A stitch in time sure saves nine, manufacturers and financiers of mining and construction equipment will say.
As the slowdown in economy and the ban on iron ore mining in Karnataka and Goa began to bite, they shifted focus to the road segment where demand was pretty much intact.
The change of tack has made sure growth remains intact even as the crisis continues to rage.
Voltas, for one, has benefitted from modifying the mining equipment’s design to suit the aggregate sector, such as quarrying, crushing and road construction.
According to Anindya Ganguly, general manager, operations, mining and construction equipment division, Voltas, the company’s mining and construction equipment division revenues are expected to grow around 25% over the Rs280 crore logged last year.
Voltas has a marketing JV with Tarex Powerscreen for crushing and screening equipment that commanded 56% market share in iron ore mining works.
“We have launched the same product offering of Tarex Powerscreen with certain modifications in the road sector and the market has responded well to these initiatives,” said Ganguly.
Voltas is adding tie-ups and collaborations with overseas equipment manufacturers to offer newer lines of products, mainly premium mechanised products.
For example, it has tied up with Japan-based Kobelco Cranes, which is the market leader in crawler mountain cranes and recently set up a production line in Sri City in Andhra Pradesh so it is spared customs duty and can thus offer products at lower prices.
A tie-up with Italy-based Simen for concrete batching plant is also in an advanced stage, he said.
“Equipment market in India is fast changing and through tie-ups, we are moving toward highly mechanised equipment and expanding our product base,” said Ganguly.
Equipment financier Srei BNP Paribas, on the other hand, has expanded its customer base even in the slowing economy by targeting the highly unorganised used-equipment market.
“In the very first year, we are targeting a revenue of Rs500 crore in the used-equipment financing segment,” said D K Vyas, CEO, Srei BNP Paribas.
According to him, the last 5-6 years have seen good growth in sales of equipment in the country, because of which there has been an increase in the population of used standard assets.
Around 75% of equipment are financed for three years. Hence, out of around 1.5 lakh construction equipment pieces in the country, around 1 lakh are debt-free with good economic life left, he said.
Srei BNP Paribas is re-financing these equipment to existing owners or forging partnership with the dealers and manufacturers for exchange schemes where manufacturers take back the equipment, refurbish them and sell them back to new customers at a discounted price with extended warranty.
“Used equipment financing by our company has become an instant hit. It is helping in expanding the customer base and is a big boost for the company as it reduces credit risk by refinancing the equipment to proven track-record contractors,” said Vyas.
The move also adds to revenue as these equipment are refinanced at interest rates higher than new equipment and the asset-liability gap is positive, he added.
“Used equipment financing is attached with high yield, low credit and asset risk and opening of new customer base and all these factors are helping us in boosting our revenue,” he said.