Atlas Copco is a Swedish industrial group engaged in compressors, expanders and air treatment systems, construction and mining equipment, power tools, and assembly systems, and a global reach spanning more than 170 countries. Filip Vandenberghe, in an email interaction with Sandeep Menezes, talks about the potential for large capital equipment in the Indian infrastructure sector.
More than new infrastructure projects getting awarded, the bigger worry for equipment companies is that of the awarded contracts taking off.
Rather than declaring hundreds of projects, I would expect the government to ensure that whatever they throw open, are financially viable and have all the mandatory clearances. Our decision makers also need to see how we can eliminate the bureaucracy by offering a one window concept, so that projects actually take off and not remain announcements. A few projects in each potent category such as roads, airports and hydropower can immediately reignite the requirement of large capital equipment.
As there are very few active projects on the anvil, most of the end users are deploying their existing fleet, thereby eliminating the need for sourcing new equipment.
Most equipment is purchased in financing mode. How has the recent softening of interest rates benefited the equipment segment?
We are yet to see the real impact of softening interest rates boosting the demand for equipment segment. The end-user demand for equipment will be a major driver rather than softening interest rates.
In spite of enjoying cost advantages in manufacturing vis-à-vis Western markets, India is yet to develop into a major manufacturing hub for heavy construction and mining equipments globally.
When it comes to equipment for mining and heavy construction (road and power infrastructure) we can clearly say that India is already a very important manufacturing hub. Almost all world players have their manufacturing operations in India, next to some very important local players.
On the other hand, I believe the Indian mining and infrastructure industry should turn much faster towards mechanisation and automation in these sectors. It will result in a much higher efficiency, not only in terms of labour but even more in terms of quality, optimal mining output, less waste and a much safer workplace.
Equipment safety standards in India are not as stringent vis-à-vis in the EU and US. Possibly, but I believe it is our role as multinational companies to set the examples and to ensure and support our stakeholders in the supply chain to cope with the ISO and OSHAS standards. It has to be part of our vendor evaluation schemes and it is part of our long-term commitment to guide, help and support them, to follow up and to demand action, and corrective action plans. If not it will finally lead to termination of agreements. Our experience in this area has been quite positive.
The same is valid for being compliant to our business code of practice, which sets all the principles, guidelines and rules to do business in an ethical way, and not to allow and not to have any tolerance regarding corruption, bribe etc. in any form.
Atlas Copco India’s current turnover is 3,000 crore. Going forward, what is your growth strategy?
Looking forward, we believe that all ingredients are present in the Indian market for a sustainable double-digit growth over a business cycle. We have to accept that in 2012 and the beginning of 2013 the economy was not doing well and consequently growth retarded, but on the midterm we remain optimistic.
By its own the Indian market is growing between 5-7 per cent; there is an increasing middle class that will drive consumption in the market. There is an entrepreneurial climate in the country and foreign investments are coming back. Our product and systems offering always comes amongst the first things in investments.
So our strategy is to increase our offerings, to further invest in the business by strengthening our organization with local product development to meet and excel the demands of our customers, strengthening our manufacturing operations, increase our feet in the street and especially building on our service and aftermarket organization throughout the country.
It is also worthwhile to mention that we continue to develop our two engineering centers in Pune and Bangalore to provide worldwide engineering services to the Atlas Copco Group, and that we now also have made a similar set up with Brand Studio to provide communication services for the Atlas Copco Group.
With the new 100-crore Chakan plant, Atlas Copco is planning to gain higher penetration into industrial and portable compressors.
The new plant at Chakan is firstly aimed at removing the production capacity constraints we experienced in the Dapodi plant. It is built to be able to meet future demands. The new plant is built for new assembly and logistics processes and hence an increased manufacturing efficiency, in other words lower cost and shorter lead times. It will allow us to meet customer demands better and strongly support our customer centers to increase our footprint and penetration in the market.
Can you talk about plans to revamp the Dapodi plant in line with the Chakan plant?
The new facility at Chakan will focus on the production of industrial air and portable energy compressors, products that previously were made at the Dapodi plant. Having freed up the latter plant, it will be revamped to a full oilfree air and quality air production plant.
Assembly lines will be reorganised, and some of the product lines for Oilfree Air which were built on rented premises will relocate to Dapodi. The oilfree product range consists of oilfree screw compressors, oilfree centrifugal compressors, high-pressure piston compressors and the oil injected compressors above 150 kVA.