strong capability in the plastics space. Sheet moulded composites, bulkmoulded composites and long fibre thermoplastics are some of the newmaterials being used to replace metal and conventional plastics.Aluminium die-casting – In the boom period of 2009-10 and 2010-11, the autoindustry had experienced significant capacity constraints for aluminium die-castcomponents. The capacity shortage was more severe at tier-2 suppliers’ end andthis had prompted few tier-1 players to backward integrate not just for captiveconsumption but also for selling to other customers. Also, for select enginecomponents, OEMs are likely to demand tighter product tolerances to meet thestringent emission control norms which in turn is likely to increase per unitrealisation for auto ancillaries manufacturing such components (although at thecost of higher capital investments). 31
  • 32. Aerospace and defence – Sunrise sector with strong long term potential Overview This sector is currently in its nascent stages in India but presents a large opportunity. Until now, most projects are executed by PSU or government research agencies which have the R&D and technological expertise. But with more private players acquiring technological capability by way of JV’s, acquisitions or talent inflow have begun to play a more significant role not just domestically but also on the international stage. Key drivers ƒƒ 100% private sector participation with defence having a restriction of 26% FDI ƒƒ Offset policy from large defence spend ƒƒ Strong maintenance, repair and overhaul (MRO) capabilities ƒƒ Continued growth of civil aviation ƒƒ Investments in the Indian space programme – INR 40,000 crores during the period 2007-2012 Key challenges ƒƒ Moving up the value chain from being tier 2-3 suppliers to tier 1 suppliers ƒƒ Building design and integration capabilities ƒƒ Availability of highly skilled workforce ƒƒ High import duties on imported components ƒƒ Access to funding for high initial capital investment Overall sector outlook Demand in the engineering sector is expected to remain healthy primarily on account of the government increased thrust on infrastructure development in turn having positive impact on various sub-sectors. Favourable government policies and regulations would enable the sector to scale up its growth potential. Increased spend in defence, improving medical infrastructure, indigenisation of auto components to tap export potential, farm and construction equipment are going to be critical drivers for growth of this engineering industry. The next section analyses Punjab’s strength in leveraging the growth potential.32
  • 33. CII – Valcon ReportPotential for Punjab’s engineeringindustryStrengths and weaknessesThough Punjab has been an agriculture dominated economy sinceIndependence, the state occupied an important position in the engineeringsector of the country. The industrial towns like Ludhiana, Amritsar, Jalandhar,Mohali, etc. host several small, medium and large industrial units. Dominatedby small and medium enterprises, Punjab excels in production of leather goods,textiles, machine and hand tools and paper packaging.Local availability of raw material, skills and market demand have contributed tosignificant growth of these industries. All of this was adequately supported bythe enterprising spirit of Punjab’s businessmen who instilled flexibility in runningtheir operations to meet diverse customisation requests and customerexpectations.The success of the engineering industry is primarily due two reasons: the spurtof agricultural growth that aided the manufacturing to move out of infancythrough sustained local demand, and the ability of the businessmen to thinkahead of time and ahead of competition.Examples of such forward thinking include use of automation in textilemanufacturing, development of machine tools industry, leadership in highvolume bicycle market and so on.However, it would not be prudent to say that all local companies have adoptedinnovative thinking and best practices. Companies have usually focussed on oneor two strengths that would set them apart from the competition. This is alsoreflected by inputs received during our discussions across industries in Punjab(see figure {29}). 33
  • 34. Figure 29: Factors perceived as competitive strengths by Punjab based engineering sector industries 100% 90% 80% 70% 60% 50% 40% 75% 67% 30% 58% 50% 20% 42% 33% 33% 10% 25% 17% 0% 0% Superior quality Cost advantage Lead time Design & development New product technology Niche product Location Process technology Talent & skills Government policies Yes No Source: Primary research, Valcon Analysis This is also reflected in the views of the industrialists: I think one of the strengths for our company is that we are a single source to most of our customers because of our lower prices than our competition. This has been possible because we bought the right technology at a very early stage and today the competition is incurring high capital costs for the same technology. COO of an automotive parts supplier. For a long time the availability of raw materials, vendors and skilled manpower for the machine parts that we manufacture has remained in Punjab. That ecosystem gives us the advantage of being present in Punjab. Partner of a machine manufacturing company. We have been successful because of the shorter lead times of product development and the high service levels. The customers have never had any complaints regarding the quality of our products and are always satisfied with the design we provide them. Senior mnagement member of an electrical firm.34
  • 35. CII – Valcon ReportWe invested in automation of our processes and technology much before thecompetition to mitigate low productivity and improved quality. Today, 80% of oursales is in exports. MD of automotive parts company.Ease of doing businessAccording to the World Bank, “Doing Business in India report 2012”, Ludhiana isranked the best in the Indian cities in ease of doing business.Starting a business Cost Procedures Time (% of income City (number) (days) per capita) Kochi 13 41 47,2% Bangalore 13 40 64.7% Ranchi 12 38 51.5% Guwahati 13 38 40.5% Bhubaneshwar 12 37 39.9% Patna 11 37 38.5% Kolkata 13 36 39.6% Ahmedabad 13 35 46.3% Chennai 13 34 40.3% Gurgaon 12 33 50.7% Ludhiana 12 33 48.0% Hyderabad 12 33 41.6% Indore 13 32 43.8% New Delhi 11 32 41.1% Jaipur 12 31 45.5% Mumbai 13 30 70.9% Noida 12 30 52.5% 7The literacy rate in Punjab is 76.7% which is much higher than the nationalaverage of 74%. But there is a sense of stagnation in the industry post theliberalisation era. The agricultural sector dwindled first and dropped to growthof 2.16% per annum as compared to 5.15% per annum in the 1980s8. Thisperhaps had a domino effect on the manufacturing industry as well. If wecompare the rate of growth of different states post liberalisation period, itshows Punjab losing the edge.7 Doing Business in India (World Bank Report), 20128 Deceleration of Economic Growth in Punjab – Lakhwinder Singh, Sukhpal Singh, Economic and Political Weekly, Vol 37, No. 6, (Feb9 -15, 2002) 35
  • 36. Table 09 Relative economic performance of Indian states during the 1980s and 1990s Table 02: Relative economic performance of Indian states during the 1980s and 1990s Annual rate of growth of Annual rates of growth of SDP (per cent) per capita SDP (per cent) 1980-81 1991-92 1980-81 1991-92 to to to to State 1990-91 1997-98 1990-91 1997-98 Bihar 4.66 2.69 2.45 1.12 Rajasthan 6.60 6.54 3.96 3.96 Uttar Pradesh 4.95 3.58 2.60 1.24 Orissa 4.29 3.25 2.38 1.64 Madhya Pradesh 4.56 6.17 2.08 3.87 Andhra Pradesh 5.65 5.03 3.34 3.45 Tamil Nadu 5.38 6.22 3.87 4.95 Kerala 3.57 5.81 2.19 4.52 Karnataka 5.29 5.29 3.28 3.45 West Bengal 4.71 6.91 2.39 5.04 Gujarat 5.08 9.57 3.08 7.57 Haryana 6.43 5.02 3.86 2.66 Maharashtra 6.02 8.01 3.58 6.13 Punjab 5.32 4.71 3.33 2.80 SDP of 14 states 5.24 5.94 3.03 4.02 GDP (national accounts) 5.55 6.89 - - 8 Source: Ahluwalia (2000) The scale of industries tended to remain small and medium which meant the productivity remained low. There were not many large scale industries that could help the accompanying small and medium scale industries grow. Small scale industries struggled with financing new projects and could not keep pace with the modern technology and advanced methods of production and modern forms of organisation adopted by industries in other states. Adding to the handicap was the competition for the raw materials and markets. Punjab found itself isolated and away from the source of raw materials and markets. The logistics costs made some industries unviable to operate from Punjab. The low turnover and localised nature of most of the companies also meant that Punjab did not remain a attractive destination for talent. Youth started to emigrate to other states and countries for better opportunities. The lack of skilled managers meant, the working experience of managers in companies was more than in the other states. The skills set got dated due to lack of exposure to new best manufacturing practices and management8. “What you find here in Punjab is commitment in the workforce, but not professionalism”, says HR Vice President of tractor manufacturer.36
  • 37. CII – Valcon ReportIn a survey with the companies in the region, they feel the rising manufacturingand material costs will hurt cost competitiveness in the future. Already, Punjabis far from the sources of raw material, any increments in the logistics costs andprices of raw materials may make the businesses unviable. Out of the variousreasons highlighted, Punjab is grappling with low productivity and lack of skilledtalent and labour. Cost is the major focus ofFigure 30: Punjab’s engeneering industry’s major challenges as identified by business leaders Punjab’s engineering industry. While it has been a key 100% success factor for industries 90% here in the past squeezing it further is also the toughest 80% challenge today. 70% 60% 50% 40% 83% 75% 30% 58% 50% 50% 20% 42% 25% 25% 10% 17% 17% 17% 0% High material costs High manufacturing costs Lack of skilled talent/labour Low productivity Lack of best manufacturing practices and quality control Drop in customer/market demand Rising interest rates/financing Lack of R&D capability Currency fluctuation Lack of new technology and products Global economic instability Yes, it is a major challenge No, it is not a major challengeSource: Primary research, Valcon AnalysisApart from these factors, industry leaders are pressing in their demands forgovernment incentives, infrastructure and pro-industry policy.Some excerpts from interviews:The land availability for expanding our facilities is low and since it is becomingvery expensive to buy land here we have to look beyond Punjab to seth-up newfacilities at reasonable costs. Senior Management Member of an auto electricalparts firm.Buying new land in and around Mohali will make my new business planunviable. Countries like Luxembourg have cheaper land rates than in Punjab andthey specifically invite us to set-up facilities in tax-free zones there. MD of autoparts manufacturer. 37
  • 38. A lot of tax incentives given by neighbouring states pulled away big multinational companies that could have changed the manufacturing landscape in Punjab. On the other side, why do you think the Mittals and Munjals have moved out their majority of businesses out of Punjab? President of a textiles firm. The location poses a major challenge for Punjab, away from sea-ports and airports, landlocked with a hostile neighbour. My customers are not willing to come down 350Kms to visit my plant. President of a textiles firm. The government must focus on improving infrastructure – mainly in areas of power generation, road connectivity and airports and inland ports. The already disadvantage in location makes it worse if the infrastructure in not good. Partner of a machine manufacturing firm. Drug addiction is a challenge due to which the Punjabi youth does not want to work. With migrant labour becoming scarce our machines are lying idle without operators. General Manager of a hand tools manufacturer. Law enforcement agencies ask us for equipment as they do not have funds. The road infrastructure is miserable due to lack of investment from the government. The government doesn’t even have money to pay salaries to its employees so can we expect it to invest for us? Small industries will become extinct in Punjab as it is impossible to run a profitable business. Capability assessment In this section, we look at some specific capabilities that are necessary for supporting growth of engineering companies, amongst many others. We have also tried to assess how the engineering companies in Punjab fare on these, on the basis of our interactions with their top management, visits to facilities and comparing with similar companies in other regions. Systems and processes The best in class engineering industries across India are focussing on technology upgradation across the manufacturing lines through intensive automation, newer process technology, precision tooling, shorter change over times and tighter process controls to match up their global competition and gain the confidence of both Indian and foreign customers. These companies work the tight line in staying ahead of the technology curve and still continuously reducing costs. The customers have started looking beyond only costs and now focus on value. A majority percentage of companies in Punjab admit that they are not using the latest generation of machines/equipment, technology and process standards. It38
  • 39. CII – Valcon Reportwas noted in the study that while Punjab was a pioneer in the technologyadoption in the 1980’s, it has gradually fallen behind its competitors in the lastdecade. The underlying reasons for this technology and process stagnation aremulti-fold:ƒƒ Almost 95% of companies think that they don’t see the need to upgrade their technology and processes until they are ‘necessary’ to meet the customer requirements.ƒƒ Most of the companies in Punjab invariably think that the depreciation of their machines/equipment adds to their cost advantage over the competition; thus investing into technology upgradation will hurt the cost competitiveness.ƒƒ Even if the companies are interested in investing into technology upgradation, systems and processes, they face roadblocks in form of lack of exposure and technical know-how, impending change management on the shop-floor and lack of skilled labour to operate the new equipment and machines.Figure 31: Is your company using the latest generation machines and process standards 14% Yes No 86%Inadequate technology upgradation by the companies due to these reasonshas associated side-effects:ƒƒ Almost 70% of the companies feel that their current technology and processes are only sufficient to meet the existing customers’ requirements. The lack of high process standards, effective controls and advanced manufacturing techniques incapacitate the companies to enter new and profitable sectors such as medical devices, defence and aerospace or even gain new customers in the existing sectors.“If I have to rate our technology on the scale of 10, it will be 7. We know weare not best on the technology and our manufacturing lines are not the latest,something that explains why we are not able to move up the value chain andserve customers like BMW & Audi”, says senior management member of anauto electrical parts company. 39
  • 40. The engineering sector companies in Punjab have fallen into a stagnation loop when it comes to adopting technology which puts them at serious disadvantage not only due to their reduced competitiveness vis-a-vis other states but also the risk of obsolescence in the wake of continuous technology evolution. Skills The engineering industry has moved ahead from the days where success was based on workmanship to a new era where it is as necessary to have the hard skills like design and development capabilities and manufacturing expertise to soft skills such as project management and leadership skills. As the industry becomes more competitive, the companies have the onus on constantly reinventing themselves to stay ahead of the curve. This is the very same reason the best in class engineering companies feel that their people are the most valuable resources in order to maintain competitive advantage. The companies diligently invest time in hiring the best talents and train them for multitude of roles. As a departure from the past trend, employees are expected to have multiple skills so that the company retains the flexibility in changing demand situations. The engineering industry in Punjab faces challenges of its own when it comes to hiring, retaining and imparting the skills across the management and working levels. ƒƒ Punjab has emerged as the education hub in North India. There are 10 universities/deemed universities in addition to exclusive technical universities with 100 plus professional colleges. 10,000 technicians and 20,000 skilled craftsmen are trained every year in 55 polytechnics and over 200 ITIs/ITCs9. And yet, Punjab faces a shortage of skilled labour across the levels. ƒƒ On the shop floor, companies face labour shortage in the range of ~20%- 40%10 across high, medium and low skilled labour. Following reasons have been attributed to the shortage of labour: a) Migrant labour moving back to homelands on account of the NREGA scheme b) Local labour migrating to other states and countries for better opportunities c) Local labour opting for other sectors such as health care and trading over manufacturing 9 Investment Climate in Punjab, CII Report, 2009 10 Valcon Survey40
  • 41. CII – Valcon Reportƒƒ Across the engineering sector in Punjab, labour skills are not the only issue but also labour work culture and productivity. There is general sense of belief Lack of availability of local among the industrialists that the work culture in their companies is not a working people has been the progressive one and is shackled by old paradigms. result of historical economic prosperity from agriculture,ƒƒ At the managerial level, the managers are mainly local bred talent with industry and financial success lesser exposure to best in class practices as compared to their counterparts of NRI Punjabis sending money in other world class engineering companies. back home.Improving the labour productivity and work culture will take conscious efforts inlot of areas. This has to be done with a lot of the exposure of the labour to bestin class practices, training and incentives.In order to illustrate the gaps in skill levels, in general, of engineering companiesin Punjab, we did a comparison of the levels for critical organisational skills withneighbouring state Haryana, which has been highly successful in developing thesector:Figure 32: Perception of challenges with labour in Punjab’s engineering industries 100% 90% 80% 70% 60% 50% 40% 79% 71% 30% 20% 29% 10% 21% 14% 0% Labour Labour Labour Labour Labour attitude & work productivity skills incentives background & culture education Yes, it is a major challenge No, it is not a major challengeSource: Primary research, Valcon Analysis 41
  • 42. Comparison of the levels for critical organisational skills Skill set/capability Haryana Punjab Marketing Product management Business development Medium Low Sales and order management Demand forecasting Customer engagement Planning Inventory and RM planning Sales planning Medium-high Low Inventory management Production planning Manufacturing Lean High Low-medium TPM, TQM, Quality Circles Kaizen, 3M, 3G,5S Procurement Cost reduction targets VA-VE High Medium Procurement systems and processes Supplier development, management and upgradation Costing Supply chain Distribution management Medium Low Network planning Logistics planning Soft skills Leadership Project management High Low Team work Negotiation skills IT High Medium ERP/SAP systems In the current scenario where the best in class engineering companies are expected to be highly skilled in production, IT, procurement, etc. the companies in Punjab need to come upto the mark on these competencies as also on soft skills, supply chain and marketing skills. The general split of the trainings imparted in the engineering companies is given on page 43.42
  • 43. CII – Valcon ReportFigure 33: Trainings imparted in last two years by Punjab’s engineering companies 100% 90% 80% 70% 60% 50% 40% 30% 57% 50% 50%50% 20% 43% 43% 43% 10% 21% 21% 14%14% 14% 14% 7% 7% 7% 7% 0% 0% 0% 5S TQM and related quality trainings Quality circle Kaizen workshop TPM and related maintenance Visual management Lean manufacturing Productivity improvement Automation and fool proofing VA - VE Leadership training Effective communicaton MIS reporting Procurement practices Negotiation skills Project management ERP tools Product management Inventory management Yes NoAs can be seen, the companies in Punjab are primarily focussing on impartingtraining in the areas of manufacturing whereas training for other skills related tomanagement would also be necessary to build competitive organisations.Marketing capabilitiesOften the design and development prowess, manufacturing technology,operational performance and talent and skills are the key determinants toseparate the best performers in the engineering industry from the worst. But thishas drastically changed as the supply chains become even more agile and thevalue chains are increasingly becoming integrated. The key determinants arebecoming commoditised as the best performing companies are increasinglyimproving their standards and surprisingly marketing is becoming increasinglyimportant in the engineering industry. While it can be said that there has beensome spill-over effects of the importance of marketing and branding from theFMCG industry, the customers in the engineering space are increasinglybecoming demanding and seek more value. The best performing companieshave moved from the model where the finance or manufacturing team was amake-shift marketing team to having a full time professionally qualifiedmarketing team in place. The marketing team is ever in constant touch with the 43
  • 44. customer right from the pitching for new business to day to day sales and order management. Customers expect suppliers and other engineering companies to work closely with them, seek more customisation for its products and services, expect short turnover times for requests/orders and operational flexibility from suppliers/engineering companies. The engineering companies that have been able to anticipate and act quickly on customer demands are the ones who have progressed and have a strong relationship with customers. In terms of the share of revenues by geographies, there is contrast among the engineering companies in Punjab. While on one hand, the larger, much successful companies have understood the importance of marketing capabilities and a have distributed market portfolio – Domestic (Punjab), Domestic (Rest of India) and Exports, the smaller and medium companies are struggling to move and expand their presence in newer regions and gain new customers. On probing the aspirations of the Punjabi companies for growing their business, most of the companies are focussed on gaining more business with the current customers and gain more market share in their current regions while the more progressive companies mentioned that they are focussed on gaining new markets such as exports and gaining new customer accounts. Figure 34: Focus for business development in Punjabs engineering industries 100% 90% 80% 70% 60% 50% 86% 40% 30% 57% 50% 20% 10% 14% 0% Gain more market Gain more market Gain new customers Diversify into new share with the share in the current and enter new sectors such as current customers regions regions defence, aerospace, medical instruments, etc. Yes No Source: Primary research, Valcon Analysis44
  • 45. CII – Valcon ReportIt can be seen that very few companies are focussing on diversifying into thenew attractive sectors we have mentioned previously in the report. Through ourinterviews it was found that companies felt handicapped on two broadparameters:ƒƒ Inability to reach out to new customers in the domestic and export markets due to lack of networking opportunitiesƒƒ Lack of the market knowledge and customer expectations in order to diversify into new sectorsMost of the companies in Punjab have very small marketing teams to handlecustomer accounts. In addition, the managers are inexperienced when it comesto scouting and developing connections with potential customers, lackknowledge of handling customer expectations and skills for product/portfoliomanagement. In contrast, the more successful engineering companies havededicated marketing/sales experts who understand the intricacies of the market,the customer expectations and relationship management.In our view, the role of marketing is also limited by the state of the engineeringcompanies in Punjab. Most of the medium and small companies are not on parwith the best in class companies on operational performance, technology anddesign and development thus limiting the role and confidence of marketingteams when pitching for new businesses and clients. 45
  • 46. SWOT analysis of Punjab’s engineering industry A comprehensive view of the current strengths and weaknesses of the engineering sector in Punjab and understanding of the opportunities that exist for the engineering sector in general led us to create a SWOT table for Punjab’s engineering industry. We have done this along five key areas of business: STRATEGY, CUSTOMERS & MARKETS Strengths Weaknesses • Entrepreneurial spirit and risk taking approach • Absence of clear strategies and business plans support has strongly supported growth of the with most SMEs/MSMEs affecting growth sector in the past • Local or nearby customer centric business models of most of the companies Opportunities Threats • High growth potential - India poised to be an • Fast changing business environment could engineering hub for many critical sectors have adverse long term impacts if not • Opportunity to diversify into newer emerging addressed well high profitability/high return sub-sectors of • Continuation in low return sectors could affect engineering viability of the businesses • Growing presence of foreign players setting shop in the country MANAGEMENT Strengths Weaknesses • High ownership and commitment due to • Prevalent owner driven culture with their family involvement in many businesses high involvement leading to poor leadership • Family type management style has created bandwidth creation loyal empolyee base over years • Management at SMEs/MSMEs lacks professionalism, strong ambitions and exposure to opportunities Opportunities Threats • Younger generation with professional • Growing presence of professionals towards management education joining the team could new sectors like retail, IT, etc. could rev up the businesses significantly impact supply of managerial talent46
  • 47. CII – Valcon Report SYSTEMS, PROCESSES, TECHNOLOGY Strengths Weaknesses• Some companies across sectors have taken lead • Low focus on implementing best practices due in using latest technology and implementing to lack of awareness of benefits and low systems management bandwidth • In majority of SMEs/MSMEs, systems and processes are unstructured and non-scalable Opportunities Threats• Technology tried and tested by other companies • Lack of effective systems and processes can put in the country can be adopted companies out of favor with customers via-à-vis some other states where companies have taken significant lead PERFORMANCE, INNOVATION Strengths Weaknesses• Strong cost focus make the business cost • Low asset utilisation and quality levels lead to competitive higher real costs • Management lacks ability to innovate. Lack of technical expertise also hampers improvement of current products and development of new ideas • Workforce productivity is lower than in some other states Opportunities Threats• Opportunities exist to extend offerings to higher • High dependence on migrant labour for skills value added services like design, R&D, etc. for • Economic growth of traditional ‘labour supplying both domestic and export markets states’ expected to further reduce labour and skill supply BUSINESS ENVIRONMENT Strengths Weaknesses• Ranks highest on ease of doing business index • Most companies do not have any strong plans (World Bank report) to handle changes in business environment• Cordial labour relations as compared to other states Opportunities Threats• Thrust on infrastructure – Government plans • Severe shortage of power and poor road and to spend close to US$ 1 trillion investment in air connectivity hamper businesses from developing infrastructure operating efficiently • Reduction in import duties on certain critical products leading to preference for imports instead of domestic production 47
  • 48. Key success factors for growth While opportunities exist for companies in engineering sector to grow, both in the domestic and export markets, the sector study and future outlook indicates that following factors would remain key to achieving success: ƒƒ Ensuring their presence in the emerging and relatively more attractive sub-sectors would be important for tapping the newer growth opportunities being created ƒƒ Moving towards higher value added products ƒƒ Focus on innovation, design, research and development to gain competitive edge ƒƒ Strong collaboration and partnership with customers to develop products by understanding their needs proactively ƒƒ Creating professional managements with robust systems ƒƒ Strong cost focus to support margins ƒƒ Focus on operational excellence to ensure continued improvements in operational and business performance parameters ƒƒ Attracting, developing and retaining skill by running systematic skill management programs with long term perspective ƒƒ Focus on untapped markets48
  • 49. CII – Valcon ReportHurdles and roadblocksPower: While there is the recognition of national power deficit, in Punjab it hasreached an alarming proportion. In June 2012 for example, industrial units inPunjab suffered 50% industrial production loss due to power cuts11. As asubstitute, the industry uses expensive petroleum generated power but forbusinesses with thin margins this is quite unsustainable. Going forwardsustainability of businesses in Punjab is going to depend heavily on continuousavailability of energy supply.Surface transport: Surface transport is the key to moving industrial output tothe destination markets. While there has been good progress on the nationalhighways, local infrastructure in industrial areas is poorly maintained. Betterinvestment in focal point infrastructure is likely to contribute to state revenuegrowth.Air connectivity: Poor air connectivity limits the flow of business into the statesince time critical man and material movements are not possible. Developmentof international airports in the state will allow faster movement.Government investment: Punjab’s public expenditure is under severe debtstress. Nearly 75% of its revenue income is consumed by committedexpenditure including interest payments. The annual interest liability is morethan about 20% of the revenue receipts. This level of debt is clearly un-sustainable12. While the attempt is to relieve the state from fiscal stress, it isdifficult to see the government finances recover to a sustainability level andallow large investments in industry and infrastructure.High cost of funds: While one result of poor public fiscal situation is deferralof tax refunds for the companies, rising interest rates have not helped theircause either. With current cost of debt hovering around 15% annually, it isalmost impossible for companies seeking growth to raise significant financesfrom the debt market.Shortage of labour: With the implementation of social schemes in backwardstates, immigrant labourers are starting to move back to their states of origin.Local labour is in short supply due to large scale international emigration ofPunjabi youth as well as their general unwillingness to work. Drug and alcoholabuse is emerging as one of the major problems in the state. Without activeparticipation from the local youth and immigrant labour moving back to theirstates it is likely that there will be a long term labour shortfall.11 Times of India Report 25 Jul 2012: Double Whammy for Punjab Industry: Power Cuts and Tariff Hike12 Punjab Economic Survey 2011-12 49
  • 50. Valcon’s view Engineering sector would continue to play a key role not only in growth of industrial output in Punjab but also providing employment and livelihood. It is imperative, therefore, to make planned efforts to improve its competitiveness and enhance its growth rate. A holistic assessment of the engineering sector and the prevalent opportunities along with the current performance of the sector in Punjab has led us into formulating the following set of views and recommendations for the sector in Punjab. ƒƒ Identify and tap new opportunities. In the past decades, the engineering industry in Punjab has grown around some specific sectors. As opportunities appear in newer sectors which promise better business prospects and growth possibilities, Punjab’s industry would need to assess these opportunities and venture into the viable ones. Competing states have already taken a lead in grabbing these opportunities like Gujarat for automotive sector, Karnataka for aerospace, etc. ƒƒ Explore beyond local markets. Companies in Punjab appear to be primarily focused on customers in nearby states. They need to come out of this frame and start exploring additional opportunities in the rest of the country as well as export markets. Limiting to customers in nearby states has ensured limited growth opportunities on the one hand and aloofness from the emerging developments in the sector on the other. A large proportion of the companies appear to have been stunted by their growth to the MSME and SME segments for long. ƒƒ Low cost alone would not sustain competitiveness. While a high focus on keeping costs in control has helped keep the companies instead for long, for many of them, it has been done at the cost of improvising quality, developing robust systems, developing innovation and design abilities, developing skills or creating professional management teams. All of these would be necessary if these companies aspire to grow to the next phase. ƒƒ Adopting best practices is not an option but a necessity. Progressive companies have taken a lead in adopting global best practices and implementing operational excellence initiatives like lean, six sigma, TPM, integrated business planning, etc. in the last decade. These have not only resulted in improved business performance for them but also led to implementation of systems for continued improvement. It is necessary for companies in Punjab too to adopt the best practices before the gap with the competitors becomes insurmountable.50
  • 51. CII – Valcon Reportƒƒ Innovate to lead growth. The companies must incorporate focus on innovation, design, research and development in their strategies if they aspire to keep pace with the industry and tap the emerging growth opportunities.ƒƒ Adopt a long term perspective to addressing problems. A long term perspective and joint approach to addressing many current problems like skilled manpower unavailability, power shortage, poor infrastructure, etc. may be more beneficial and viable as compared to short term solutions.ƒƒ Government and industry cooperation is necessary. The government and the industry bodies have to play a significant role in not only exposing the companies to the emerging opportunities but also making them aware of the stringent performance expectations necessary to succeed in them. Additionally, providing stable policies by the government for the industry would help support growth.The enterprising nature of Punjab’s industry and the undying spirit of itsentrepreneurs are akin to country’s folklore. While this has helped the stategrow and create riches over years, the time has now come to adopt the changesnecessary to ride the next curve of growth. Valcon believes that a heady mix ofmanagement vision and strategy and robust execution of organisationaltransformation plans would just do the trick for Punjab’s engineering industry. 51
  • 52. Information sourcesƒƒ Planning Commission reportƒƒ Department of Heavy Industry, Ministry of Heavy Industries & Public Enter- prises reportƒƒ Capital Goods and Engineering sector reportƒƒ ASI report 09-10ƒƒ Aero strategyƒƒ Industry reports by CIIƒƒ Automotive Component Manufacturers Association of Indiaƒƒ Sectoral risk outlook – Auto components by D&Bƒƒ Medical technology report by CII and Deloitteƒƒ ICI Engineering Sector Reportƒƒ www.defense-aerospace.comƒƒ www.aiacra.comƒƒ www.securities.comƒƒ www.dnb.co.inƒƒ www.ibef.orgƒƒ www.aimedindia.com (Association of Indian Medical Device Industry)ƒƒ www.cmie.inƒƒ www.icra.inƒƒ www.rediff.comƒƒ www.articles.economictimes.indiatimes.comƒƒ www.business-standard.comAcknowledgementsIn the process of creating this report, we have interacted with many owners, directors and chief executives of organisationsin Punjab and other states to seek their opinion, understand their views and capture outlook for the industry. We express oursincere gratitude to all of them for sparing time to interact with us and provide their valuable opinions. This report would nothave been possible without the inputs received from all of them.This report has also been possible due to the efforts and contribution of certain individuals at Valcon. This team worked fromdifferent offices of Valcon to research the industry, interact with many owners and chief executives of organisations acrosscities to understand and capture their views and finally compile everything into this comprehensive report. This teamcomprised of Birgitte Dahl Skaaning, Moulik Mahesh Kumar, Pavan Ponnappa, Rishabh Bhandari, Satish Munoth and wasguided by Anirban Mazumdar.52
  • 53. CII – Valcon ReportAbout The Confederation of Indian Industry (CII)CII works to create and sustain an environment conducive to the growth of industry in India, partnering industry and government alikethrough advisory and consultative processes.CII is a non-government, not-for-profit, industry led and industry managed organisation, playing a proactive role in India’s developmentprocess. Founded over 117 years ago, it is India’s premier business association, with a direct membership of over 7000 organisationsfrom the private as well as public sectors, including SMEs and MNCs, and an indirect membership of over 90,000 companies fromaround 400 national and regional sectoral associations.CII catalyses change by working closely with government on policy issues, enhancing efficiency, competitiveness and expandingbusiness opportunities for industry through a range of specialised services and global linkages. It also provides a platform for sectoralconsensus building and networking. Major emphasis is laid on projecting a positive image of business, assisting industry to identifyand execute corporate citizenship programmes. Partnerships with over 120 NGOs across the country carry forward our initiativesin integrated and inclusive development, which include health, education, livelihood, diversity management, skill development andwater, to name a few.The CII Theme for 2012-13, ‘Reviving Economic Growth: Reforms and Governance,’ accords top priority to restoring the growthtrajectory of the nation, while building Global Competitiveness, Inclusivity and Sustainability. Towards this, CII advocacy will focus onstructural reforms, both at the Centre and in the States, and effective governance, while taking efforts and initiatives in AffirmativeAction, Skill Development, and International Engagement to the next level.With 63 offices including 10 Centres of Excellence in India, and 7 overseas offices in Australia, China, France, Singapore, South Africa,UK, and USA, as well as institutional partnerships with 223 counterpart organisations in 90 countries, CII serves as a reference pointfor Indian industry and the international business community. CII address: Confederation of Indian Industry Sector 31-A, Dakshin Marg, Chandigarh 160030About ValconValcon is a global management consulting firm having footprints in India, Denmark, Sweden Norway, China and Czech Republic. Wehelp you manage both strategic and operational challenges within growth, efficiency, innovation, globalisation, and transparency.Valcon = Value consulting. Creating value is the starting point for all our efforts. You will always be assisted by a team of highly skilledand experienced management consultants – as well as seasoned subject matter experts. Every one of them is thoroughly competentwithin their area; a competence built through impressive careers on the other side of the desk – and in the field. Consequently, weare the only consulting company capable of taking you all the way. We will not only tell you what needs to be done – but also how.And if necessary we can do it for you as well.We believe that the best results are created by direct and straightforward dialogue. By openness and co-operation. And by having anunfailing focus on creating real solutions to real challenges.In short: Valcon will take you further.Read more: www.valcon.in Valcon address: Valcon Management Consultants Pvt. Ltd No. 608A, 6th Floor, Spencer Plaza, 768/769, Annasalai, Chennai 600 002 53
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  • 55. Connect with usKrishnan NaganathanCEOkrn@valcon.in+91-97910 33967Anand NergunamDirector & COOanan@valcon.in+91 95000 01946Sandeep DahiyaAssociate Directorsada@valcon.in+91-90083 66300Prasanna SaiDirectorprsa@valcon.in+91-98400 39505Valcon Management Consultants Pvt. LtdNo. 608A, 6th Floor, Spencer Plaza, 768/769, Annasalai, Chennai,India-600 002Anirban MazumdarAssociate Directoranma@valcon.in+91-98104 76116Valcon Management Consultants Pvt. Ltd001, U & I Corporate Center, Plot 47, Sector 32, Gurgaon,India-122 001www.valcon.in 55
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