Global Focal Point But Turnaround A Tough Vortex

Construction Equipment 600At a time when growth in major developed markets is saturated and China, the world's biggest market is headed for a slowdown, the global market for ECE is looking at India to generate new business. But competition will be tough with Indian OEMs fighting hard for market share with entrenched global majors.

After enduring stagnant demand for Earthmoving and Construction Equipment (ECE), last few years, the Indian market is now seeing buoyant demand. There are two major growth drivers for ECE in India now; adoption of modern construction methods, and the focus on modernizing India's creaking infrastructure to global norms. And both these factors are underpinned by the current economic turnaround, which is providing the powerful impetus required to sustain this boom in demand. After a prolonged recession ECE OEMs in the construction sector will finally expect robust demand in the near future for machines across product verticals and the price spectrum. The strategic differentiator for winning players will be aftermarket services like MRO, rentals, and equipment finance.

Robust demand

Till recently construction activity in India used traditional methods which were slow and archaic. Now, gearing up to the new reality of timely project execution, which is emerging a major imperative loaded with stiff penalties, there is an increasing adoption of modernized, mechanized, methods of construction to ensure timely delivery of a project. There is also a new emphasis on quality of construction. All these imperatives require use of modern machines, and in ECE there is a wide spectrum of product verticals which will see huge demand now. These range from off-highway vehicles, to lifting equipment like cranes-hoists-AWPs, to crushing and screening plants, excavators, drilling and piling rigs, all types of batching plants, road equipment like compact vibratory rollers, pavers, asphalting machines, etc. Major demand for machines will be driven by three sectors; construction, infrastructure, and mining.

According to a report 'Building India's Earthmoving and Construction Equipment Industry' published by Consultant AT Kearney, commissioned by the ICEMA (Indian Construction Equipment Manufacturers Association), India's infrastructure spending could result in a $ 16-21 billion ECE industry by 2020. The Indian market for ECE will grow at a substantial CAGR of 20-25 per cent over the next few years, from FY13-14 levels of about 48,000 units.

According to Planning Commission estimates, India's mining sector will see about $ 15 billion invested up to FY 17. Consequently it has projected mining equipment demand of about $ 600 million by FY 17. Mining equipment encompasses a large gamut of equipment such as rope shovels, motor graders, rotary drills, large excavators, surface miners, long wall equipment, dragliners, continuous miners, dumpers, dozers, etc. According to a report by Research & Markets, 'Strategic Outlook for Construction and Mining Equipment Market in India,' the total demand for select construction and mining equipment market in India was found to be 105,811 units in FY2013. The market for new ECE is likely to grow at a CAGR of 9.6 per cent to 166,876 units in FY2018. Large allocations by government to public projects such as NHDP, Metro, and BRTS in India and strong emphasis on construction and real estate are likely to push demand for construction and mining equipment. Government projects would account for 80 per cent of the total demand, the report says.

Earthmoving equipment is the biggest segment value wise within the ECE group, and the single biggest share therein is of excavators, followed by backhoe loaders, wheeled loaders, skid steer loaders, dumpers-tippers, etc. According to research consultancy Off-Highway Research, "Within the Indian construction equipment industry, the crawler excavator segment is the largest by value and the second largest in terms of number of units sold after the backhoe loaders." It is also projected to be the fastest growing equipment type in the future. Major players in the excavator and loaders segment include Caterpillar, JCB, Volvo CE, Hyundai, Komatsu, Kobelco, Kubota, Sany, Liugong, Doosan Infracore, Terex, Leyland Deere, etc. Among Indian companies major players include, Bharat Earth Movers Ltd, Escorts Construction Equipment Ltd., etc. However Tata Hitachi dominates the excavator segment. In the dumper and tipper truck segment major players include, Daimler India Commercial Vehicles (DICV), Volvo Trucks, Scania, Mahindra & Mahindra Ltd, Tata Motors, AMW, etc.

Lifting equipment is another major segment which is quite mature on both sides, Demand and Supply. As end users demand equipment for niche applications in newer areas manufacturers are offering them customized end-to-end solutions. Also the demand for most capacities will grow since the demand ranges from residential construction sites which need small capacities, to bigger sizes being demanded by infrastructure mega projects like power plants, dams, irrigation, road and rail transport etc. However, the biggest demand driver for lifting equipment -- lifts, hoists, and cranes, is the increasing pace of mechanization in all areas of construction in India, where the speed of construction has become a pressing need to ensure timely project execution. Major global brands include Liebherr, Manitowoc, JCB, Terex-Genie, Houlette, Sany, Hyundai, etc. Among Indian companies, ElectroMech is a major player, other entrenched players include, Escorts Construction Equipment, Spartan, ACE, etc.

Batching plants are another segment where demand will be robust, which include concrete and asphalt batching plants. Demand for both these types will be fuelled majorly by road construction projects, infra projects, and real estate projects. Global players like Linnhoff, Wirtgen, and Amman Apollo, offer the entire range of plants. And the latter two offer the whole range of machines for the road construction sector. Among Indian companies major players include Cosmos Construction Machineries & Equipment, Akona Engineering, Aquarius Engineers , Universal Construction Machinery & Equipment, KYB-CONMAT etc. Demand will be buoyant for both, stationary and mobile plants.

Crushing & Screening plants will also see a rise in demand concomitant to the demand for aggregates, which will be fuelled by almost all demand verticals ranging from roads and rail, to EPC projects to the real estate sector. Global players in India include Wirtgen's Kleemann range of crushing and screening equipment, Powerscreen, Sandvik, etc.
Concreting equipment is another segment where demand will rise in proportion to rapid urbanization across India in Tier II and Tier III cities. Most of it will comprise of mobile batching plants, transit mixers ,and concrete boom pumps. Liebherr, Ajax Fiori, Schwing Stetter, etc are present in the first two product verticals and Putzmeister has niche competence in the pumps and placement booms segment.

Apart from these major equipment verticals there will be plenty of demand for other types of equipment like making ACC products, and also prefab segment in the real estate sector will generate major demand for prefab manufacturing plants producing prefabricated concrete products. 


Sailing on the Turnaround Tide

portInstalled cargo handling capacity at Indian ports is slightly higher than the total cargo handled as of early last year. However, now as the economy sails full steam ahead there's going to be substantial rise in India's exim trade. Indian ports, both major and non-major, need to expand their capacity, mechanise operations, and develop port related logistics infrastructure to global norms.

As the much awaited Turnaround gathers momentum India's transport infrastructure will have to match its capacity to transport cargo rapidly, otherwise it will be a critical bottleneck to economic growth. Ports and shipping are an important link in this infrastructure to ensure speedy movement of cargo. The cargo traffic includes coastal trade as well as exim trade. While the number of ports are just about adequate to handle India's projected cargo traffic the most critical need is intermodal transport, excellent road and rail connectivity for these ports to the hinterland. Nitin Gadkari, Union Minister of Road Transport, Highways & Shipping has announced plans to set up a Railway Corporation, which can be important for connectivity of ports. Latest in this context is the Rail Vikas Nigam Ltd (RVNL) and Dighi Port Ltd (DPL) signing an MoU to build a railway line connecting Dighi to Roha, integrating Dighi port with the DMIC. Part of this connectivity is the need to develop logistics hubs, or dry ports, alongside major rail and road networks. There's also an urgent need to mechanise cargo movement from ship to port in order to speed up cargo throughput.

Sagar Mala

The Prime Minister Narendra Modi's strategy of 'Port led development' augurs well for India's maritime trade, and it gels with his concept of the 'Sagar Mala.' He says, “The prime objective of the Sagar Mala project is to promote port-led direct and indirect development and to provide infrastructure to transport goods to and from ports quickly, efficiently and cost-effectively. Therefore, the Sagar Mala Project shall, inter alia, aim to develop access to new development regions with intermodal solutions and promotion of the optimum modal split, enhanced connectivity with main economic centers and beyond through expansion of rail, inland water, coastal and road services.”

The Sagar Mala initiative will address challenges by focusing on three pillars of development, namely:

  1. Supporting and enabling Port-led Development through appropriate policy and institutional interventions and providing for an institutional framework for ensuring inter-agency and ministries/departments/states’ collaboration for integrated development
  2. Port Infrastructure enhancement, including modernization and setting up of new ports
  3. Efficient evacuation to and from hinterland.

To implement the Sagar Mala project the government is currently drafting a National Perspective Plan (NPP) for the entire coastline to be prepared within six months. It will identify potential geographical regions to be called Coastal Economic Zones (CEZs). While preparing the NPP, synergy and integration with planned Industrial Corridors, Dedicated Freight Corridors, National Highway Development Programme, Industrial Clusters and SEZs would be ensured. Detailed Master Plans will be prepared for identified Coastal Economic Zones leading to identification of projects and preparation of their detailed project reports.

India currently ranks 16th among maritime countries, with a coastline of about 7,517 km. Around 95 per cent of India's trade by volume and 70 per cent by value passes through its ports which add up to 13 major ports and about 200 non-major ports. Cargo traffic is projected to reach 1,758 MMT by 2017. To develop port infrastructure to global standards the government has allowed 100 per cent FDI cent under the automatic route for projects regarding construction and maintenance of ports and harbours. The government has also granted a 10-year tax holiday to enterprises engaged in developing, maintaining, and operating ports, inland waterways and inland ports. The Maritime Agenda (2010-2020), has estimated traffic projections and capacity additions at the ports upto the year 2020. Based on the estimated growth, it has projected capacity of 3,130 MT by 2019-20.


Funding Strategies for Infra Projects

infra financeCurrently there's a huge legacy of financially unviable projects stuck in the infra sector. Add to this the need to raise fresh funds for new greenfield projects being rolled out currently. The situation is aggravated by the difficulty in raising long term debt for infra projects, which is becoming dearer since commercial banks are reluctant to lend due to insensitivities towards private equity exposure in the infra sector. However, this is the beginning of the Turnaround, the first wave. Opportunities will abound…Bhaskar Som identifies the key challenges and discusses ways to deepen the infrastructure debt market.

The infrastructure sector consisting of electricity, airports, energy, shipping and ports, railways, roads, and urban development has been a key driver of Indian economy since 2002, after the government started reforming these sectors and inviting development projects in keeping with country-wide requirements for these facilities. By adopting international competitive bidding process, allowing external commercial borrowings, providing development incentives like tax holidays, and facilitating statutory clearances the government opened up opportunities in the sector as never seen before.

The importance given by the Government of India (GoI) to infrastructure projects increased substantially in the 11th Five Year Plan. The investment targeted in infrastructure in the 11th Five Year Plan was Rs. 20 lakh crore, constituting about 5 per cent of India’s GDP. A more ambitious target of Rs. 41 lakh crore (at 2006-07 prices; US$ 1,000 billion) – amounting to over 10 per cent of India’s GDP - was set for infrastructure investment in the 12th Five Year Plan, commencing April 1, 2012. It was envisaged that these projects would be set up under the PPP mode, with around 50 per cent of the investment coming from the private sector. Accordingly, private investment on infrastructure development in the 12th Five Year Plan was estimated at around Rs 25 lakh crore (trillion) at current prices. Assuming that projects would be financed at an average debt-equity ratio of 2.5:1, the incremental debt requirement for financing infrastructure works out to around Rs 17.85 trillion.

A significant part of the debt has been financed by commercial banks - over 50 per cent of the total debt requirement of the sector. Infrastructure sector exposure of Indian banks currently stands at Rs. 8.72 trillion, almost 15 per cent of the total outstanding bank credit and almost 35 per cent of bank credit to industry. Given the cash reserve ratio, statutory liquidity ratio, and priority sector obligations, it is unlikely that this ratio of lending to infrastructure projects can increase further.
Key challenges in infra funding

The fundamental requirement for financing infrastructure is the availability of long term debt at reasonably certain and predictable interest rates. Unlike other sectors, infrastructure financing needs long-term tenure debt of more than 10-15 years. This kind of capital is limited and remains largely with insurance companies and pension funds. The private sector has limited access to these long term funds and had to resort only to the commercial banking system to fund long gestation projects. Meanwhile, commercial banks avail short-term funding for long-term financing which has made long term capital dearer not only in terms of availability but also in terms of cost, apart from asset-liability mismatch in the banking system and distortion of the yield curve. Further, the annual variability clauses in the financial documents relating to pricing of bank debt mean that bank borrowings are quite volatile in terms of pricing. Thus, thermal power and road projects, which were initially envisaged to be funded at the rate of around 10 per cent (prevailing rate at the time of financial closure), have been facing an interest rate of around 14 per cent currently; making interest rate risk significantly outweigh operational risks in the overall project life cycle.

This has impacted the viability of several PPP projects, reflected in stalled projects and rising stressed assets in the banking system. Impaired assets (gross NPL, standard restructured loans, receipts from asset reconstruction companies and discom bonds) are expected to reach 13 per cent of loans by March 2016 (9.1 per cent in March 2014; 12.5 per cent for March 2015). Operational challenges such as the lack of fuel availability and poor cash flow generation relative to assumptions made at the time of conception have had a marked effect upon credit quality of infrastructure loans. Around 20 per cent of loans by the banking sector to the infrastructure sector have already been restructured so far.

Commercial banks are therefore reluctant to lend further to infrastructure projects. Further, to manage Basel III transition, Indian banks will need a total capital infusion of Rs. 6.8 trillion (US $ 114bn), which will further constrain bank financing in infrastructure and make PPP projects more difficult to execute. Hence, the GoI is now contemplating the EPC (Engineering, Procurement and Construction) route for project implementation rather than the PPP mode.


Flying at Cruise speed on a Tailwind

Flying at Cruise speed on a Tailwind

Air travel is projected to triple in India over the next decade, however there's a huge deficit of airport infrastructure to handle this traffic. The deficit is regional across urban centres which are developing rapidly and need to be connected, as well as commercial in terms of expanding passenger and cargo handling capacities. To fill up this deficit the government has already rolled out several expansion and greenfield projects via the PPP route. This and the MRO segment are already generating plenty of projects for EPC companies in the aviation sector.

India's sprawling geography always had the potential for a pan India aviation network. But till recently air travel was never the most preferred mode of transport because of its cost. Now with an open sky policy the air travel market in India is growing rapidly. That’s because air travel has become affordable for the middle class with plenty of Low Cost Carriers (LCC). To cope up with this projected growth in traffic, India plans to increase the number of operational airports to 250 by the year 2030. The new focus for greenfield projects will be regional connectivity across the country. The Airports Authority of India (AAI) is planning 50 airports under the low cost model to be developed all over the country, including under PPP. The two biggest projects are a greenfield airport at Navi Mumbai, and another in Mopa (Goa) and some are brownfield airports projects.

Demand drivers

India’s middle income population is expected to increase to 267 million by 2016. The domestic traffic will now increase leaps and bounds. Indian aviation is experiencing dramatic growth across the board, from the emergence of LCC/new carriers to a growing middle class ready to travel by air as well as growth in business and leisure travel. As per certain projections, by 2020, Indian airports are estimated to handle; 100 million passengers -- Including 60 million domestic passengers, and cargo in the range of 3.4 million tonnes per annum.

According to estimates by Airports Authority of India (AAI), aircraft movements, passengers and freight at all Indian airports are expected to grow at a rate of 4.2 per cent, 5.3 per cent, and 5 per cent, respectively, for the next five years, air traffic in India grew between 20 to 40 per cent for six years starting 2003, when LCC made available budget fares.

Current opportunities

Considering the huge capital and expertise to execute its airport modernization programme the government has successfully adopted the PPP model for several key airport projects. Currently five PPP airports account for approximately 54per cent of total passenger traffic in the country. Airport investment opportunities include two greenfield airport projects at Navi Mumbai and Goa Mopa and PPP concessions for four existing airports – Chennai, Kolkata, Ahmedabad and Jaipur – currently operated by the state-owned Airports Authority of India. End 2014 the government announced bids for concessions of four airports, currently operated by the state-owned Airports Authority of India (AAI), to be offered on a PPP basis. This includes the AAI’s two metro airports at Chennai and Kolkata, by far its most profitable.

The AAI aims to bring around 250 airports under operation by 2020. For North-east region it plans to develop Guwahati as an inter-regional hub and Agartala, Imphal and Dibrugarh as intra-regional hubs. AAI plans to spend USD 1.3 billion on non-metro projects by 2017, focusing on the modernization and upgradation of airports. The preferred business model is an SEZ Aerotropolis model to enhance revenues, focused on retail, advertising and vehicle parking, security equipment, and services. 100 per cent FDI is permitted for greenfield airport projects under the automatic route. Up to 74 per cent FDI is permitted for existing airport projects under the automatic route, above 74 per cent and up to 100 per cent permitted under government approval route.


EPC, Realty, Fuel Robust Demand

Compact Batching PlantAs fast track clearance of pending infra projects in the EPC sector and new mega projects on the anvil to modernise India's infrastructure gather full steam, the demand for concreting equipment is rising by leaps and bounds. Add to this substantial demand for concreting equipment generated by real estate projects on the back of rapid urbanization in Tier II and Tier III cities, and you have a buoyant market.

The market for concreting equipment in India is very competitive and a matured one where all product verticals, ranging from concrete batching plants to concreting pumps, are manufactured locally. Global OEMs and entrenched Indian players in concreting equipment are ramping up their production facilities with an eye on capitalizing on the robust demand being generated by construction projects in the infrastructure sector and real estate projects across the country. The biggest demand is for mobile batching plants, truck mounted transit mixers, and concreting pumps.

Demand dynamics
According to a report by research consultancy Knowledgefaber, ‘Indian Construction Equipment Market -In-Depth Analysis and Insights into Concrete Road Construction Equipment Industries,’ the current market size of construction equipment sector in India is $4.8 billion (FY2012) and it is expected to grow to $17.5 billion by 2020 at a CAGR of 17.6 per cent. "Indian concrete equipment industry has been growing at a rapid pace in recent years owing to high demand for sophisticated equipment. Entry of various foreign players in Indian market provides an indication of the potential of the Indian concrete equipment market, which is expected to grow at a CAGR of ~18.0% over the next five years. “Another report ' Understanding India's Construction Equipment Market,' by Ipsos Business Consulting, reports that concreting equipment accounted for 15% of the overall construction equipment market in India in 2012. The report states that currently concreting equipment is the second largest segment in construction equipment verticals in the Indian market, accounting for a market share of approximately 14 %. This segment comprises asphalt finishers, transit mixers, concrete pumps and batching plants.

Considering India's current drive to modernise its creaking infrastructure and the new government's action plan to fast track infra projects, and the boom in real estate construction across India, the share of concreting equipment is bound to increase in the construction equipment market in India.


Turnaround will fuel Demand

TurnaroundAfter remaining subdued by recessionary pressures last couple of years, India's construction sector is expecting a recovery as new greenfield projects are cleared on a fast track basis. This will fuel demand for equipment finance, which is currently the only recourse available for cash strapped construction companies to buy new equipment.

Tenets of modern financial management always advocate preservation of scarce capital to ensure adequate cash flows for operating expenses. This strategy becomes all the more important in times of recession. With earnings under pressure companies want to preserve their capital and cash flows while at the same time be able to buy equipment involving heavy capital investment. The best option under such circumstances is equipment finance.

Preparing for turnaround

Now that the new government is in place it will expedite clearance of pending projects in the construction sector, considering there's a huge backlog of pending projects whose clearance needs to be fast tracked. Now construction companies need to be prepared to take new projects and have the cash flows to execute them. Taking up new projects means they will need to buy equipment and machinery to have the capability to execute those projects. Since their available funds need to be conserved for operational expenses most of these companies will resort to equipment financing to buy or lease/rent the machinery and equipment to execute those projects. These facts clearly foresee a jump in demand for equipment finance, which was flat in the recent past due to slowdown in the construction sector.

A majority of this new demand for financing equipment purchase will be fuelled by small and medium size companies, most of which are cash strapped but need costly equipment to execute their projects. The other two segments, of big companies who are big ticket buyers, and tie-ups with OEM companies will also generate substantial demand. The other segment that will account for a substantial share in sales is the lease/rental companies. They are the best placed to take advantage of the current harsh conditions the sector is operating in. Many small and medium sized contractors will resort to rentals to tide over their immediate problem of building up their equipment bank fast and with minimum capital investment. Financiers will generally offer tailor made packages to suite the requirements of the customer, depending on his business cash flows and repayment capacity. The most in demand are; loan for new equipment purchases, loans for used equipment, refinance on unencumbered free asset, top-up loan facility, dealer trade advances etc.


In order to meet this increasing demand for equipment financing the NBFC sector is undergoing structural changes and increasingly integrating with the global financial system. Srei Equipment Finance Private Ltd (SEFPL) has tied up with BNP Paribas of France. SEFPL is benefitting from its parent company Srei Infrastructure Finance’s expertise and network and the global leasing insight in diverse product classes of BNP Paribas. It recently received an "AAA(SO)" rating from CRISIL. To survive in a competitive market, NBFCs are offering innovate financing packages, improved customer service via the utilization of technology, reduction in operational costs and implementation of international best practices in accounting and disclosures. Recently Tata Capital Financial Services Ltd (TCFSL), a wholly owned subsidiary of Tata Capital Ltd, the financial services arm of the Tata Group, have tied up with global OEM major Caterpillar’s Financial Products Division, to offer customers finance options for purchasing CAT equipment at all its dealership stores. Caterpillar customers will be offered beneficial quotes and credit approval turnaround. This arrangement will tap eight dealer territories of Caterpillar India and benefit from the extensive network and coverage of over 100 TCFSL service locations across the country. Praveen Kadle, Managing Director & CEO, Tata Capital Ltd, says, “We are pleased to have this arrangement with Caterpillar in India to finance their wide range of products and believe that the arrangement is beneficial for our customers. We are confident that customers will find our financing schemes easy and attractive, and that this will add value to their business.” Sunil Chaturvedi, Managing Director & CEO, TIPL, adds, “As Indian infrastructure begins to expand again, there has been need for the 'financing products' which carry requisite flexibility while reflecting long-term and abiding customer commitment. This model will bridge this gap effectively and will provide to the teeming majority of Indian retail customers a non-leveraged choice and an opportunity to own the best in class equipment.'' H Jayaram, Managing Director & CEO, GMMCO, agrees, “This arrangement is yet another major step in helping customer buy Cat products with GMMCO’s Product Support at competitive financial offering through Tata Capital, which ultimately will increase customer’s productivity and profitability.”

The equipment finance market in India can be segmented into four business models. Third party financiers like NBFCs which offer leasing largely as an alternate means of financing. Second segment is emerging Asset Life Cycle Management (ALCM) companies such as Rentworks and OPC Asset Solutions which offer operating lease structures with interest in residual value. Third type are captive leasing and financing arms of leading OEM companies to facilitate the parent’s product sales through financing and leasing support and take the residual value risk on their balance sheet. In this category, there are companies that are registered as NBFCs and also companies that function as an operating lease company. The fourth type are rental operators such as Quippo, GMMCO (for Caterpillar), and Gemini Equipment and Rentals (GEAR), which provide equipment on rental for periods ranging from few weeks to years to end customers.

Major NBFC players in the market include Sundaram Finance, Shriram Equipment Finance Company Ltd, Bajaj Financial Services, Magma Fincorp Ltd, L&T Finance Ltd, GE Finance etc, and among banks HDFC Bank's Construction Equipment Finance is a major player. At the OEM end most have their own equipment financing division or have tied up with major banks and NBFCs, such as Sany has tied up with L&T Finance. ACE, and Volvo CE, etc. also have equipment financing arrangements with banks and NBFCs.


Greased for Growth

Greased_For_GrowthThe market for construction equipment lubricants in India is going to be fuelled by the growing number of equipment OEMs and by a proliferation of equipment owners at the user end. And lubricant manufacturers are gearing up for this by expanding their product lines and refining facilities.

With the recessionary tide turning around on the back of India's trillion dollar budget to modernize its infrastructure, there's going to be robust demand for construction equipment and machinery. This is going to generate a concomitant demand for industrial and construction machinery lubricants in India. In a market that was depressed last few years, the expected demand is a good news. However, the rise in demand this time will not just be in volumes but also for new high-end specialty products required to service sophisticated construction machinery. There is also going to be substantial demand for automotive lubricants from the off-highway vehicles' segment. Apart from this OEM market, the MRO segment will also generate significant demand.

Fluid Dynamics

As the machines get more sophisticated their lubricant needs become more demanding. Most refiners are developing innovative products with niche applications. Nitin Prasad, Managing Director, Shell Lubricants, Shell India says, “Our focus has always been to provide solutions that help improve performance, productivity and profits. Our product innovation is put to work by our world-renowned industry specialists who create the world’s best performing solutions." Adds Akhil Jha, Vice President Technical (Lubricants), Shell India Markets Private Ltd, “Shell continually strives to develop technology leading products and services that help meet deadlines, reduce operational costs and maximize equipment availability. We are investing enormously on R&D to develop market leading products and solutions for our OEMs and customers across sectors." Shell's synthetic product portfolio includes the range of Shell Tellus, Shell Omala, Shell Corena and Shell Turbine oil (Shell Turbo) in fluids and greases from the Shell Gadus range. Most global majors have a substantial presence in India with their own refining and blending facilities. Indian oil marketing PSUs are also entrenched players and have managed to corner a substantial market share.

Another entrenched player in the Indian market is Gulf Oil. The global major is so upbeat on the Indian market that it recently demerged its lubes division into an independent company Gulf Oil Lubricants India Ltd (GOLIL), which was recently listed on the Bombay Stock Exchange (BSE). GOLIL will manage the standalone lubricant business in India under “Gulf Oil” brand. According to the company its lubricant business has reached the size and scale to take up its future growth journey independently with a pure lubricants play in the Indian market. Sanjay. G. Hinduja, Chairman, Gulf Oil International, says, “Gulf Oil Lubricants India Ltd. aims to realize its vision of becoming one of the top 3 lubricant brands in the industry with expected support from the growing Indian economy. The company will continue to outperform the industry’s growth by enhancing its distribution, investing in the brand and securing more OEM tie-ups. Further, this is in line with our global vision of being one of the largest independent downstream players in lubricants and specialty chemicals in the world.” Commenting on their growth rate Ravi Chawla, Managing Director, GOLIL, says, “ In the past 5-6 years, our strategies of leveraging our longer drain technological prowess, increasing our distribution reach and innovative brand building initiatives have resulted in volumes, revenues and profits growing multi-fold. The lubricant business has attained CAGR growth of about 15% in revenues and about 42% in profits before taxes over last 6 years. The Lubricant business has delivered an EBIDTA margin of over 12% consistently and volume growth rates are more than double the industry growth rates during this period, to emerge as one of the fastest growing lubricant majors in India. With this demerger we have plans to further expand our current 7% market share in the ‘open market’ namely the bazaar channel and in the B2B related – OEM, Industrial & Infrastructure segments.”

Most players in the Indian market have adopted branding as a strategy to corner more market share. Well known brands include; Shell's Helix, Castrol's GTX, Gulf Oil's Superfleet, Tide Water Oil Corporation's Veedol, Indian Oil's Servo, Bharat Petroleum's MAK. In addition to their branding strategy, lubricant manufacturers need to have a strong sales and marketing network to maintain a pan Indian presence in order to capture more market share. With construction sites in far flung remote areas, it is essential that your brand be available in the local retail outlet. Indian oil marketing PSUs have an edge over foreign players in terms of their market reach.


No More Unaffordable!

Affordable HousingAffordable housing segment is poised for growth exponentially with the government and RBI seeming focused on promoting the sector. The positive change in scenario is reflected in foray of established high-end residential project brands also into the segment. Developers say that the key to deliver affordable housing is to keep costs low without compromising on quality or speed of execution. Read on to know more…

Affordable housing is no new concept. And developers always promoted it. However, certain factors, like land cost, various sanctions, environmental issues, eviction of tenants and its political fallout, had a major impact on it.

India is on the brink of urban revolution. 32 per cent of country’s population is living in urban areas but contributing 60 per cent GDP of the country. Union Minister for Urban Development and Housing & Poverty Alleviation, M Venkaiah Naidu, says, “Today urban areas are at the heart of many great challenges, opportunities and promise. Since long time development of cities was ignored even as the urban population increased. It has resulted in the haphazard expansion of cities and rapid growth of slums. To overcome these challenges we all have to work together. Transparency and accountability has to be the basic principle of governance.”


Opportunities galore

According to Rana Kapoor, Managing Director & CEO, YES BANK and President, ASSOCHAM, “India requires an estimated INR 8.5 lakh crore investment to fill the Affordable Housing gap today and with the country expected to emerge as the third largest economy by 2030, development of affordable housing & urban infrastructure will play a pivotal role in the structural transformation of India’s economy. This clear opportunity coincides with the Hon’ble PM Shri Narendra Modi’s vision of ‘housing for every Indian by 2022’ and will contribute to the Government’s planned skill development programme.”

“Institutional reforms in land acquisition, approval processes and taxation are much needed to expedite development of affordable housing and finally facilitating investments through FDI, REITS, InvITs and other innovative real estate financing models will help attract long term funds from foreign and domestic investors,” adds Kapoor.

Seconding his view, Vivek Jaiswal, Head - Sales & Marketing, Pashmina Developers, says, “This segment is poised for growth exponentially now with the government and RBI seeming focused on promoting the sector with various schemes and incentives. The positive change in scenario is reflected in foray of established high end residential project brands also into affordable homes segment. In fact, some big players have instituted separate SBUs to spearhead progress in this segment.”

It is rightly said that the key to deliver affordable housing is to keep costs low without compromising on quality or speed of execution. On his company’s latest initiative, Anand Mahindra, Chairman, Mahindra Group, says “Our commitment to sustainable urbanization is to be in businesses and develop projects that promote Culture, Connectedness and Community. Happinest, an initiative by Mahindra Lifespaces epitomizes the concept of Shared Value where companies seek to do business in a manner which combines profitability with advancing the economic and social conditions of the communities which they operate in. I welcome this foray into the affordable housing space which is critical to India’s growing urbanization.”

Adding to this Anita Arjundas, Managing Director & CEO, Mahindra Lifespace Developers Ltd, maintains, “India is urbanising fast and more than a third of urban Indians cannot afford to buy their own homes. Happinest stands for our intent to enable a cross section of Indians fulfill their dreams of home ownership in a safe, secure and healthy environment. Enduring and thoughtful design, swift execution using technology and enabling access to home ownership through financial inclusion will be both the enablers and the pillars of success.”