Case Construction Equipment, which runs wholly owned manufacturing operations in Pithampur, near Indore, Madhya Pradesh, has a market leadership in vibratory compactors and is a leader in loader backhoes. Abhijit Gupta, in an interaction with Sandeep Menezes, talks about the current scenario in the Indian construction equipment sector.
The construction equipment market has not witnessed growth during the current year because projects are not taking off as planned. What is the evolving scenario?
Things are very complex as of now. The industry’s future prediction is anybody’s guess. But there is hope that after elections stability should come in although there are varied views on it due to various related factors. Also, it depends on the new government and how it takes decisions. But there are small pockets where things are still moving. It is a combination of what ultimately happens. The situation is not a straightforward one.
The government has said projects will take off in a few months but even then it will some time the construction equipment segment benefits.
It is an unusual situation this time because it has taken so long for recovery. The factors governing are probably more complex than predicted by people. Since the government is saying so, we remain hopeful about projects taking off soon.
Raw material costs are rising while the market slowdown is not allowing manufacturers to raise prices.
Raw materials prices are also a function of demand and supply; therefore, if the overall demand is not great then the raw materials prices have to also subside. As far as raw material prices are concerned, it is always our endeavour to do some special initiatives by which to offset the cost increases.
How has rupee depreciation impacted the industry?
For us the rupee depreciation has not had a major impact since we have majority of local content in our products. The quantum of local components in our products is very high, nearly 95 per cent.
Since we are mainly targeting the local domestic market, the rupee depreciation has not had an effect on us. We will be targeting export markets shortly. Since we have production facilities and sales across the world, every market is our target.
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?
There has been pressure on financers to give larger portions of loans in terms of LTV (Loan to Value Ratio). Also, all OEMs have to give customers some sops in terms of discounts; therefore, we are trying to take care of those aspects.
What is the extent of shortage of trained equipment operators?
This is a crucial subject since shortage of operators is really creating an issue in terms of managing these machines, not only from availability point of view but also usage patterns. We are trying to provide training in our premises and also planning to have regional training centers in collaboration with some of the institutions.
There has been a negative growth of around 20 per cent across the construction equipment industry. Can you throw light on Case’s sales figures vis-à-vis the industry?
Our sales figures are aligned to the industry. I would not say 20 per cent negative growth because it’s a combination of several products. But in whatever product category we are present, our sales are aligned to the industry.
Which product category has faced the brunt of slowdown?
I would say the heavy line has got hit more than the general purpose line. We have been two years as a fully owned subsidiary in India. Two years is long enough just to consolidate. Our next step would be further improvement in export market.