Atlas Copco is a global industrial group with world-leading positions in compressors, expanders and air treatment systems, construction and mining equipment, power tools and assembly systems. Nitin Lall highlights the major areas in the construction equipment industry that require government intervention. Interview by Sandeep Menezes.
What are your expectations on infrastructure development from the new government?
The current status is more or less the same across all regions of the country, that is, an exponential boom in traffic plus residential constructions. This has put a lot of pressure on roads and other basic amenities like water supply and sanitation.
With the new government, we hope to see better planning by the town authorities so that issues with respect to all general facilities do not crop up so early. If the government can drive states to introduce the metro on fast track, that will also ease the situation within the city to a very large extent. Also, what can give added benefit to the citizens is good quality of existing roads which can be taken up on priority.
Major areas which need government intervention are land acquisition and faster redressal of contractor grievances.
Overall the equipment sector is still seeing low demand and overall activity is sluggish. However, with the new government in place, we hope to see growth improvement in the coming months.
What will be the main demand drivers in the equipment sector?
The main demand drivers will be new projects pertaining to widening of roads, construction of new flyovers and underpasses and, of course, metro rail.
Why has the equipment rental segment not reached its full potential in India?
In India, people like to own the equipment instead of hiring it. Further, the pride of ownership drives direct purchasing versus rental of equipment.The other aspect which prevents us from focusing on growing this segment is the slow legal process in India. Should a customer default on our payment/fail to return the rental equipment, quick redressal via the legal system is slow and painful and therefore prohibits large companies from investing in this segment.
We are seeing major technological changes in the Indian construction equipment industry as demand for specialised and high-capacity equipment rises.
Yes, technological innovation is the need of the hour and the future growth path of construction equipment manufacturers will depend on how fast and relevant are new products launched in the market. The first mover advantage will enable the proactive manufacturers to lead the innovation process in the CE industry.
At Atlas Copco, the aim will be to introduce reforms which will reduce the cost to the customer and improve the environmental footprint that our products leave behind. Our recently launched new compressors offer higher CFM and pressure which ensures 10 per cent lower fuel consumption.
Additionally, in the hydraulic breakers segment, Atlas Copco strives to work on the weight-power ratio and most of our upcoming launches likely within the next 12 months will focus on lower weight on the excavator, which gives higher blow energy by around 15 per cent.
How has rupee depreciation changed the business dynamics across the equipment sector?
Rupee depreciation has definitely impacted our profitability. It has put a lot of pressure on the profitability as the market is not prepared to give a higher price. But we are focusing on cost of production and trying to see how we can have a lower cost of manufacturing at our plants in Nashik and Chakan, in Maharashtra, so that there is minimal impact on the end customer. However, in some cases where we are hard pressed, the price of capital equipment has been adjusted with minimal impact to the end customer.
Around 90 per cent of equipment sales are routed through funding from financial institutions. How has the recent hardening of interest rates affected the equipment market?
Yes, that is true. One of the major challenges for the new government is to address this issue. But it has a direct correlation with available projects in the market. Once we have more projects cleared on the table it will automatically help in easing out the financial crunch as well.
Does Atlas Copco have a long-term roadmap for the construction and mining equipment segment?
Yes, we will continue to invest in R&D and manpower and build on new dealers as since we intend to improve our growth in the coming years. Eighteen months down we were approximately 50 dealers and today we are close to 60 dealers and growing. This clearly indicates that we are trying to spread out across the country. In addition, the aim is to localise equipment from Indian factories so as to have value benefit for our Indian customers.
Does Atlas Copco intend to launch new products or increase focus on a particular product segment?
Continuous innovation to be ‘first in mind, first in choice’ in the minds of customers will be top priority for Atlas Copco as we bank on our global portfolio which offers innovative products for developed markets. As the Indian market matures and is market ready for these new products, we hope to introduce more innovations on a timely and frequent basis. On the horizon are new products from our portable compressors, hydraulic breakers and road construction portfolio.