1. REVIEW OF
INDIAN EARTHMOVING & CONSTRUCTION EQUIPMENT INDUSTRY
INDUSTRY UPDATE
(Annual Report 2012-13)
Indian Construction Equipment Manufacturers Association
2. 2
Constituted in 1949 as Tractor & Allied Equipment manufacturers and Importers
Association Ltd., the association started with 10 Indian member companies, primarily
manufacturers and importers of tractors, earthmoving and allied equipment. It was
rechristened as Indian Earthmoving & Construction Industry Association Ltd. (IECIAL) in
1986 with the objective to make the body a national point of reference for the Indian
earthmoving & construction equipment industry. The association has been renamed as
Indian Construction Equipment Manufacturers Association (ICEMA) in 2012 with the
objective to make the association a truly representative body of the Indian construction
equipment industry and to expand its scope of services.
ICEMA is affiliated to the Confederation of Indian Industry (CII) and presently represents
51 leading companies who manufacture, trade and finance a variety of products such as
hydraulic excavators, wheel loaders, backhoe loaders, motor graders, vibratory compactors,
cranes, dumpers, tippers, forklifts trucks, dozers, pavers, batching plants, diesel engines,
etc.
ICEMA is the only Industry body that represents the Indian Construction Equipment
industry and its membership consists of CE manufacturers, CE component manufactures,
and CE industry related financial institutions, media.
Indian Construction Equipment Manufacturers’ Association
3. 3
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4. 4
TABLE OF CONTENTS
Executive Summary……………………………………………………………………6
1. State of the Economy ...................................................................................... 7
2. Construction Sector Overview ......................................................................10
3. Development in User Sectors.........................................................................12
4. Overview of Construction Equipment Sector...............................................14
4.1 Overview of Construction Equipment Sector................................................... 14
4.2 Detailed Component-wise Analysis................................................................... 17
4.2.1 Earth Moving Equipments....................................................................... 17
4.2.2 Performance of Construction Companies................................................ 18
4.2.3 Material Handling Equipments ............................................................... 19
4.2.4 Concreting and Road Construction Equipments...................................... 19
4.3 Status of Infrastructure Projects ...................................................................... 20
4.4 Iniatives for Infrastructure in the Budget 201-14………………………………21
4.5 Rise in Credit Offtake……………………………………………………………23
4.6 Outlook for Construction Equipment Sector ................................................... 23
5. Appendix ........................................................................................................25
5.1 Policy Development in the Union Budget 2013-14……………………………..25
5.1.1 Impact of Union Budget 2013-14............................................................. 25
6. Primary Data .................................................................................................26
6.1(a) Overall Results:Financial Year-wise Sales............................................. 26
6.1(b) Overall Results:Quarterly Sales ............................................................. 27
6.2 Offhighway Trucks ..................................................................................... 28
6.3 Articulated Trucks ...................................................................................... 28
6.4 Wheel Loaders ............................................................................................ 29
6.5 Skid Steer Loaders ...................................................................................... 29
6.6 Motor Graders............................................................................................. 29
6.7 Backhoe Loaders ........................................................................................ 30
6.8 Track Type Excavators ............................................................................... 30
6.9 Wheeled Excavators.................................................................................... 30
6.10 Track Type Tractors.................................................................................. 31
6.11 Shovels Electric......................................................................................... 31
6.12 Pipe Layers................................................................................................ 31
6.13 Diesel & Electric Forklifts ........................................................................ 32
6.14 Telescopic Handlers.................................................................................. 32
6.15 Static Crushers.......................................................................................... 33
6.16 Wheeled Crushers ..................................................................................... 34
6. 6
Executive Summary
Recent pro-reform steps taken by the government in the last few months coupled with improvement in the
global scenario, an easy monetary policy and extensive thrust on housing and infrastructure sectors in the
Union Budget 2013-14 has helped in reviving the construction equipment sector. January-March quarter
2013 has witnessed the highest sales of 16,765 units as compared to previous three quarters. Since April-
June quarter 2012, equipments sales have registered a robust growth of 10.3% in January-March 2013 and
around 3 percent over October-December 2012. This improvement in sales is an encouraging sign but will
take time to return to its January-March 2012 sales trajectory. On year on year basis, dip in the equipments
sales was estimated at about 13% during January-March 2013. Near 10% growth in construction and road
making equipments have helped in improving the overall construction equipment sales in this quarter
while remaining two categories, earthmoving and material handling segments experienced a decline in
their sales.
For the financial year as a whole, construction equipment sales have dropped from 73,243 units during
April-March 2011-12 to 63,161 units during April-March 2012-13, a dip of 13.8%. Sales have dropped
across categories during April-March 2012-13 as compared to the same period last year. Largest drop has
been observed in the material handling segment of about 39%, followed by earthmoving (10%) and
construction and road making equipments (9%). Further data reflects that earth moving equipments
remained the dominant segment of the construction equipment industry despite contraction in its sales.
Given that domestic economy is still passing through rough phase, moderate turn around is only expected
on the back of certain policy developments taken place in the last five to six months. Some of the notable
policy developments which are expected to boost construction sector and hence construction equipment
sales are as follows (a) raise in FDI limit in railways, retail and other sectors, (b) recent frequent cuts in
repo rate by RBI in 2012-13 and in May 2013, (c) exclusive thrust of 12th Five Year Plan on creating
world class infrastructure in the country, (d) Announcements of favourable housing and infrastructure
sectors schemes in the Budget 2013-14, (e) Gradual improvement in the world economic and financial
environment is likely to push FDI inflows in housing sector and infrastructure segments, (e) emergence of
real estate as the best investment option and (f) general elections in 2014 is expected to push central and
state governments to expedite projects clearance and governance. In view of these positive developments,
the outlook of the sector is likely to improve in the coming months. However, the positive impact of this
development on the sales of construction equipments is expected to fructify only with a time lag.
Overall, upswing in the economy is projected (with a GDP of over 6%) in the year 2013-14, with
increasing government focus on certain sectors such as housing, infrastructure, coal, power, oil & gas
which are of key importance for the development of nation and expansion of construction equipment
sector. A clear policy direction from the government, inflation containment, benign interest rate
environment, and improved fiscal situation are keys to revive the growth momentum & investment
confidence.
7. 7
1. State of the Economy
As per the advance estimates released by CSO recently, GDP growth is expected to slow
down to around 5 per cent levels in 2012-13. But due to the recent pro-reform steps taken
by the government in the last few months coupled with improvement in the global scenario
and an easy monetary policy, growth is expected to bounce back to 6.0-6.4 per cent in the
current fiscal. Amongst the broad sectors, agriculture is expected to grow at an above-trend
rate of 3.5 per cent in the current year aided by a low base of last year and expectations of
a normal monsoon. Industrial growth is expected to recover to a range of 5.0-5.5 per cent
in the current fiscal as compared to an expected 3.1 per cent growth in the last fiscal, while
services sector growth is expected to climb to 7.2-7.5 per cent in 2013-14 from expected
6.6 per cent growth posted in 2012-13. Services sector growth is expected to benefit from
the improved growth prospects in agricultural and industrial sector. Being a pre-election
year, increase government spending is also expected to boost service sector growth
especially in its sub-sector of community, social and personal services. The upturn in
growth, however, cannot be sustained next year unless the investment pipeline begins to
replenish, supported by necessary policy actions. A monsoon failure however can drag
growth below 6 per cent.
Real GDP growth Agriculture growth Industrial growth Services growth
5.5 5.3
4.5
6.3
Q1 Q2 Q3
FY13 FY14
(E)
2.9
1.2
3.5
1.1
Q1 Q2 Q3
FY13 FY14
(E)
3.6
2.7
3.3
5.3
Q1 Q2 Q3
FY13 FY14
(E)
7.0 7.2 6.1 7.3
Q1 Q2 Q3
FY13 FY14
(E)
Source: CSO Note: E- CII Estimates
Reflecting the uncertain global scenario and dismal competitive environment, industrial
growth moderated sharply. It stood at an anemic 1.0 per cent in 2012-13 as compared to
2.9 per cent in 2011-12. In the current fiscal, IIP growth is expected to recover to around 5
per cent underpinned by turning of the interest rate cycle. Average WPI inflation on the
other hand stood at 7.3 per cent in 2012-13, sliding to 6.0 per cent in March 2013. WPI
inflation is expected to average in a range of 5.5-6.0 per cent in the current fiscal. The
global inflation outlook for the current year appears more benign compared to last year on
expectations of some softening of crude oil and food. Additionally, expectations of a
normal monsoon will also help to keep food inflation under check in the current year.
However, the timing and magnitude of administered price revisions, particularly of
electricity and coal, will impact the evolution of inflation trajectory during the year. In
tandem with the moderation in headline WPI print, RBI cut the key repo rate and CRR by
a cumulative 100 bps and 75 bps respectively in 2012-13. However, the monetary policy
transmission has not been efficient as evidenced by the fact the median base rate of 10
banks was reduced by only 20 bps in 2012-13.
8. 8
Industrial production
growth
Inflation Policy interest rates
(Repo)
Non-food credit growth
-0.3
0.4
2.3 1.8
Q1 Q2 Q3 Q4
FY13
7.5 7.9 7.3 6.7
Q1 Q2 Q3 Q4
FY13
8.0 8.0 8.0 7.5
Q1 Q2 Q3 Q4
FY13
1
8.6 1
5.9 1
4.3 1
4.4
Q1 Q2 Q3 Q4
FY1
3
Source: CSO, Ministry of Industry & RBI
On the external front, merchandise exports contracted by 1.8 per cent in 2012-13, but as
per the monthly numbers recorded positive growth for the third straight month in March
2013. The annual export contraction was the first since 2009-10 and reflected falling
orders from the US and Europe. For the full year, exports stood at US$300 billion, well
below the US$350 billion target. Merchandise imports on the other hand, increased by a
marginal 0.4 per cent to US$491.5 billion in 2012-13 from US$489 billion in 2011-12,
leaving a trade deficit of US$190.9 billion, an increase of 4.1 per cent, from US$183.3
billion in 2011-12. Reflecting the rising trade deficit, current account deficit widened to an
all time high of 6.7 per cent of GDP in the third-quarter of 2012-13 from 5.4 per cent in the
previous quarter. With this, the cumulative CAD in the first three months of 2012-13
stands at US$71.7 billion (5.4 per cent of GDP), as compared with US$56.5 billion (4.1
per cent of GDP) in April-December 2011. Rupee remained range-bound against the US
dollar in the final quarter of 2012-13. Currently the Rupee is hovering around 54.0-54.5
per US$ levels. In the current fiscal, Rupee is expected to trade with an appreciation bias
against the Greenback due to positive impact of policy measures such as increasing FDI
limits in different sectors.
Trade growth Merchandise Trade
Deficit (US$ billion,
average)
Current Account Deficit
(% of GDP)
Currency (Rs per
US$ average)
-2.6
-5.9
6.7
4.0
-11.8
-2.1
2.0
-5.7
Q1 Q2 Q3 Q4
FY13
Export Import
13.3
16.4 19.3
15.0
Q1 Q2 Q3 Q4
FY13
5.4
4.5
3.9
6.7
Q4 Q1 Q2 Q3
FY1
2 FY1
3
54.2
55.2
54.1 54.2
Q1 Q2 Q3 Q4
FY1
3
Source: RBI, Ministry of Commerce
The fiscal deficit of the central government for 2012-13 has now been re-estimated at 5.2
per cent of GDP as compared to the budgeted estimate of 5.1 per cent. The extent of
breach in 2012-13 from the budgeted levels was significantly lower mainly due to
contraction of 4 per cent in total expenditure growth led by a decline of 17.6 per cent in
plan expenditure. The budget for 2013-14 clearly began the process of fiscal consolidation
9. 9
by targeting fiscal deficit at 4.8 per cent of GDP. To lower the fiscal deficit to 4.8 per cent
of GDP in 2013-14, the government is betting on revenue growth of 21.2 per cent and
expenditure growth of 16.4 per cent compared to the revised estimates for the current year.
With the government’s revenue collection falling below the budgeted revenue in four of
the past five years, including the current fiscal year, the revenue targets for 2013-14 looks
ambitious.
Fiscal Deficit (as % of
GDP)
Expenditure growth Revenue growth Tax/GDP
4.8
5.8
5.1 4.8
FY11 FY12 FY13
(RE)
FY14
(BE)
8.9 9.7
16.4
16.9
FY11 FY12 FY13
(RE)
FY14
(BE)
-4.7
1
6.0
21
.2
37.6
FY1
1 FY12 FY1
3
(RE)
FY1
4
(BE)
10.0
10.4
10.2
10.9
FY11 FY12 FY13
(RE)
FY14
(BE)
Source: Ministry of Finance Note: RE- Revised Estimates, BE- Budget Estimates
10. 10
2. Construction Sector Overview
2.1 Developments in Construction Sector
Construction sector growth dipped for the second straight quarter to 5.8% during
October-December 2012 from the high of 10.9% in April-June 2012. This growth
had even been lower than 6.8% achieved during October-December 2011.
Construction sector contribution to industry has remained nearly stable at around
32.0% during April-December 2012. This has been marginally above 31.0%
observed during October-December 2011. Increasing share of construction in
industry GDP reflects its growing presence in fostering industrial output. Rising
demand from housing and infrastructure sector has resulted in a notable surge in
the construction activities in last several years.
Contrary to the pick up in the share of this sector in the industry GDP, a dip was
noticed in its contribution to the national GDP from 8.6% in quarter ending June
2012 to 8.0% in quarter ending December 2012. This however, remained
unchanged at 8.0%, what was recorded during October-December last year.
Share of Construction Sector in GDP and Industry
29.7% 30.3%
28.1%
30.7% 31.2% 31.0%
32.3% 31.9% 32.0%
7.8% 8.2% 7.7% 8.4% 8.0% 8.2% 8.6% 8.5% 8.0%
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
% Share in Industry % Share in GDP
Source: CSO
2.2 FDI Inflows in Construction and Related Sectors
Construction sector which includes townships, housing, built-up infrastructure,
construction development projects and construction (infrastructure) activities has
11. 11
attracted US$1,260 million worth of FDI flows during April-February 2012-13, not
even half of US$3,228 million received in the corresponding period last year.
However, their collective share in total cumulative inflows during April 2000-
February 2013 remained stable at 12.0%. It remains the second most attractive
sector for the foreign investors after services sector (financial and non-financial).
The share of FDI in this sector is expected to improve going forward as the RBI is
expected to cut interest rates considering moderation in the inflation rate. Further,
incentives provided to boost infrastructure, housing and construction activities in
the Union Budget 2013-14 would also provide a fillip to the construction sector
activity.
FDI Inflows during April-February (2011-12 v/s 2012-13)
3,228
1,616
0
141
35
1,260
529
0
51
5
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Construction sector
(including roads &
highways)
Power Ports Mining Earth moving
equipments
US$
Million
April-February 2011-12 April-February 2012-13
Source: DIPP, Ministry of Commerce and Industry
2.2.1 Cumulative FDI Inflows in Construction and User Sectors during April 2000-
February 2012-13
Note: Figure in Brackets Represent Share of the Respective Sector in Cumulative FDI Inflows during April 2000-February 2012-13
Source: DIPP, Ministry of Commerce and Industry
Cumulative
FDI Inflows
Construction - US$22.0 Billion (12%)
Power - US$7.8 Billion (4%)
Ports - US$1.6 Billion (0.9)
Earth Moving Equipments - US$0.2 Billion (0.1%)
Mining - US$1.0 Billion (0.5%)
12. 12
3. Development in User Sectors
Sector Progress in the
current fiscal
Special Comment Outlook
Power 98.03% of the
annual capacity
addition target
achieved in 2012-
13.
99.1% of the thermal
capacity addition
target achieved in
2012-13.
Ministry of Power has set an ambitious
target of seeking power for all by 2013,
with strategies encompassing power
generation, transmission, distribution,
regulation, conservation &
communication strategy. The key to the
outlook of the sector however rests on the
implementation and continuation of
reforms at the public utilities front.
Coal The total production
of raw coal in the
country during
2012-13 was 557.5
MT which was 97%
of the target
production.
Coal production grew
by 3.3%, while coal
supply grew by 6.2%
in 2012-13.
Government has been proactively
addressing the impediments coming in
the way of taking up of coal mining
projects by the coal companies.
Additionally, the coal bearing State
Governments have been advised to
facilitate and expedite in obtaining the
various clearances, grant of mining leases
and land acquisition by the coal blocks
allocattees so that coal production can be
increased.
Mining Mineral sector
continued to remain
a laggard for the
economy, as its
output contracted
by 2.9% in 2012-13
as compared to -
2.0% in 2011-12.
The contribution of
petroleum was highest
in total value of
mineral production in
Nov 12.
During the past year, controversies
pertaining to mining resulted in a
significant loss for the industry.
Government has made high level
committees to probe into the
irregularities. This move will most
probably harbinger the start of a new
innings by the sector.
Steel Steel production of
main producers
grew by 6.5% in
2012-13, while
consumption grew
by 3.3 per cent.
India remains the
fourth largest
producer of crude
steel in the world as
against the eighth
position in 2003. It
however retains its
lead position as the
world’s largest
producer of sponge
iron.
According to estimates of World Steel
Association, India has the potential to
become the second largest producer of
steel globally by 2015-16 on account of
growing steel demand, rich resources
base of iron ore, skilled man-power and
capacity expansion planned and being
executed in the steel sector. However, it
would be essential to certain adequate
supply of raw materials in future in order
to ensure smooth production of steel.
13. 13
Cement Cement production
decelerated to 5.6%
in 2012-13 as
compared to 6.7%
during 2011-12.
In 2013, cement
industry is projecting
a capacity addition of
30-40 million tones in
view of the expected
surge in demand.
Outlook for the sector is bright as the
world economy has started showing some
signs of recovery, which will have a
positive impact on the domestic
economic activities. Further with several
positive announcements in the Budget
FY14 for housing & infrastructure, the
demand for cement is bound to bounce
back.
Airports As per IATA,
domestic air traffic
dropped by 9.1% in
February 2013 on
an annual basis. The
decline occurred
even when the
global passenger
demand rose 3.7%.
Sector’s poor
performance is due to
the ongoing global
slowdown, rise in
airfare etc.
The closure of the recent Jet-Etihad deal
could pave way for fructification of more
deals in the aviation sector, which could
well boost the sector’s sentiments, going
forward.
Ports Cargo traffic at 12
major ports in the
country declined by
2.6% at 545.68
million tones (mt)
during 2012-13 as
compared to 596.03
mt handled in
FY11.
The outlook for the sector appears
encouraging due to the continued policy
thrust given by the government to the
sector in form of signing several MoUs
with global economies, making loans
available at nominal rate etc.
Railways Railways carried
1,009.73 million
tonnes (mt) of
revenue earning
freight traffic
during 2012-13,
which is 15 mt less
than the budget
estimates. The
freight carried,
however, shows an
increase of 39.95 mt
over the freight
traffic of 969.78 mt
carried during the
corresponding
period last year,
showing rise of 4%.
The total approximate
earnings of Railways
on originating basis
during 1st
April 2012
to 31st
March 2013
registered an increase
of 19.6% on an annual
basis.
In the railway budget 2013-14, many
important measures such as deregulating
the fuel prices, linking of freight rates to
increase in diesel prices were taken.
Additionally, 347 projects were
prioritised in terms of assuring regular
funding for them. These steps will help to
invigorate the railways sector in the
current year.
14. 14
4. Overview of Construction
Equipment Sector
4.1 Overview of Construction Equipment Sector
Recent pro-reform steps taken by the government in the last few months coupled with
improvement in the global scenario, an easy monetary policy and extensive thrust on
housing and infrastructure sectors in the Union Budget 2013-14 has helped in reviving the
construction equipment sector. January-March quarter 2013 has witnessed the highest sales
of 16,765 units as compared to previous three quarters. Since April-June quarter 2012,
equipments sales have registered a robust growth of 10.3% in January-March 2013 and
around 3 percent over October-December 2012. This improvement in sales is an
encouraging sign but will take time to return to its January-March 2012 sales trajectory.
On year on year basis, dip in the equipments sales was estimated at about 13% during
January-March 2013. For the year as a whole, construction equipment sales have dropped
from 73,243 units during April-March 2011-12 to 63,161 units during April-March 2012-
13, a dip of 13.8%.
Construction equipment market size also exhibited a similar trend. The market size of the
ECE (Earthmoving and Construction Equipment) industry kept growing during 2012-13
fiscal but remained subdued by 11.9% from US$ 982 million during January-March 2012
to US$ 866 million in January-March 2013.
The scenario is, however, expected to improve in the coming months with the positivity
seen in the macro economic indicators. Further, the recent cut in key policy rates by RBI in
its annual monetary policy review 2012-13 and growing reliance of people on the real
estate as a strong investment option is also expected to improve the investment outlook for
construction and infrastructure sectors. In addition, the steady momentum witnessed in the
construction activities during fiscal year 2012-13, despite general economic downturn,
brings a ray of hope of a likely pick-up in the construction equipment sales in the coming
months. Surge in absolute credit flow to the construction and infrastructure sectors too
affirms the signs of revival in the sector.
Trends in Earth Moving and Construction Equipment Sector
Apr-Jun
2011
Jul-Sept
2011
Oct-Dec
2011
Jan-Mar
2012
Apr-Jun
2012
Jul-Sept
2012
Oct-Dec
2012
Jan-Mar
2013
Number 16,477 18,034 19,513 19,220 15,203 14,914 16,279 16,765
% YoY 27.8 26.3 11.6 -9.7 -7.7 -17.3 -16.6 -12.8
US$
Million 840 916 992 982 773 759 839 866
% YoY 28.1 26.2 10.8 -9.0 -8.0 -17.1 -15.4 -11.9
Source: Primary Data- iCEMA Members and Non-Members
15. 15
Detailed break-up of sectoral data shows that earth moving equipments remained the
dominant segment of the construction equipment industry, despite contraction in its sales.
During January-March 2013, major players sold 12,767 units of earth moving equipments
as compared to 14,914 units in the corresponding period last year. This is followed by the
construction and road making segment which sold 2,931 units and the material handling
segment which sold 1,067 units. The sale of earth moving equipments dropped by 14.4%,
compared to a nominal increase of 1.6% increase in the corresponding period last year.
Material handling segment’s sale also continued to decline (34.6%) during the fourth-
quarter 2012-13. Contrary to this downward trend, sales of construction and road making
equipments increased by a robust 9.6% on year-on-year basis, which has helped in
augmenting the overall equipment sales during the January-March 2013.
However, on an annual basis, sales have dropped across categories during April-March
2012-13 as compared to the same period last year. Largest drop has been observed in the
material handling segment of about 39%, followed by earthmoving (10%) and construction
equipments (9%).
Equipment Sales by Category (in Number)
Quarter Annual
Source: Primary Data- iCEMA Members and Non-Members
Earth moving equipments continued to have the highest share (of 76.2%) in total
equipments sold during the reference period (January-March 2013), followed by
concreting & road construction equipments (17.5%). The share of latter has increased as
compared to last year. On the other hand, the share of material handling declined from
8.5% in January-March 2012 to 6.4% January-March 2013.
On annual basis, share of each segment in total ECE sales remained broadly in the same
direction. Share of material handling has declined considerably from 13.5% in April-
March 2011-12 to 9.5% a year later. While that of other two segments, it has increased.
During April-March 2012-13, share of earthmoving and construction and road making
equipments stood at 74.9% and 15.6% respectively.
16. 16
Share of Equipment Segments in Total Equipments Sold
Quarter Annual
Source: Primary Data- iCEMA Members and Non-Members
Similar trend was visible in value terms1
. Earth moving equipments segment had the
largest current market size of US$638 million in January-March 2013 as compared to US$
746 million during the same period last year. The current market size of the concreting
equipments has surged from US$164 million to US$180 million, while that of material
handling has shrunk from US$72 million to US$47 million during January-March 2013.
Revenue by Category (US$ Million)
Quarter Annual
Source: Primary Data-iCEMA Members and Non-Members
On annual basis, revenues have dropped across categories during April-March 2012-13 as
compared to the same period last year. Market size of material handling segment has
reduced to nearly half at US$ 267 million during April-March 2012-13 from US$439
million in April-March 2011-12.
Accordingly, their share in the overall total market size was found to be as follows- for
material handling equipments, the share has squeezed from 7.4% to 5.4% during the
comparable time-period, while that for concreting equipments, the share has increased
from 16.7% to 20.8%.
1
The price has been calculated based on Accenture report and it is assumed to be constant in 2012.
17. 17
Share of ECE Segments in Total ECE Industry Revenue
Quarter Annual
Source: Primary Data- iCEMA Members and Non-Members
During April-March 2012-13, share of material handling has declined while that of other
two segments has increased as compared to last year.
4.2 Detailed Component-wise Analysis
4.2.1 Earth Moving Equipments
Sales of earth moving equipment remained better than the previous three quarters during
January-March 2013 quarter. Sales, however declined by 14.4% on year-on-year basis to
12,767 in quarter ended in March 2013 from 14,914 in quarter ended in March 2012.
Considerable contraction has been observed in the sales of backhoe loaders, wheel loaders
and track-type excavators in the reference period. However, in comparison to the previous
quarter, sales have been better for most of the equipments.
Revenue contracted to US$638 million during January-March 2013 from US$746 million
in the same period last fiscal but remained higher than US$627 million in the previous
quarter, (October-December 2012).
Quarterly Sales by Equipments (in Numbers)
Jan-Mar
2012
Apr-Jun
2012
Jul-Sept
2012
Oct-Dec
2012
Jan-Mar
2013
Off highway Trucks 179 58 52 92 254
Wheel Loaders 472 415 356 404 433
Skid Steer Loaders 94 105 119 95 114
Backhoe Loaders 9,620 6,932 7,161 8,433 8,433
Track type Excavators 4,347 3,387 3,131 3,381 3,357
Track Type Tractors 115 64 44 52 112
Drills 85 88 83 82 62
Others 2 2 8 1 2
Total 14,914 11,051 10,954 12,540 12,767
%YoY 1.6 3.7 -12.9 -12.8 -14.4
Source: Primary Data- iCEMA Members and Non-Members
18. 18
4.2.2 Performance of Construction Companies
Preliminary corporate results of 7 construction companies show that these companies did a
better business during March quarter 2013 as compared to the previous quarter. Net sales
rose by nearly 12% to Rs. 55.5 billion during January-March 2013, against Rs. 49.6 billion
during October-December 2012. However, on yearly basis, net sales moderated by 4.1%
during January-March 2013 in comparison to a moderate growth of 2.1% seen in the same
period last year. This reflects the likely slow down in the construction sector in the fourth
quarter of the fiscal year 2012-13. Contrary, decline in the expenditure growth of about 2%
on year-on-year basis during the reference period is indicating the beginning of a healthy
trend, as accentuating cost observed in last couple of years had been putting pressure on
the margins of companies. Nonetheless, a lot needs to be done by companies to improve
their operating profit (PBDIT) and PAT margins going forward.
Corporate Performance of Construction Companies
Jan-Mar
2012
Apr-Jun
2012
Jul-Sept
2012
Oct-Dec
2012
Jan-Mar
2013
Y-o-Y Growth
Net Sales (Rs. Billion) 57.9 43.9 42.3 49.6 55.5
Net Sales Growth (%) 2.1 2.7 4.9 12.9 -4.1
Expenditure Growth (%) 0.6 5.1 4.2 19.0 -2.1
PBDIT Growth (%) -0.3 1.6 2.0 -12.6 -11.9
PAT Growth (%) -52.4 -54.0 -38.8 -69.5 -80.5
Margins
PBDIT Margin (%) 20.9 23.0 24.8 21.8 19.2
PAT Margin (%) 3.6 1.9 2.5 1.2 0.7
Source: ACE Equity& CII calculations
Individual performance of five companies shows mixed results for both net sales and PAT
in quarter ended in March 2013. Among these, IL&FS Engineering and Construction Co
Ltd and Reliance Industrial Infrastructure Ltd exhibited robust progress on both these
parameters which reflects the strength of these companies in bagging new projects and
effective measures of outlay management.
Growth in Net Sales of Some of the Construction Companies (Y-o-Y Growth)
Jan-Mar
2012
Apr-Jun
2012
Jul-Sept
2012
Oct-Dec
2012
Jan-Mar
2013
Coromandel Engineering Company Ltd.
Net Sales (%) 19.9 66.8 19.3 31.5 3.9
PAT (%) -404.2 -560.2 -79.8 -91.8 -83.0
Hindustan Construction Company Ltd.
Net Sales (%) -3.9 -8.4 4.5 7.2 -14.3
PAT (%) -339.6 -1,179.8 -55.9 -70.5 -7.2
IL&FS Engineering and Construction Co Ltd.
Net Sales (%) 6.2 46.4 10.6 4.7 16.6
PAT (%) -137.8 137.6 -57.5 -1,193.8 23.8
Reliance Industrial Infrastructure Ltd.
Net Sales (%) -12.8 8.8 28.8 37.5 48.2
PAT (%) 43.4 -3.2 3.8 4.8 6.9
Stewarts & Lloyds Of India Ltd.
Net Sales (%) 51.3 50.3 20.7 156.4 2.6
PAT (%) -112.1 -60.2 -143.0 -95.5 -701.7
Source: ACE Equity
19. 19
4.2.3 Material Handling Equipments
Though there has been a consistent decline in the sales of material handling equipments,
but the rate has moderated relatively in March 2013 quarter as compared to the previous
quarter. The sales of these equipments contracted by 34.6% during January-March 2013 as
compared to a dip of 53.4% in the corresponding period last year and 58.9% during
October-December 2012. In revenue terms, the material handling segment has shrunk from
US$72 million in March quarter 2012 to US$ 47 million in March quarter 2013.
Quarterly Sales by Equipments (in Numbers)
Jan-Mar
2012
Apr-Jun
2012
Jul-Sept
2012
Oct-Dec
2012
Jan-Mar
2013
Diesel and Electric Fork Lifts 1 142 162 0 0
Cranes 1,630 1,898 1,725 1,020 1,064
Pipe Layers 1 2 0 1 1
Telescopic Handlers 0 2 0 1 2
Total 1,632 2,044 1,887 1,022 1,067
% YoY -53.4 -31.0 -33.2 -58.9 -34.6
Source: Primary Data- iCEMA Members and Non-Members
This downward spiral is expected to continue in the coming months but some revival is
expected in the coming quarters on account of various reasons. Pick–up in construction
activities across nation, expected rise in cargo traffic at ports and FDI in railways in
coming are expected to lay the foundation for a positive segment outlook in coming future.
4.2.4 Concreting and Road Construction Equipments
Unlike material handling and earth moving segment, spurt has been noticed in the sales of
concreting & road construction equipments. Reported sales (2,931 units) in the January-
March quarter 2013 had been 9.6% higher than last year’s sales of 2,674 units. Rise has
been noticed in the sales of many of the important equipments as compared to the last year
such as compactors, compressors, concrete pumps, batching plants and crushers; whereas,
in comparison to October-December 2012, sales had been better for almost all equipments.
In revenue terms, the segment did a business of US$180 million in January-March 2013
quarter as compared to US$164 million in the same period last year and US$167 million in
quarter ending December 2012.
Quarterly Sales by Equipments (in Numbers)
Jan-Mar
2012
Apr-Jun
2012
Jul-Sept
2012
Oct-Dec
2012
Jan-Mar
2013
Motor Graders 86 64 64 62 76
Compactors 692 488 449 722 771
Hot Mix Plants 65 0 39 59 66
Asphalt Pavers 236 102 78 194 233
20. 20
Compressors 556 520 575 584 614
Concrete Pumps 178 136 107 190 229
Boom Pump 7 0 0 0 0
Batching Plants 116 108 84 117 131
Concrete Mixers 693 537 521 573 592
Crushers 28 139 149 197 195
Screeners 9 12 6 12 14
Cold Planers 0 0 0 0 0
Milling (Wheel/Track) 8 2 1 7 10
Total 2,674 2,108 2,073 2,717 2,931
%YoY -13.5 -26.2 -21.1 2.7 9.6
Source: Primary Data-iCEMA Members and Non-Members
4.3 Status of Infrastructure Projects
Decelerating trend witnessed during most part of 2012 appears to have arrested a bit in
January-March 2013, as new projects announcements have improved to 124 from previous
quarter of 114. However, it remained contrastingly low if compared with the same period
(323) last year. Another cheering news is the significant improvement in the cost of new
projects during quarter ending March 2013 to Rs. 336.2 billion over Rs. 138.4 billion in
quarter ending December 2012 and Rs. 180.4 billion in quarter ending September 2012.
Further performance of majority of the infrastructure sectors have either improved or
remained same during January-March 2013 in comparison to the previous quarter except
ports and irrigation.
Number and Cost of Newly Announced Infrastructure Projects
(At the End of Each Quarter)
475
342
242
323
238
127
114
124
524.9
911.5 883.3 882.3
518.3
180.4
138.4
336.2
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
900.0
1000.0
0
50
100
150
200
250
300
350
400
450
500
Apr-Jun
2011
Jul-Sept
2011
Oct-Dec
2011
Jan-Mar
2012
Apr-Jun
2012
Jul-Sept
2012
Oct-Dec
2012
Jan-Mar
2013
Rs.
Billion
Number
New infrastructure projects (Number) Cost of new infrastructure projects (Rs.Billion)
Source: Capex, CMIE
The improvement is likely to be supported by a further cut of 25 bps in repo rate by RBI in
its annual monetary policy review dated 3rd May 2013 taking cognizance of slow
21. 21
economic growth and moderation in inflation rate. This would help in changing the
environment which could bolster construction activities and hence sales of construction
equipments going forward. All these developments are indicative of the likely
improvement in scenario in coming quarters.
Break-up of Newly Announced Infrastructure Projects
Apr-Jun
2011
Jul-Sept
2011
Oct-Dec
2011
Jan-Mar
2012
Apr-Jun
2012
Jul-Sept
2012
Oct-Dec
2012
Jan-Mar
2013
Mining 11 11 10 28 10 7 6 6
Road 199 122 60 53 39 32 10 13
Railway 13 12 11 15 6 4 4 11
Airport 10 9 6 9 9 1 3 6
Shipping/Ports 7 7 5 7 4 6 7 2
Construction & Real Estate 225 167 132 183 153 75 82 85
Irrigation 10 14 18 28 17 2 2 1
Total Projects 475 342 242 323 238 127 114 124
Source: Capex, CMIE
4.4 Initiatives for Infrastructure Sector in Budget 2013-14
Infrastructure and power sector reforms are a priority to boost investments and provide a
fillip to growth in economy and industry. While infrastructure investment has gained
significant momentum over the last few years, the deficit continues to remain large. With a
view to address the shortfall in infrastructure, the 12th Five year plan has set a target of
investing US$1 trillion over the next five years, 47% of which is to come from the private
sector. However, time and cost overruns continue to pose major challenges to attracting
sufficient investment in infrastructure. The Finance Minister has given a big push to
infrastructure and has proposed a number of welcome measures to boost infrastructure
development in the country.
Some of the key measures announced for infrastructure sector include:
Encouraging the use of innovative and new financial instruments to increase investment in
infrastructure including takeout financing and credit enhancement
Four infrastructure debt funds have been set up and two more are on the anvil
Allowing tax-free bonds up to Rs. 50,000 crore in 2013-14 strictly based on capacity to raise funds
from the market.
Identifying seven new cities identified along the Delhi-Mumbai industrial corridor
Seeking assistance from multilateral agencies such as the Asian Development Bank and the World
Bank to build roads in northeastern India, linking the region with neighbouring Myanmar.
Constituting an independent regulatory authority in the roads sector to address bottlenecks
including financial stress and contract management.
22. 22
Intending to award 3000 kms of roads in states including Gujarat, Rajasthan, Uttar Pradesh in the
first six months of 2013-14.
Exempting Imported ships and vessels from countervailing duty
Proposing to establish two major ports to add 100 million tonnes of capacity
Road regulator to be set up.
Extension of the 80 IA benefit (tax holiday) for one year till 31st March 2014
Equalising the duty on both steam and bituminous coal as both are used in thermal power plants.
Introducing PPP policy framework for projects with Coal India Limited (CIL) as one of the
partners to enhance domestic coal production and reduce coal imports
Adopting a policy of blending and pooled pricing for coal.
Lowering the cost of finance for the clean energy sector by introducing low interest bearing funds
to IREDA from the National Clean Energy Fund for a period of five years.
Introduction of Generation-based incentives for Wind Power and allocation of Rs. 8 billion to the
Ministry of New and Renewable Energy for this purpose.
Announcement of a policy to encourage exploration and production of shale gas
Review of the natural gas pricing policy
Clearance of stalled NELP blocks
Operationalising the 5 million metric tonnes per annum LNG terminal at Dabhol in 2013-14.
Two new major ports will be established in Sagar, West Bengal and in Andhra Pradesh to add 100
million tonnes of capacity.
On the policy front, a major ‘breakthrough idea’ is the announcement of an Independent
Regulator for the roads’ sector. Most of the other policy related matters which have been
alluded to in the Budget are 'work in progress'. These refer to infrastructure debt funds,
coal imports and pooling, gas pricing policy, infrastructure bonds, etc.
The extension of the sunset clause by another year on tax holiday to power sector
investments while welcome is not sufficient. The expectation was that the extension would
happen at least till March 31, 2017 i.e. the terminal year of the 12th plan. The equalization
of customs duties on steam coal and bituminous coal to 2 per cent basic customs duty and
2 per cent CVD will eliminate the classification disputes.
Among the other positives include the number of interventions made and outlays provided
for wind power, waste-to-energy, inland waterways, storage, rural roads, growth corridors,
urban housing, renewables, MRO (aircraft maintenance and repair operations) and capital
market investment instruments.
Overall, the infrastructure sector has got its fair share of attention we look forward to the
policy ‘work-in-progress’ culminating into a fresh burst of energy all around.
23. 23
4.5 Rise in Credit Off-take
Growth in credit off-take by all industries taken together remained robust and nearly same
as last year. On 22 February 2013, credit off-take grew by 17.6% compared to 18.2% as on
24 February 2012. Credit off-take to majority of the sectors such as petroleum, cement,
basic metal, infrastructure and iron and steel remained better in February 2013 in
comparison to last year. About 12% growth in credit lending to mining and quarrying
sector is particularly encouraging considering the near stagnant situation of the sector in
last couple of years.
Contrary, slow growth (9.5%) in credit flow to construction sector in February 2013 as
compared to 14.3% in the previous year is a worrisome trend as the sector has so far ably
cushioned the slowing economic growth. The recent announcement by RBI in its annual
review of Monetary Policy Review dated 3 May 2013 to cut its key policy rate by 25 bps
along with government measures to reduce policy irritants are expected to improve the
credit off-take in the sector going forward.
Deployment of Gross Bank Credit
Industry
Outstanding as on ( in Rs. Billion) Variation (Y-o-Y)
Feb 25, 2011 Feb 24, 2012 Feb 22, 2013
2012 over
2011
2013 over
2012
Mining & Quarrying (incl. Coal) 240 302 338 25.6 11.9
Petroleum, Coal Products & Nuclear Fuels 511 474 587 -7.3 23.9
Cement & Cement Products 325 365 454 12.2 24.6
Basic Metal & Metal Product 2,082 2,535 3,093 21.8 22.0
Iron & Steel 1614 1888 2331 17.0 23.5
Construction 427 488 535 14.3 9.5
Infrastructure 5098 6125 7350 20.1 20.0
Power 2582 3173 4159 22.9 31.0
Telecommunications 928 922 926 -0.6 0.4
Roads 892 1089 1329 22.1 22.1
Other Infrastructure 697 941 936 35.1 -0.5
Industries 15692 18555 21823 18.2 17.6
Source: RBI
4.6 Outlook for Construction Equipment Sector
ECE industry sales have shown a considerable improvement on quarter on quarter basis
during 2012-13. But for the entire fiscal year, sales have moderated sharply by about
13.8% to 63,161 units in 2012-13 from 73,243 units a year ago. Given that domestic
economy is still passing through rough phase, moderate turn around is only expected on
the back of certain policy developments taken place in the last five to six months.
24. 24
In view of these positive developments, the outlook of the sector is likely to improve in the
coming months. However, the positive impact would unfold with a time lag.
Overall, upswing in the economy is projected (with a GDP of over 6%) in the year 2013-
14, with increasing government focus on certain sectors such as housing, infrastructure,
coal, power, oil & gas which are of key importance for the development of nation and
expansion of construction equipment sector. A clear policy direction from the government,
inflation containment, benign interest rate environment, and improved fiscal situation are
keys to revive the growth momentum & investment confidence. Furthermore, problems
related to slow down in projects under implementation could be tackled with more
effective policy making at the government level, such as quickly implementing the
Investment Tracking System, close coordination among Ministries and fast-tracking 50
large investment projects, as proposed by CII.
Measures like opening up of railways, retail and other sectors for FDI
would go a long way in promoting construction activities in the country.
Favourable Policy
Measures for
Construction
Sector
&
Earthmoving and
Construction
Equipment
Industry
Recent frequent cuts in repo rate by RBI in 2012-13 and in May 2013 will
also create an enabling environment for banks to trim down their lending
rates for housing and other sectors.
Exclusive thrust of 12th Five Year Plan on creating world class
infrastructure in the country
Announcements of favourable housing and infrastructure sectors schemes
in the Budget 2013-14 will promote construction activities in the country
Gradual improvement in the world economic and financial environment is
likely to push FDI inflows in housing sector and infrastructure segments
Increasing faith of people on the real estate as the best investment option
considering the eroding purchasing power will also act in the favour of
construction sector
General elections in 2014 is expected to push central and state
governments to expedite projects clearance and governance
25. 25
Appendix
5.1 Policy Development in the Union Budget 2013-14
Item Excise Duty (%) Customs Duty (%)
2012-13
What CII
wanted
Budget 2012-13
What CII
wanted
Budget
Complete equipment such as
excavators / dozers
/ shovel loaders / mechanical
shovels etc. (8429,
8430)
12 12 12 7.5 7.5 7.5
21 specified equipment for
construction of roads
– list 18 of customs (84 or
any other chapter)
12 12 12 Nil Nil Nil
Complete Off-Highway
dumpers (8704 10)
12 12 12 10 10 10
Source: Union Budget 2013-14
5.1.1 Impact of Union Budget 2013-14
There is no change in customs and excise duties on earthmoving and construction
equipments. Hence, the situation remains status quo.
