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Construction : Cover Story | January 2018 | Source : Equipment India

In the Limelight of Infra growth

With over 50 per cent of the demand stemming from the infrastructure sector, construction equipment industry is set to grow to $5 billion. Sameer Malhotra, CEO, Shriram Automall India (SAMIL), writes more on how the organised used equipment market adds to the growth of infrastructure equipment market in India.

Construction equipment today not only makes it easier to complete the project at hand, but also ensures the efficient use of labour, time and money. About 30-35 per cent of money involved in construction is dedicated towards procurement of good machinery and equipment.

Evolution of tools to machines
Centuries ago, development of tools started with humans where hands and teeth were the first tools used to pick, dig, break, scrape, and shape. They were used to make other tools and shelter. Eventually simple tools were used to create a better living environment. Improved tools resulted in increase of the amount and speed with which construction work. Therefore, the scale and complexity of construction projects increased and this same development cycle continues today.

Infrastructure revival
In line with equipment development, the study of productivity and cost for equipment have also become more sophisticated, as now machines are designed to be extensions of the operators. Manufacturers are now able to provide tested and documented technical and operating information to better help users understand impacts on their work production. Importantly, they are able to communicate best practices to increase production and promote safe operation.

In India, the CE industry is considered to be the second-largest employer and contributor to economic activity. Over 50 per cent of the demand for construction activities in India comes from the infrastructure sector, while the rest comes from industrial activities, commercial and residential development etc.

The need for and dependency on heavy construction equipment in the country has grown with size and complexity of construction projects. The development of automated heavy construction equipment for earthmoving, excavating, and lifting occurred in the last two decades. Today, it is assumed that if equipment does not exist to perform a necessary task, it can be designed and built. So, heavy construction equipment manufacturers are very responsive to market needs and feedback from users. Hence, we can say, design and development of heavy construction equipment is driven and evolved from the needs of the user market.

Government push
Government of India while paving the way for a better quality of life and a rapid rise in gross domestic product (GDP), looks forward to focus on the infrastructure of the country for further growth. As the country's infrastructure holds the key to potential which both India and SAMIL understands.

As outlined in the next Five Year Plan (FYP), infrastructure will be the focus area for spending, about Rs 31 trillion ($454.83 billion) earmarked for investment with 70 per cent of funds needed for power, roads and urban infrastructure segments. The Government of India has planned an investment worth Rs 45,000 crore ($7.07 billion) for the development of India's north-eastern regions bordering China, Bhutan, Bangladesh and Myanmar.

At the same time, the Ministry of Road Transport and Highways invested Rs 14,916 crore ($2.32 billion) in the Special Accelerated Road Development Programme for North East (SARDP-NE) and Rs 4,095 crore ($635.6 million) for the national highways over the past two years to improve the road infrastructure in India's north eastern region.

Also in the Union Budget 2017-18, the Government of India has taken the following measures for the development of infrastructure, resulting in growth of the equipment industry:

  • Increased total infrastructure outlay and defence capital expenditure by 10 per cent and 20.6 per cent to Rs 396,135 crore ($59.18 billion) and Rs 86,488 crore ($13.1 billion) respectively, over FY17 revised estimate.
  • Railway expenditure allocation has increased by eight per cent to Rs 131,000 crore ($19.58 billion) for laying down 3,500 km of railway lines in 2017-18.
  • Affordable housing has been given infrastructure status.

With the investments in infrastructure, construction and mining sectors, the equipment segment has become one of the fastest growing in the country. With the increasing demand for the construction equipment, SAMIL has become the largest solution provider for both public and private enterprises as demand of construction equipment is highly lead by the enterprises investing in areas like road construction, maintenance, ports, power plants, telecommunications, urban infrastructural development etc.

Used equipment market
The used construction equipment industry is a critical part of the construction ecosystem and has to be dealt with as a major sector of utmost importance. SAMIL with an eye for 100 per cent customer satisfaction has come a long way while emerging the largest platform for acquisition and disposal of used vehicles and equipment in the country. So far, the company has sold over 28,000 used construction equipment through effective physical and online bidding platforms across the country.

Shriram Automall understands the demand and requirements of its customers, thereby gains a leading edge for implementing the most unique line up of used construction equipment with a dedicated team for the segment.

The company manages to reduce the equipment budget by providing good quality used equipment at optimal price to its customers in a structured regulatory way while paving the way for them to clear the challenges they face, which lead to delay in their projects, ie, non-availability of the needed equipment or delay in delivery of the construction equipment. SAMIL provides them the insight to make the complete process both easy and accessible. As a result, since 2011, SAMIL has garnered over 5,80,000 transactions from over 45,000 bidding events through 73 well structured Automalls across the country, acquiring over 6,80,000 unique bidders.

Being the one-stop solution for all types of used vehicles and equipment requirements in India, the company provides a common platform to owners, dealers, individuals and corporates. For construction equipment segment, the company's innovative advance platforms work the best for both acquisition and disposal.

SAMIL's Private Treaty Platform was especially initiated to complete the bulk transactions of used construction equipment. Through this platform, customers can do one-on-one deals to buy or sell their used vehicles and equipment. This platform enables them to directly make the transaction without having to participate in the bidding process with personalised approach and negotiated deals.

Now, SAMIL has also made bidding quite prominent amongst the masses through its technologically driven online bidding platforms. Out of multiple innovative advance platforms, online bidding has made the exchange of used construction equipment extremely exciting as well as convenient. Innovation is the only reason why today Shriram Automall is growing at 30 per cent quarter on quarter basis.

Future prospects in CE
By FY20, the CE industry's revenue is estimated to reach $5 billion. Revenue has increased at a compounded annual growth rate (CAGR) of 8.38 per cent during FY07- 14 and is further estimated to grow at a CAGR of 2.34 per cent between FY07-20 due to rapid infrastructure development, undertaken by the Government of India. Today, the road to construction equipment market involves demand
of 52,000 machines per year and this demand is currently growing by 5-7 per cent.
 
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