The material handling solutions division of TIL Ltd is engaged in manufacture and marketing of a comprehensive range of material handling equipment and lifting solutions like mobile cranes, reachstackers, wlectric level luffing cranes and articulated lorry loaders. Somnath Bhattacharjee spoke to Sandeep Menezes on prospects for the construction equipment industry in the coming years.
Although the equipment industry is not growing currently, what growth do you foresee post-elections?
The construction equipment industry, which is approximately $3.5 billion, is likely to grow to around $16 to $ 20 billion by 2020. Currently, the construction equipment industry is facing a decline due to the huge drag in the economy, but the pent-up or underlying demand remains strong. Since the underlying demand remains strong with little bit of political stability or political will the situation can turn around.
I expect the market to get better after the general election in April. Therefore, by second quarter of 2014-15, I am sure that the market will be up because with political stability and decision making will be much faster.
Tell us about the increased pricing pressures from customers because of the current flat market.
It is certainly difficult to increase prices even if raw material costs have risen. Although we realise that there is no scope for increasing prices, we have not witnessed prices falling either.
How has rupee depreciation impacted the sector?
There has been a significant impact because our products are between 30 to 50 per cent import content depending on which model we are talking about. At one point the rupee had devalued nearly 20 per cent and that had an impact on the end product. Therefore, it has definitely put lot of pressure on profitability.
Does TIL intend to focus on localisation of products?
Our business model is checking the global technology and adapting it to local cost structure; this has been our business model always.
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?
We have lot of institutional business and supply to many public sectors companies and private corporates that don’t purchase through financing institutions. For customers who purchase through financing institutions, although interest rates are high, the availability of finance is not an issue. The availability of finance depends on the credit behaviour or balance sheet of the customer. Therefore, there are pressures but we have managed well.
India has traditionally been a market where costs or pricing takes priority over safety and quality. Do you see a shift in customer behaviour?
Not at all. We are able to produce high quality products at competitive prices. I don’t think anyone wants to take risks in terms of safety aspects.
Do you feel Indian customers are willing to pay a small premium for better quality?
If it improves the total cost of ownership then the product that we have produced has high safety standards and better revenue potential.
For instance, we see normal pick-and-carry cranes in the market. It has pick-and-carry and carry-on-deck; therefore, a customer who gets his rental rate only on load lifting can get an additional rate based on load carrying because it has a deck. Therefore, the added revenue potential that has been provided in the machine makes that customer go for it along with additional safety that comes with the product.
We are focused on the customer’s rental rate and total cost of ownership. We offer best technology and high standards of safety.
Tell us about TIL’s initiatives to make products more affordable?
Costs are always our primary focus. We work on the design and also work closely with vendors. Costs are not only the material costs – it also gets developed by the various processes. Since we are exposed to international processes and standards – we play a strong advisory role with our vendors and better their processes to ensure that they improve their costs.
What is TIL’s future strategy?
We have been expanding our product range significantly. We are a full range player in cranes, crushing and screening, and hot mix plants. Therefore, we have significantly expanded our product range because we believe the pent-up demand is very strong. With a full-fledged range our ability to cater to customers will be much better. It will give us higher market share as well as higher revenues.
We launched two new products at Excon 2013—the pick-and-carry crane which is a revolutionary product and a crushing and screening plant.