India : Engineering Sector Report_August 2013


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India : Engineering Sector Report_August 2013

  1. 1.       
  2. 2. Source: Dept of Heavy Industries, India Electrical and Electronics Manufacturer Association, NASSCOM, Aranca Research Notes: CG - Capital Goods, ER&D - Engineering Research & Design Increasing industrialisation and economic development to drive capital goods & engineering market Expansion in the electrical equipment industry Engineering research & design segment revenues to increase fourfold by 2020 Capital goods & engineering turnover is expected to reach USD125.4 billion by 2017 from USD57.6 billion in 2012 Electrical equipment market size expected to reach to USD105 billion by 2022 from USD24.2 billion in 2011 ER&D revenues projected to reach to USD45 billion in 2020 from USD11.2 billion in 2012 57.6 125.4 2012 2017 CG & Engineering turnover CAGR: 16.8% 24.2 105 2011 2022 Electrical equipment market size CAGR: 14.2% 11.2 45 2012 2020 ER&D revenue CAGR: 19.0%
  3. 3. Source: Booz & Company, Volvo India Ltd, Estimates, Ministry of Heavy Industries and Public Enterprise, Aranca Research Note: DHI - Dept. Of Heavy Industries, CPSE - Central Public Sector Enterprise Indian construction equipment market to grow sevenfold from 2012 to 2020 Indian telecom equipment market to more than double by 2020 Increased production of Central Public Sector Enterprise (CPSE) Construction equipment market projected to reach USD22.7 billion by 2020 from USD3 billion in 2012 Telecom equipment market to reach USD37 billion by 2020 from USD16 billion in 2011 Production of CPSE under DHI to aggregate USD10.7 billion by 2014 from USD9.2 billion in 2011 3 22.7 2012 2020 Construction equipment market revenue CAGR: 28.8% 16 37 2011 2020 Telecom equipment market size CAGR: 9.7% 9.2 10.7 2011 2014 Production of CPSE's CAGR: 5.4%
  4. 4. • The engineering sector is delicensed; 100 per cent FDI is allowed in the sector • Due to policy support, there was cumulative FDI of USD14.0 billion into the sector over April 2000 – February 2012, making up 8.6 per cent of total FDI into the country in that period Growing demand Source: Government of India, Ministry of Heavy Industries, Department of Industrial Policy & Promotion, India Electrical and Electronics Manufacturer Association, Aranca Research Notes: FDI - Foreign Direct Investment, FY - Indian Financial Year (April – March), USD - US dollar Growing demand • Capacity creation in sectors such as infrastructure, power, mining, oil & gas, refinery, steel, automotives, and consumer durables driving demand in the engineering sector • Rising demand for electrical and construction equipment Attractive opportunities • Nuclear capacity expansion to provide significant business opportunities to the electrical machinery industry • Rapid increase in infrastructure investment and industrial production to fuel further growth Policy support • De-licensed engineering sector; 100 per cent FDI permitted • Cumulative FDI totalled USD19.9 billion over April 2000–April 2013 due to policy support Higher investments • Comparative advantage vis-à-vis peers in terms of manufacturing costs, market knowledge, technology and creativity • Highly organised sector and dominated by large players employing over four million skilled and semi-skilled labour Engineering exports from India: USD56.7 billion FY14E Engineering exports target from India: USD125.0 billion Advantage India FY13
  5. 5. Engineering Heavy Engineering Light Engineering Heavy Electrical Heavy Engineering and Machine Tools Automotive Low Technology Products High Technology Products
  6. 6. Source: Ministry of Heavy Industries and Public Enterprise Annual Report 2012-13, Aranca Research Notes: MW - Mega Watt, KVA - KiloVolt - Ampere Boilers • The Indian boiler industry has the capability to manufacture boilers with super critical parameters up to 1000 MW unit size • The industry’s market size was USD5.1 billion in FY12 and is expected to reach USD11.7 billion in FY22 Turbines and generator sets • The industry manufactures various turbines in the range of 800–7000 MW per annum, and generators ranging from 0.5 KVA to (ones even higher than) 250,00 KVA • Total production of turbines and generators stood at US2.2 billion in FY12 and is estimated to reachUSD6.7 billion by FY22 Transformers • A whole range of power and distribution transformers, including special type of transformers required for furnaces, electric tracts and rectifiers, are manufactured in the country • The transformers market in India was valued at USD2.7 billion in FY11 and is expected to reach USD11.1 billion in FY22 Switchgear and control gear • About 32.6 million switchgears and control gears were produced during FY12 • The switchgear market size touched USD2.0 billion in FY12 and is projected to reach USD8.2 billion in FY22
  7. 7. Source: Ministry of Heavy Industries and Public Enterprise Annual Report 2012-13, Cabinet Committee on Infrastructure report, Aranca Research Notes: TPD - Tonnes Per Day Machine tools • This segment churns out basic machinery for all major industries and determines competitiveness in other sectors such as automobiles, heavy electrical and defence • Nearly 200 machine tool manufacturers are operational in the organised sector along with 400 small-scale units • Production of machine tools totalled USD900 million, while exports stood at USD288.7 million in FY12 Textile machinery • It comprises over 1,446 units involved in churning out machinery and components; another 600 units manufacture complete machinery • The industry is de-licensed with FDI permitted up to 100 per cent • The industry has an installed capacity of USD1.7 billion and produced goods worth USD1.1 billion in FY12 • In FY12, total exports from textile industries stood at USD368.8 million Cement machinery • Cement plants based on raw mill grinding, pre-processing and cement grinding process technology (for capacities up to 10000 TPD) are being manufactured in India • Currently,100 per cent FDI is allowed under the automatic route • With an installed capacity of around USD125 million, the industry is capable of catering to the domestic demand Material handling equipment • With around 50 units in the organised sector, the material handling equipment industry is engaged in the setting up of coal/ore/ash handling plants and manufacturing associated equipment • The sector’s total imports stood at USD331 million in FY12, while exports aggregated USD31.9 million
  8. 8. Source: Ministry of Heavy Industries and Public Enterprise Annual report 2012-13, Aranca Research Plastic processing machinery • There are 11 major and nearly 200 small & medium manufacturers • Domestic manufacturers cater to 95 per cent of the processing industry’s needs • Total production stood at USD0.6 billion in FY12 • Exports increased 17.1 per cent to USD124.1 million in FY12 Dies, moulds & tools industry • It includes over 500 commercial tool manufacturers • Nearly18 governments tool rooms as well as training centres are operating in the country • Total production of dies, moulds & tools stood at USD2.8 billion • Exports aggregated USD604.7 million in FY12 Process plant equipment • Over 200 manufacturers are engaged in the production of process plant machinery • Nearly 65 per cent of the total manufacturers are small and medium enterprises • Production and exports totalled USD4.1 billion and USD788.1 million, respectively, in FY12 Earth moving and mining equipment • Currently, 20 large and global manufacturers, and 200 small & medium manufacturers operate in the industry • Production and exports totalled USD3.8 billion and USD274.9 million, respectively, in FY12
  9. 9. Source: Ministry of Heavy Industries and Public Enterprise Annual Report 2012-13, Cabinet Committee on Infrastructure report, Aranca Research Note: * From April 2012 to November 2012, ** CAGR calculated on Indian rupee Passenger and utility vehicles • Currently, there are 16 manufacturers of passenger cars and multi-utility vehicles, 13 manufacturers of commercial vehicles and 16 manufacturers of two-wheelers and three- wheelers • Total production in the automobiles sector stood at approximately 20.4 million units in FY12 and 13.7 million units over FY13* • Total exports stood at 2.9 million units during FY12 and 1.9 million units over FY13* Auto components • The auto components industry has more than 500 companies in the organised sector and about 10,000 entities in the unorganised sector • The industry’s turnover expanded at a CAGR of 19 per cent between FY08 and FY12 to USD43.9 billion from USD22.2 billion • During FY08-12, exports increased at a CAGR** of 22 per cent to reach at USD7.0 billion Agriculture machinery • The agriculture machinery sector is primarily dominated by agricultural tractors • The Indian tractor industry is the world’s largest and accounts for one-third of the global production • More than 250,000 tractors are manufactured every year by 13 manufacturers • Indian tractors are exported to the US, Malaysia, Turkey and Africa
  10. 10. Source: Ministry of Heavy Industries and Public Enterprise Annual Report 2012-13, IVG Research, Aranca Research Notes: MMT - Million Metric Tonnes Casting and forging • The Indian casting industry produces 6 MMT of various grades of casting and ranks sixth in the world • The forging industry comprises around 10 organised players, with nearly 100 players in the small and medium sector • The industry exports a substantial part of its production apart from catering to the local demand Medical and surgical equipment • The medical and surgical equipment industry manufactures a wide range of medical equipment such as ECG and X-ray scanners • The industry is highly fragmented and dominated by small players • The indigenous industry caters to 40 per cent of the demand and the remaining is met through imports Industrial fasteners • The fastener industry in India can be classified into high tensile and mild steel fasteners • Mild steel fasteners are primarily manufactured by the unorganised sector, while the high tensile steel segment is dominated by the organised sector • Total Industrial fasteners exports stood at USD621.9 million in FY13, a growth of 13.8 per cent from FY12
  11. 11. Source: Reserve Bank of India, Engineering Export Promotion Council, Ministry of Commerce & Industry Estimates, Aranca Research Note: P - Data for FY12 is provisional, R - Data for FY11 is revised India’s engineering exports (USD billion)Indian engineering exports stood at USD56.7 billion in FY13 Over FY08–13, exports registered a CAGR of 12.6 per cent Engineering exports include transport equipment, capital goods, other machinery/equipment and light engineering products such as castings, forgings and fasteners Exports target for FY14 is estimated at USD125 billion To boost engineering trade, “India Engineering Sourcing Show 2013” was held by the Engineering Export Promotion Council (EEPC) in March 64 countries participated in the show and there were 320 exhibitors including 60 overseas companies 418 business enquiries worth USD38.0 million received by the respondents 31.3 45.3 38.3 58.1 67.1 56.7 FY08 FY09 FY10 FY11R FY12P FY13 CAGR: 12.6%
  12. 12. Source: Engineering Export Promotion Council, Aranca Research Exports performance of principle commodities (FY13) Transport equipment is the leading contributor to engineering exports. The segment accounted for 32.5 per cent of the total engineering exports during FY13 Machinery and instruments is the other major contributor with a share of 26.8 per cent The engineering sector retained its 18 per cent share in overall exports from the country which is the maximum in terms of sectoral contribution 32.5% 26.8% 17.7% 9.0% 14.1% Transport equipment Machinery and instrument Manufactures of metals Primary and semi furnished iron & steel Others
  13. 13. Source: Company Reports, News Article, Bloomberg, Aranca Research Note: Financial Year Ending * 30 September 2012, ** 31 December 2012 Company Revenues (FY13) Products Larsen & Toubro USD28.3 billion Engineering & Construction, Cement, Electrical & Electronics Bharat Heavy Electricals Ltd USD9.3 billion Power Generation, Transmission, Transportation Siemens India Ltd USD2.6 billion* Power Generation and Distribution Equipment, Transportation Systems, Communication and Healthcare Products ABB Ltd USD1.4 billion** Transformers, Switch Gears, Control Gears Crompton Greaves Ltd USD2.1 billion Power Generation and Transmission Equipment
  14. 14. Company Revenues (FY13) Products Engineers India USD0.5 billion Highways & Bridges, Mass Rapid Transport Systems Construction, Specialist Materials Manufacturing Kirloskar Oil Engines Ltd USD0.4 billion Engines, Engine Bearings & Valves, Grey Iron Casting Cummins India Ltd USD0.8 billion Power Generation, Construction and Mining Equipment, Fire Pumps & Cranes, Compressors Thermax USD1.0 billion Boilers and Heaters, Air Pollution and Purification, Absorption Cooling BGR Energy USD0.6 billion Boilers, Turbines, Generators Source: Company Reports, News Article, Aranca Research
  15. 15. Source: Aranca Research Note: BHEL - Bharat Heavy Electricals Ltd Diversification • Several companies in the engineering sector have diversified, either geographically (mainly to Middle Eastern countries) or sector-wise • BHEL plans to foray into Ukraine • Simplex Infra has moved to the Middle East • Larsen & Toubro (L&T) has diversified into power equipment manufacturing • Thermax entered the power utility segment Shift to value-added products • Rising competition is driving domestic players to focus on improving their capabilities, become more quality conscious, and upgrade their technology base in line with global requirements • More than 2,500 firms in the engineering sector have ISO 9000 accreditation • Companies are now increasingly focusing on R&D and product development Entry of international companies • With 100 per cent FDI allowed through the automatic route, major international players such as Cummins, ABB and Alfa Laval have entered the Indian engineering sector due to growth opportunities • Entry of new players has raised the industry’s competitiveness
  16. 16. Growth drivers Demand-side drivers InvestmentPolicy • De-licensing • Reduction in tariff and customs • Supportive government policies leading to higher investments • Increasing FDI inflows • Higher M&A • Easy credit facilities for manufacturing companies • Capacity addition for power generation • Increase in infrastructure spending • Rise in exports
  17. 17. Energy requirement (‘000’ MU)India’s energy requirement increased at a CAGR of 6.7 per cent over FY06–13 to 995.5 billion units Demand for energy grew 6.2 per cent during FY13 vis-à-vis the previous year Higher demand for energy has led to increasing capacity additions for power generation that, in turn, boosted demand for power generation and transmission equipment Source: Ministry of Power, Annual report 2012-13, Load Generation Balance Report 2012-13, Aranca Research Note: MU - Million Unit 632 691 739 777 831 862 937 996 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 CAGR: 6.7%
  18. 18. Addition in generating capacity (‘000’ MW)Investments to increase capacity have led to rising demand for power generation and transmission equipment Capacity increased to 20600 MW during FY13 compared to 20500 MW in FY12 Source: Ministry of Power, Annual report 2012-13, Aranca Research Note : MW - Mega watt 8.1 12.1 17.1 22.3 32.9 20.5 20.6 FY90 FY97 FY02 FY07 FY11 FY12 FY13
  19. 19. Infrastructure index and growth rateThe Infrastructure Index (part of the wider Index of Industrial Production) comprises eight core industries: coal, crude oil, natural gas, petroleum refinery products, fertilisers, steel, cement and electricity The index rose to 144.4 in FY12, implying a CAGR of 5.1 per cent since FY07 The infrastructure index rose to 145.1 over April–December 2012 Source: Reserve Bank of India, Aranca Research Notes: The base year for Infrastructure index has been changed from 1993-94 to 2004-05 * - April 2012-December 2012 112.6 118.5 121.8 129.9 138.4 144.4 145.1 0 1 2 3 4 5 6 7 8 9 0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 FY07 FY08 FY09 FY10 FY11 FY12 FY13*
  20. 20. Total highway length added during Five-Year Plans (KM) India has one of the largest road networks (4.7 million km), consisting of national highways, expressways, state highways, districts and village roads The length of the highways added during the 11th Five-Year Plan was 9,044 km (as of 2011) During the 11th Five-Year Plan, of the total USD 456.9 billion investments in infrastructure, development of roads and bridges accounted for 15.3 per cent Owing to large-scale public and private investments in roads, demand for related machinery has increased significantly Share in roads network (FY13) 3.3 1.7 95 State highway National highway Districts and rural roads 23,814 7,091 9,044 9th Plan 10th Plan 11th Plan* Source: National Highway Authority of India, Ministry of Road Transport and Highways, Aranca Research Notes: * - Physical Achievements under National Highways Development Project during 11th Five Year Plan upto Sept, 2011
  21. 21. Source: DHI Annual report 2010-11, Ministry of Power Annual Report, Aranca Research Notes: GW - Giga Watt De-licensing • The engineering industry has been de-licensed and 100 per cent FDI has been permitted in the sector • Foreign technology agreements are allowed permitted under the automatic route Tariffs and custom duties • The government has eliminated tariff protection on capital goods • It has reduced custom duties on a range of engineering equipment Initiatives focussed on power generation and infrastructure development • The government has an ambitious mission of ‘Power for all by 2012’ and has planned capacity additions of 120 GW in the 12th Five-Year Plan • Governmental infrastructure projects such as Golden Quadrilateral and the North-South and East-West corridors fuelled growth in the engineering sector Special Economic Zones (SEZs) • The government approved a significant number of SEZs across the country for the engineering sector • Delhi Mumbai Industrial Corridor (DMIC) is being developed across seven states that is expected to bolster the sector National Manufacturing Policy (2011) • Government of India launched the National Manufacturing Policy with the aim of enhancing the sector’s share in GDP to 25 per cent within a decade and creating 100 million jobs by 2022
  22. 22. Source: Union Budget FY14 Note: Capex - Capital Expenditure JNNURM - Jawaharlal Nehru National Urban Renewal Mission 15 per cent investment allowance to boost capex • The government would provide 15 per cent exemption on tax to manufacturing companies that invest more than USD18.4 million in plant and machinery over FY14–15 Cut in excise duty to aid the auto industry • A cut in excise duty on truck chassis from 14 per cent to 13 per cent would increase profit margins for major automobile companies such as Ashok Leyland and Eicher Motors Increase in allocation to JNNURM to aid infrastructure and capital goods • The government has increased the allocation to JNNURM from USD1.3 billion in FY13 to USD2.6 billion in FY14; this is expected to benefit companies in capital goods, infrastructure and automobile sectors Higher allocation to the defence sector • Allocation to the defence sector was raised to USD37.5 billion, which includes USD16 billion for modernisation-related expenditure. This could further increase investments in the defence equipment industry
  23. 23. Source: SEZ India, Aranca Research Developer Location Product Andhra Pradesh Industrial Infrastructure Corporation Limited (APIIC) Ranga Reddy, Andhra Pradesh Aerospace and precision engineering Deccan Infrastructure and Land Holdings Ltd Nalgonda, Andhra Pradesh Light engineering M/s Essar Hazira SEZ Hazira, Gujarat Engineering Gujarat Industrial Development Corporation Ltd (GIDC) Gandhinagar, Gujarat Electronic products N.G. Realty Pvt Ltd Ahmedabad, Gujarat Engineering M/s Synefra Engineering and Construction Ltd Vadodara, Gujarat High-tech engineering and related products E. Complex Pvt Ltd Amreli, Gujarat Engineering Dishman Infrastructure Ltd Ahmedabad, Gujarat Engineering Ansal Properties and Infrastructure Ltd Sonepat, Haryana Engineering Raheja Haryana SEZ Developers Pvt Ltd Gurgaon, Haryana Engineering Ansal Kamdhenu Engineering SEZ Ltd Sonepat, Haryana Engineering Karnataka Industrial Areas Development Board Shimoga, Karnataka Engineering Suzlon Infrastructure Ltd Mangalore, Karnataka Port-based for high-tech engineering products
  24. 24. Developer Location Product Quest Machining and Manufacturing Pvt Ltd Belgaum, Karnataka Auto, aerospace and industrial engineering Viraj Profiles Ltd Thane, Maharashtra Stainless steel engineering products Navi Mumbai SEZ Pvt Ltd Navi Mumbai, Maharashtra Light engineering Maharashtra Industrial Development Corporation (MIDC) Satara, Maharashtra Engineering Township Developers India Pvt Ltd Pune, Maharashtra Engineering Maharashtra Industrial Development Corporation (MIDC) Aurangabad, Maharashtra Engineering & Electronics Orissa Industrial Infrastructure Development Corporation (IDCO) Jajpur, Orissa Metallurgical engineering Vividha Infrastructure Pvt Ltd Patiala, Punjab Engineering Mahindra Worldcity (Jaipur) Ltd Jaipur, Rajasthan Light engineering New Chennai Township Pvt Ltd Kanchipuram, Tamil Nadu Engineering Perundurai Engineering SEZ by SIPCOT Erode, Tamil Nadu Engineering Uttar Pradesh State Industrial Development Corporation (UPSIDC) Kanpur, Uttar Pradesh Engineering Source: SEZ India, Aranca Research
  25. 25. Source: Department of Industrial Policy & Promotion, Aranca Research Note: FY10 - Cumulative from April 2000 to March 2010 and so on FDI inflows includes Automobile industry, Electrical equipment, Miscellaneous mechanical and engineering industry, Industrial machinery, Machine tools, Agriculture machinery, Earth-moving machinery and Industrial instrument Cumulative FDI inflows in Engineering sector (USD billion) Cumulative FDI inflows increased to USD17.3 billion in FY13 from USD8.9 billion in FY10 With the increasing focus by government to attract foreign investors in manufacturing and infrastructure, FDI in the sector is set to rise 8.9 11.1 14.7 17.3 FY10 FY11 FY12 FY13
  26. 26. Source: Grant Thornton, Aranca Research Note - * - Acquired by its German subsidiary- Geometric Europe GmbH M&A deals Acquirer Target Type Acquisition date Geometric * 3Cap Technologies GmbH Acquisition January, 2013 Simplex Infrastructures Ltd Joy Mining Services India Pvt Ltd Acquisition May, 2012 Larsen & Toubro Ltd Thalest Ltd Acquisition April, 2012 Titagarh Wagons Ltd Titagarh Marine Ltd Acquisition March, 2013 JBM Cadmium Pvt Ltd Tesco GO Acquisition January, 2012 Diamond Power Infrastructure Ltd Utkal Galvanizers Ltd Acquisition April, 2011 Yash Birla Group Aircon Engineering Services Majority stake May, 2011 Gaji Mercantile Bharat Wire Ropes Ltd Acquisition July, 2010 HBL Power Systems Igarashi Group-Agile Electric Drives Technologies and Holdings Majority stake December, 2010
  27. 27. Source: Company Reports, Indian Express, Aranca Research Note: ‘Navratna’ is the title given to nine Public Sector Enterprises (by the Government of India) having distinct comparative advantages Net sales (USD billion) 3.0 3.9 4.5 5.8 7.1 9.0 10.4 9.2 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 Salient features • One of the largest engineering and manufacturing companies with ‘Navratna’ status • One of the major integrated power plant equipment (IPPE) manufacturers in the world • Profit-making company since 1971–72 • Installed base of more than 120,000 MW • Fifteen manufacturing units, two subsidiaries and seven joint ventures • Accounted for over 59 per cent of the total generating capacity in FY12
  28. 28. Key success factors Boiler efficiency Lower design heat rate Better PLFLower lifecycle cost Lower auxiliary power consumption Recent Awards and Recognitions • Golden Peacock Award 2011 for Occupational Health and Safety(2011) • SCOPE Meritorious Award 2010-11 for Best Practices in Human Resource Management • Intellectual Property Award from the Government of India(2011) • Essar Steel Infrastructure Excellence Award (2011) • DSIJ Gentle Giant Award from the Government of India (2011) • CII-Thompson Reuters Innovation Award (2010)
  29. 29. 1960 1970 1980 1986 1990 1996 2000 2004 2005 2006 2007 2008 2011 2012 ISO accreditations Open Die Forging Closed Die Forging Crank Shaft Front Axle Beams Hubs Transmission Parts Organic growth & integration Entry into new markets such as US and Greece Acquisitions in various countries FY13 USD1050 million turnover FY05 USD245 million turnover Joint ventures and technical partnerships Source: Company Reports, Aranca Research
  30. 30. Source: Company Reports, Aranca Research Note: ‘Navratna’ is the title given to nine Public Sector Enterprises (by the Government of India) having distinct comparative advantages, HAL- Hindustan Aeronautics Limited Net sales (USD billion) 2.1 2.3 2.4 2.9 3.0 2.6 FY08 FY09 FY10 FY11 FY12 FY13 Salient features • One of Asia’s largest aerospace companies with ‘Navratna’ status • Produced over 3,700 aircraft including 15 types of indigenous designs and over 4,300 engines • Nineteen production units and 10 research & design centres across eight locations in India • Promoted and established 11 joint venture companies in collaboration with leading international and Indian aviation organisations • Offers services for the aircraft accessories, foundry and forge, engine, helicopter, industrial & marine gas turbine division and transport aircraft division
  31. 31. Source: Aranca Research Notes: GW - Giga Watt, SME - Small and Medium Enterprises Defence • Budget for the defence sector is expected to grow 8 per cent until 2014; of this, 54 per cent would be earmarked for procuring manufactured items which is likely to translate into a market opportunity of USD91 billion over 2010–2014 • Government initiatives, such as allowing private sector participation, have been reinforced by opening up the sector to 26 per cent FDI, and its offset policy is expected to enhance private sector (including SME) participation Civil nuclear sector • India‘s nuclear capacity is expected to be strengthened by 3.8 GW by 2012; an additional 12,000 MW has been planned under the 12th Five-Year Plan (2012–17) • It represents a total business opportunity worth USD312 million for the manufacturing industry, which is likely to garner 61 per cent Auto components • Global auto majors are rapidly ramping up the value of components they source from India, steered by the country’s advanced engineering skills, established production lines, a thriving domestic automobile industry and competitive costs • Industry sales are expected to increase to USD40 billion by 2016, with about USD20 billion generated from exports
  32. 32. Source: Aranca Research Power transmission and distribution (T&D) • T&D expenditure is set to increase as a result of growth in power generation and privatisation of distribution • By the end of 2012, the transmission network was expected to be about 60,000 circuit km, with a potential demand for 630,000 transformers Material handling equipment • The material handling equipment sector is expected to gain from robust demand from steel, power, mineral and other infrastructure industries • Market demand for material handling equipment is estimated at USD30 billion over 2007– 14 Machine tools • Demand for machine tools from the capital goods sector (especially automobile and textile industries) is projected to remain high • Considering the industry's demand for higher productivity, superior precision and accuracy, as well as low-cost manufacturing solutions, computer numerically controlled (CNC) machine tools are set to be in greater demand
  33. 33. Source: Booz Allen Hamilton, Nasscom, Aranca Research Notes: ESO is Engineering Services Outsourcing India Competing countriesIndia Competing countries ~ 20% 25-30% Total Spend ~ USD850 billion Projected Spend USD1100 billion Offshore Expenditure Onshore Expenditure ~4.5% 15-20% 2009 2020 By 2020, the ESO market in India is expected to reach USD40–50 billion, propelled by increasing onshore to offshore movement of services 2009 • The global engineering services spending is estimated to be around USD850 billion • About USD40 billion is expected to flow through the outsourcing channel into vendor countries • India accounts for about 20 per cent of the outsourced market 2020 • The global engineering services spending is projected to reach USD1100 billion • About USD180 billion is estimated to flow through the outsourcing channel into vendor countries • India can account for about 25–30 per cent of this outsourced revenue
  34. 34. Growth in industry size of major electrical equipment (USD billion) India‘s electrical equipment industry has witnessed significant growth in the last few years Major electrical equipment registered a CAGR of 21.8 per cent from a small base of USD11.4 billion to USD25 billion between FY08 and FY12 Major electrical equipment manufactured include capacitors, energy meters rotating machines, transformers, cables, switchgears, transmission line towers and conductors Based on the expected capacity and investments, domestic demand for electrical equipment is targeted to be USD100 billion by FY22 Demand for T&D equipment is expected to reach USD13.9 billion in FY22 from USD3.4 billion in FY11 11.4 10.2 11.0 13.2 25.0 FY08 FY09 FY10 FY11 FY12 T & D equipment-wise demand projection (USD billion) 3.4 7.4 13.9 FY11 FY17 FY22 CAGR: 21.8% Source: Indian Electrical and Electronics Manufacturers Association, Department of Heavy Industries Note: T&D - Transmission and Distribution, BTG - Boilers, Turbine, Generator
  35. 35. The generation equipment (BTG) segment is projected to increase to USD25 billion Production of generation equipment (boilers, turbines and generators) in India is estimated at around USD5.7 billion by 2022 Demand for generation equipment is projected to rise to USD25.1 billion in FY22 from USD6 billion in FY11 Cables contribute 27.3 per cent to the electrical equipment market followed by transmission lines (23.4 per cent), transformers (19.3 per cent) and switchgear (15.2 per cent) Market share of electrical equipment (FY13)Generation equipment-wise demand projection (USD billion) 3.8 5.8 11.7 1.6 3.3 6.7 0.6 3.3 6.7 FY11 FY17 FY22 Boiler Turbine Generator 10.0% 15.2% 27.3%19.3% 0.9% 3.9% 23.4% Rotating Machines Switchgear Cables Transformers Capacitors Energy Meters Transmission Lines Source: Indian Electrical and Electronics Manufacturers Association Notes: BTG - Boiler, Transmission and Generation
  36. 36. India’s earthmoving and construction equipment (ECE) industry has enjoyed strong growth over the last seven years due to rapid economic development The organised construction sector in India (for example, roads, urban infrastructure) accounts for approximately 55 per cent of the ECE industry. Mining, irrigation and other infrastructure segments (power, railways) account for the remaining During FY10–14, sales of construction equipment is expected to increase at a CAGR of 10.6 per cent and reach USD6.5 billion Earthmoving sector is continuing to make headways and could command a share of 56.2 per cent followed by concrete equipment and material handling equipment Product segment-wise CE market by 2014 56.2% 8.5% 19.0% 13.2% 3.0% Earth moving Road constrution equipment Concrete equipment Material handling Material processing Expected unit sales by 2014 Equipment Sold in 2010 Forecast 2014 Excavators 10500 14000 Backhoes 23000 32000 Loaders 2500 4500 Asphalt pavers 1150 1650 Mobile cranes 8000 11750 Tower cranes 200 700 Transit mixers 3800 9000 Source: Indian Construction Equipment Manufacturer’s Association, NBM media Notes: CE - Construction Equipment, ECE - Electrical and Construction Equipment
  37. 37. National Automotive Testing and R&D Infrastructure Project (NATRiP) NBCC Place, South Tower, 3rd Floor,Bhishma Pitamah Marg, Pragati Vihar,Lodhi Road, New Delhi - 110003 Tel : + 91-11-49215555 Fax : +91-11-24369333 E-mail : The Automotive Research Association of India Survey No 102, Vetal Hill, Off Paud Road, Kothrud, Pune - 411 038 P.B. No 832, Pune - 411 004 Tel. No : +91-020-30231111 Fax No : +91-020-25434190 Email Id:
  38. 38. Fluid Control Research Institute Kanjikode West, Palakkad - 678623. Phone : 91-491-2566120/2566206 Fax : 0491-2566326 E-mail : Engineering Export Promotion Council (EEPC) ‘Vanijya Bhawan’, 1st Floor International Trade Facilitation Centre 1/1, Wood Street Kolkata, West Bengal–700016 Phone: 91-33-22890651, 22890652 Fax: 91-33-22890654 E-mail:
  39. 39. BTG : Boilers, Turbines, Generators BHEL: Bharat Heavy Electricals Limited MHI: Mitsubishi heavy industries DHI : Department of Heavy industries BHEL: Bharat Heavy Electricals Ltd ICEMA: Indian Construction Equipment Manufacturer’s Association HAL: Hindustan Aeronautics Limited IEEMA: Indian Electrical and Electronics Manufacturers Association EEPC: Engineering Export Promotion Council TPD: Tonnes Per Day NHAI: National Highway Authority of India
  40. 40. MORTH: Ministry of Road Transport and Highways CEA: Central Electrical Authority HVDC: High Voltage Direct Current USD: US Dollar FY: Indian Financial Year (April to March) Wherever applicable, numbers have been rounded off to one decimal
  41. 41. Year INR equivalent of one US$ 2004-05 44.95 2005-06 44.28 2006-07 45.28 2007-08 40.24 2008-09 45.91 2009-10 47.41 2010-11 45.57 2011-12 47.94 2012-13 54.31 Exchange Rates (Fiscal Year) Year INR equivalent of one US$ 2005 45.55 2006 44.34 2007 39.45 2008 49.21 2009 46.76 2010 45.32 2011 45.64 2012 54.69 2013 54.45 Exchange Rates (Calendar Year) Average for the year
  42. 42. India Brand Equity Foundation (“IBEF”) engaged Aranca to prepare this presentation and the same has been prepared by Aranca in consultation with IBEF. All rights reserved. All copyright in this presentation and related works is solely and exclusively owned by IBEF. The same may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this presentation), modified or in any manner communicated to any third party except with the written approval of IBEF. This presentation is for information purposes only. While due care has been taken during the compilation of this presentation to ensure that the information is accurate to the best of Aranca and IBEF’s knowledge and belief, the content is not to be construed in any manner whatsoever as a substitute for professional advice. Aranca and IBEF neither recommend nor endorse any specific products or services that may have been mentioned in this presentation and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this presentation. Neither Aranca nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of this presentation.