The India Knowledge Base – an Introduction

(Building an Understanding of the Indian Construction Equipment Sector)

Introduction The CEA, with grant funding from the UKTI Advanced Engineering Sector, are implementing an India initiative to evaluate and develop opportunities for CEA members in this enormous and rapidly developing market. The two year project, called the India Knowledge Base, comprises a four phase approach –

• Research • In Market Meet the Buyer Seminar Visits • Inward Visits by Indian manufacturers and end users • UK Conference / Workshops.

Methodology The CEA is looking to better understand what opportunities exist in India for both UK OEMs and component manufacturers. For OEMs, we wish to identify who the end users for construction equipment are in market, what their purchasing strategies are – and what applications construction equipment purchased is used for. Additionally we are seeking to identify sources of components and opportunities for technology transfer / manufacturing under licence. For UK component manufacturers the CEA wants to identify potential customers, joint ventures and manufacturing sources in India. India has a major domestic market for construction equipment. Over 31,600 units were sold in 2006 - an increase of over 40% from 2005. This is forecast to expand to over 60,000 units by 2011. The construction sector, which is the second largest employer after agriculture, employs a workforce of 33 million and saw a growth of 12.1 per cent last year. Large scale civil engineering work to improve India’s infrastructure as well as a booming residential and non-residential construction sector have been the main drivers of this growth. The total investment in the sector amounted to $60 billion during 2006 and in the 11th Five Year Plan (2007-2011) a staggering investment of $347 billion is expected in infrastructure development. The construction industry’s value is forecast to reach $129 billion in 2011, contributing 10.5 per cent to the country’s GDP. (Statistics courtesy of Off Highway Research). Implementation Phase One The first research phase was completed in October / November 2007 by Joanna Oliver who undertook a two week visit to India. Joanna spoke to 16 companies in four Indian cities – New Delhi, Pune, Chennai and Bangalore - over two weeks and met with global and domestic OEMs, component manufacturers, contractors, consultants, rental operations, research companies and government departments. The areas covered included:-

• Applications and uses for construction equipment in India

• Indian Infrastructure – present and planned

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• The size of the Indian construction equipment market

• The scope of domestic construction equipment production

• The Indian Supply Chain

• Indian Government / Association structure

Companies visited – click on bookmark link to go to individual company reports Components Amalgamations Group Bharat Forge TVS Sundram Fasteners OEMs JCB Ballabgarh JCB Pune Telcon / Telcon Hitachi Contractors Larsen & Toubro – L&T Punj Lloyd ACT Research and Consultancy Off Highway Research Continex Mott MacDonald Rental and Distributors Quipo ACT Associations and Government National Highways Authority of India Builders and Contractors Association of India British High Commission Chennai The visit to the JCB plants in both Ballabgarh and Pune, employing around 1,200 people, gave a great insight into how a UK OEM can make a huge impact into the Indian manufacturing sector. The Pune plants in particular were a good example of state of the art facilities and how quickly such premises can be built. JCB source around 90% of components locally and have an astonishing 75% share of the Indian Backhoe market. Telcon (TATA) in Bangalore showed how Indian domestic OEMs worked – and how an international joint venture (with Hitachi) works. Meetings with leading contractors, Larsen & Toubro, Punj Lloyd and ACT gave an understanding of the end users of construction equipment. Comments from all three companies were that, while they were impressed by the quality and reliability of global standard equipment, they felt that delivery times were much too long, prices too high and that some equipment was much too sophisticated technologically for some of the under educated operators and was too difficult to repair in the field. Worryingly one these companies stated that they were now purchasing much of their equipment from China as, not only was the cost 50% lower than that of global equipment, but Chinese manufacturers could deliver in a matter of days, provide good in market service support and supply free loan machines to support large orders. It has been alleged that this is eased by the enthusiastic support of the Chinese government.

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Meetings with component manufacturers - Bharat Forge – Pune, TVS - Sundram Fasteners – Chennai and the Amalgamations Group - Chennai were especially enlightening as to the high standards and advanced manufacturing processes employed in India. At Bharat Forge – the largest single site forge in the world and the second largest global forging company – the facilities rivalled those of any seen in the west. With their traditional automotive and commercial component sector back ground plateauing out, all three companies were looking to break into the construction equipment sector, and were investing in equipment to allow them to service the sector. Both Bharat Forge and TVS had already acquired UK companies and were manufacturing in England and Scotland. All three companies were interested in meeting UK OEMs and also component supplies for partnerships. On the research side Joanna met with Off Highway Research in their newly opened Delhi offices, run by Nitin Sareen a formerly of JCB and Terex Vectra. Off Highway are sector filling a gap in the research market in India and have just completed the second multi-client study of the India market. Consultants, Mott MacDonald, based in Noida detailed how they work with government and major contractors to undertake infrastructure development programmes. Continex in Chennai are a company set up by Sri Nagesh, a former head of the Automotive and Construction Equipment Sector at the British High Commission Consulate in Chennai to assist UK companies source components in India and find partners in the market. Continex have expressed an interest in providing an office for the CEA and its members in India and assisting them to find partners, distributors, customers etc. Continex will run the 2008 CEA seminars and other in market events. From Government and Associations Joanna spoke to the National Highways Authority of India – the government body responsible for setting and awarding contracts for infrastructure projects and the Builders & Contractors Association of India who represented over 30,500 builders and contractors. They are hoping to set up a manufacturers group for construction equipment. The British High Commission Consulate in Chennai detailed how they could assist UK companies wishing to visit India with research and market introductions. Finally the emerging rental sector was represented by Quipo Rental & Finance in New Delhi and Calcutta, a division of Srei Equipment Finance and rented equipment around India, largely to contractors on infrastructure projects. Although the Indian education system produces a high number of engineering graduates, all employers cited very high attrition rates in their workforce as a major problem. As the economy rapidly expands there is always another employer willing to offer a few hundred rupees a week more to secure good workers. Despite the pitfalls of high import duty for construction equipment – presently around 35%, high volume of domestic production, vast geographical area and poor communications and infrastructure, there are still major opportunities for UK manufacturers in India. Government infrastructure projects often stipulate that machinery must be of a certain standard and maximum age and so there I still a market for imported products. Additionally certain categories of equipment that are not produced domestically are free of import duties, along with equipment used on major government projects. Phase Two – 2008. Phase Two is to take UK companies with an interest in developing / expanding their Indian activities, to India to meet with potential partners. It is intended to run a Seminar Mission using the model successfully established in China; i.e. to take a group of four to six UK companies to two or three Indian cities. Companies make a presentation of around 30 – 40 minutes each in the morning and, following a networking lunch, have one-to-one meetings with interested companies in the afternoon. The CEA would also make a generic sector presentation on behalf of the UK sector at the seminars.

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The Meet the Buyer Seminars will be held during the week commencing 8 September 2008, starting in Chennai with a seminar followed by a joint networking event in conjunction with the SMMT (Society of Motor Manufacturers and Traders). Seminars will be held in Pune and Chennai - Indian construction equipment and automotive clusters. To maximise the impact of the UK presence in India the CEA will link up with delegates from the SMMT (Society of Motor Manufacturers and Traders) in Chennai for joint networking events. The CEA will:-

• organise the guest invitations (speakers welcome to add any of their own contacts) • arrange the Seminars, factory visits and networking events, • Arrange in market travel, domestic flights and hotels.

Thanks to generous UK Trade & Investment sponsorship, no charge is made for participation in the Seminars – although speakers will be required to meet their own costs for travel, accommodation, subsistence etc. Grants may be available through the Regional Development Agencies. Places are limited, and any UK company interested in participating should return this to Joanna Oliver as soon as possible – joanna@aslnorth.co.uk or phone +44(0) 208 2534502 Phases Three and Four Funding for phases three and four – a UK Inward Visit by Indian manufactures and end users and an India Seminar / Conference to be held in the UK have been bid for in the 2008/09 UKTI Advanced Engineering bidding round. The results of which should be known shortly. Conclusion With its commitment to improving infrastructure, commercial buildings and housing stock, India is a vast market with huge opportunities for UK manufacturers – both OEMs and component manufacturers. However, it is also a highly price sensitive market with high import tariffs for most finished good and components and is intensely bureaucratic and demanding. Labour costs are increasing and workforce attrition rates are high. Due to heavy demand, the costs of raw materials, especially steel are at a level where the cheap manufacture of basic components is not necessarily lower than in the west. UK companies should not expect it to be easy to break into – but with perseverance, research and the right product there are excellent opportunities to increase sales, find partners and joint ventures and source components. With its ongoing India Knowledge Base programme, CEA strives to identify these opportunities and to ease market entry for suitable UK companies. Joanna Oliver CEA Director of Global Programmes May 2008

Company Name:

Advanced Construction Technologies PVT Ltd (ACT)

Name and Position of Contact:

Mohan Ramanathan - Managing Director

Address:

16 Cenotaph Road, Teynampet, Chennai, 600018 ACT has four branch offices in Tamil Nadu and one in Kerala.

Phone:

+91 44 2435 3694

Fax:

+91 44 2434 2272

Mobile:

+91 9840 0863 50

E-mail:

transtec@vsnl.com

Website:

www.actind.com

Activities, structure and history:

ACT has a number of facets to its business.

• Volvo dealers for the southern part of India - Tamil Nadu and Kerala.

• Distributors for: Atlas Copco Carmix CDI CEDIMA ERKAT Indelec Olvex (Russia) Schnell Wacker

• Contractors for demolition and recycling projects around India.

ACT is the largest scientific demolition contractor in India working nationwide on demolition projects – often in conjunction with larger general contractors.

• Contractors for structural strengthening and retrofitting services

for buildings.

• Consultants on disaster management and failure investigation.

• Service dealer and provides engineers for Deutz engines and can also service Cummins and Perkins engines with his trained engineers. The engineers are trained in house.

• Rental of Atlas Copco, hand held and drilling equipment.

• Rental of diamond cutting, drilling and sawing equipment.

• Expanding range of innovative products including: Rebar tier (battery operated) Portable rebar cutter Rotating laser level Digital laser distance Meter

• Training workshops for service engineers.

ACT has been in existence for 60 years and was started by the present MD, Mr Ramanathan’s grandfather. The equipment importing business has been trading for 8 years. Mr Ramanathan is a member of the Bureau of Indian Standards, which helps draft legislation for technical standards of equipment. Mr Mohan is a friend of David Redhead of BSP and has bought hammers from him. (Checked with DR - correct).

Opportunities for the UK:

Looking for more hand tools to distribute. Mr Ramanathan would also be interested in meeting companies manufacturing hand tools and light equipment as he felt there were no good domestic manufacturers. ACT is also interested in material handling products. He said that AUSA couldn’t find a good agent, (presumably he had spoken to them and they didn’t want to work with him). Looking to represent a site dumper manufacturer - possibly Terex, Thwaites and Winget. Interested in acting as a dealer for a mobile tower lighting company – possibly Towerlight or Sandhurst. Would like to focus more on the attachment side of the construction equipment sector.

Sourcing:

ACT is particularly interested in getting a manufacturing agreement to start manufacturing in India something called a Rotortilt, which is made by a company in Sweden called Engcon. This was described as a “tilting hydraulic cuff”, which is branded as “giving a wrist to your bucket”. It gives a 90% turn of the bucket on the hydraulic arm. ACT wants to buy the design, manufacture it in India and pay royalties to the company. Mr Ramanathan said the attachments, which are made in Sweden are very expensive. www.engcon.com. He asked if there was a company in the UK manufacturing them.

Other opportunities / comments from Mr Ramanathan:

There is space in the market for a good rental company to start up. Although the demand was not great at present – there would be an established need in 18 months to two years. Although mini or midi excavators are not widely manufactured in India, there will be a market for them very shortly as contractors are now looking for maximum speed on a project with minimum disruption particularly when they are working on jobs in cities. TATA had tried to make mini excavators and had failed – he but chose not to elaborate on why.

Used equipment that is being imported into India is sold as is and refurbished / remanufactured. There was probably a good market for refurbished / remanufactured equipment in the Indian market. ACT has links with a training institute to train people to operate Volvo equipment at the Volvo India University - previously run by Ingersol Rand. The University offers a diploma then a master’s degree course. As a dealer/distributor, ACT don’t hold a large inventory of imported capital equipment because Indian tax rules mean that duty has to be paid on imports - but they do keep stocks and spares for light equipment, concrete equipment, etc. It’s easy to get financing for construction equipment as Indian banks are cash rich at the moment and if you have a good credit reference, it’s easy to get financing. He said 95% of capital equipment is funded Used equipment is starting to come on stream for sale. Rental isn’t very big yet in India, apart from Quipo, but he thinks in the next two years it will really take off. He said that he thought that Quipo had started as a rental company because it was part of Srei International Finance Group who were buying a lot of equipment off shore and if they couldn’t find a buyer for it in India, then it went on rental. There is a CAT rental office in Chennai and Nagpur which rented out equipment up to backhoe size but he did think that there was space for another good rental company to start up. Import tax on capital goods is likely to go down by 5% in 2008. He also mentioned, which I have not heard from anyone else, that if you are moving construction equipment around the different states in India, then the equipment can be taxed as it crosses the state border. However he said the tax between states was supposed to be unified in the next few years and once that was done, there would be more opportunity for stock to be moved around and also for the sale of second hand equipment. When sourcing equipment from overseas, long delivery dates were a problem. He said that on his contracting side, ACT has 4 Volvo hydraulic excavators. They are also a sub contractor for L&T on big projects. He said L&T can be choosy about which construction projects they take as they are such a big player in the market. He mentioned he had worked with them on hydro carbon projects, the Delhi airport project and on some IT parks. He said with their hydro carbon projects, L&T tended to work with 25 sub contractors, but on a big IT park or an airport, they might work with over 200 sub contractors of all types, not just contractors with equipment, but also those supplying glass, sanitary wear and plumbing. Used equipment, if it was imported into India, still attracted 31-35% import tax and it was only the residual value of the equipment that made it cheaper than new. Used equipment imported into India, had to be certified to make sure they met with all the technical standards that are presently operative in India. There are agents who can do this at the port of entry. A lot of western equipment was far too technically sophisticated for the domestic market, people wanted user-friendly equipment and they didn’t

want automated controls and computerised cabs. Operators tended to reject the highly technical machines, as they were afraid of damaging the technology. Operators tended to have very low literacy levels and little education, so it was very hard to teach them anything to technical. Mr Ramanathan said he was interested in starting a training school for operators, mechanics and service engineers on operating machinery and also site safety. He said he would like to find 100 people per year to train as engineers. ACT is a member of the VDMA as it has been importing a lot of German equipment for a number of years. Volvo has just opened a new design department in Bangalore for designing their global products in construction equipment. Indian manufactured block making equipment was first class.

Company Name: Amalgamations Private Ltd

Name and Position of Contact:

A Krishnamoorthy - Vice Chairman

Address:

861 Anna Salai, Chennai 600002, India

Phone:

+91 2858 6610

Fax:

+91 2858 3174/ 2858 3179

Mobile:

E-mail:

akvcamal@md4.vsnl.net.in

Website:

www.amalgamationsgroup.com

Activities, structure and history:

There are 43 companies in the Amalgamations Group (AG), with 34 manufacturing plants covering engineering primarily for the automotive and tractor sectors. They include: engine components, engine bearings, pistons, wheels and bearings. On the forging side, they forge axles, crankshafts and precision forgings. AG also has some machine tooling capability for the engineering sector and manufactures the machine tools. They have several non engineering divisions which include: AMCO Batteries (est. 1956), Addison & Co. precision metal cutting tools (est. 1873) Stanes Tyre and Rubber products (est. 1943), tea and coffee plantations and a publishing house - Higginbothams (est. 1844). Three of the main components of the Amalgamations Group are Simpsons (est. 1840), TAFE (tractors and farm equipment) (est. 1960) and Agco who make tractor engines. (Massey Ferguson/Simpsons/ Agco) AG is the second largest tractor engine manufacturer next to Mahindra Tractors. It is the largest manufacturer of diesel engines for tractors in India. AG supplies engines for gen-sets. Simpsons engines meet the European emissions standards for industrial applications. AG has joint ventures with Stanadyne Corp. USA and BBL Daido Japan. AG makes diesel engines for the global market and repairs engines for the domestic market. It makes engines for New Holland and John Deere, which use India as a manufacturing base as they can achieve the quality and price control which made them competitive in the export market. AG has associations with a number of leading global companies including: Perkins (going back to 1948 when Frank Perkins first visited

India), Massey Fergusson (AGCO) T&N Group ( Federal-Mogul). AG customers include: Ford, TATA, Mahindra, Hyundai, Caterpillar, General Motors, Toyota, Honda, Cummins, Fiat, Eicher, Escorts, New Holland and Maruti.

Opportunities for the UK:

AG wants to grow its business. At present it supplies CAT and JCB with some engine components, also L&T Komatsu with engines. Mr Krishnamoorthy would like to meet with UK companies to discuss opportunities and was very interested in participating in the CEA seminar mission in 2008. In common with other the CEA companies visited, AG had not yet been approached by any other national trade associations. On mentioning to Mr Krishnamoorthy the possibility of Gordon Brown’s visit to India he felt that prime ministerial/ministerial visits were very much on a superficial macro level and no real trade was done – just the mouthing platitudes. Any real business needed to be done on a lower level directly with companies.

Partnerships:

The Tractor companies of AG may be interested in a joint venture with a European company.

Sourcing:

AG is well placed to manufacture components for UK manufacturers and is very interested in expanding the construction equipment side of its business.

Other opportunities / comments from Mr Krishnamoorthy: (Mr Krishnamoorthy is the son of the founder of the group)

Domestic engine and component prices are very competitive but he wasn’t sure that the domestic capacity at present was adequate. Therefore a lot of Indian companies were expanding so that they could meet the growing demands of the construction equipment sector. There are opportunities for manufacturers of trenching and pipe laying equipment to set up in India because they are not yet manufactured domestically. Equipment presently tended to be imported from Japan by Komatsu and Yanmar. There was a growing need for smaller equipment because mechanisation was rapidly increasing as the metro developments grew. This would lead to a move away from manual labour, which was becoming more costly. Space restrictions in cities gave rise to a need for smaller equipment for jobs that would have previously been done by manual labour, like trenching, sewer repairs, etc. Many ports were being redeveloped and were working to very tight deadlines and so increased mechanisation was required. Although there were huge infrastructure projects in road building at present, he felt that this would slow down and the infrastructure programmes would move to other areas such as ports, airports, rail and freight corridors. Indian construction sites were very strictly governed by legislation. The Indian Health & Safety departments were looking at the laws covering the demolition of buildings and these were likely to be tightened up in the near future.

There were moves afoot to create a free trade area with China, but, of course, Indian domestic manufacturers were concerned about this because it would open the door for a massive amount of low cost Chinese goods being dumped in India. He thought it was important that representation be made from the India government about anti-dumping measures to protect domestic industry. India has been a service based economy for a number of years and is now moving towards being manufacturing industry based, whereas the Chinese have gone straight into the manufacturing base and the economy has grown exponentially. India now needs to catch up instead of just offering call centres. Advantages of manufacturing in India over China were that Indian companies:

• Had acceptable levels of transparency and integrity when doing business.

• Had respect for intellectual property. • The capital can be re-exported, royalties can be repatriated. • There was a good investment climate in India.

Company Name: Bharat Forge Ltd

Name and Position of Contact:

Mr G K Agrawal - Deputy Managing Director Mr Manish Khandelwal - Senior Manager International Business Mr Yogesh Agrawal - Deputy Manager International Business

Address:

Mundhwa, Pune, 411036, India

Phone:

GKA - +91 2026 702448 MK - +91 2026 702496 YA - +91 2026 702777

Fax:

+91 2026 820699

Mobile:

GKA - (h) +91 2027 2703 13 MK - +91 9860 0921 25 YA - +91 9850 9844 61

E-mail:

yagrawal@bharatforge.com gkagrawal@bharatforge.com mkhandelwal@bharatforge.com

Website:

www.bharatforge.com

Activities, structure and history:

Established in 1966, employing 6,700 people and part of the US$1.5 billion Kalyani Group, Bharat Forge (BF) is the world’s largest foundry in a single location and is the world’s second largest overall foundry company. BF has another plant at Chakan nr Pune. It has three manufacturing divisions: Closed Die Forging, Open Die Forging and Machined Components. The Kalyani Group has joint ventures with Meritor (USA), Carpenter Technology Corp. (USA), FAW Corp. (China) Hayes Lemmerz (Germany). BF has operations in a number of countries, including the UK where it has a foundry in Scotland (Ayr). The BF Pune plant was vast and very well organised, very modern, particularly the machine tooling production line, a lot of which was automated and appeared to be running to an extremely high standard which would equal or better anything seen in the west. Bharat Forge Pune produces: steel forgings, machine crankshafts, pistons, front axel assemblies, steering knuckles, rocker arms, control arms, connecting rods, camshafts, steering arms, spindles, wheel carriers, piston crowns, small forgings, open die forgings and general engineering equipment for the automotive, diesel engine, railway, construction equipment, oil and gas and other sectors. The Heavy Forge division produces forged and machine components (open die forgings) for the capital goods industry: sugar plants, steel plants, cement plants, bulk material handling, steam turbines, hydro turbines, windmills, oilfield equipment and other industries.

BF bills itself as a “Full Service Supplier” of engine and chassis components. It offers a service from product conceptualisation, design, manufacturing, testing and validation. BF is the largest exporter of automotive components in India and the leading chassis components manufacturer in the world. BF is presently supplying Caterpillar (engines and undercarriages, some track links and rollers), Cummins and Perkins in the construction equipment sector. BF can offer fabrications and machining capabilities in addition to the core foundry operation. They are supplying:

• Tractor Engines Ltd, a previous Caterpillar joint venture, supplying them with track links and roller assemblies.

• Telcon and JCB for niche products. • In Germany they are manufacturing bucket teeth, and are almost

making 100% of bucket teeth in Germany for ground engaging tools. • Their new 80 tonne hammer will be able to handle over 40,000 parts

per annum from 500kg up to 200 tonnes in weight, so smaller volumes might be of interest to them. Presently there is open capacity on the hammer, whereas with their general foundry and forging they are almost running to full capacity – so if they took on new clients, any new business would have to be fitted into the work schedule.

BF only employs graduate engineers for all grades of job. They run an apprenticeship scheme for graduates who work for 18 months on the shop floor to gain a full understanding of the work, after which they graduate to engineering positions.

Opportunities for the UK:

Source of forgings and components. Extremely keen on working with British companies and would be very interested in meeting British companies at a seminar or other event in India. If BF thought there was a sustainable amount of business to be had from UK CE manufacturers, they would consider visiting the UK on a meet the buyer mission.

Other opportunities / comments from: Mr G K Agrawal Mr Manish Khandelwal Mr Yogesh Agrawal:

BF is expanding the sub assembly operation and they think that might be of interest to manufacturers in the UK. BF are installing some new heavy presses and hammers which will allow them to make open forged parts for larger equipment, such as crushing and screening and materials handling equipment. I was advised that Lord Digby Jones had visited the plant in September 2007 with a view to them manufacturing components for the aerospace industry and had said that he would be interested in helping them with that project. Historically an automotive component supplier, BF has not traditionally supplied construction equipment OEMs as volumes in CE have traditionally been too low for them. Now the production of construction equipment is increasing rapidly, they think that there is a market for their services and products. Volumes are not as important on niche products because of the higher values. BF have no problems with shipping and supplying to just in time deadlines,

because they have regular shipments direct from the factory to the port. They have their own fleet of lorries and, because they have regular shipments, they get priority access to ship. They are shipping around 300 container loads of components per month. BF asked me to explain how construction equipment works with UKTI and fitted into the government sector with UKTI and BERR. When asked if they perceived China as being a threat, they said that they didn’t at present because they didn’t’ think the quality was as good as they produced in India.

Company Name: British Deputy High Commission

Name and Position of Contact:

Ian Mason - Deputy Head of Mission & Head of Commercial Section Sujith Thomas - Assistant Trade & Investment Advisor

Address:

20 Anderson Road, Chennai, 6000006

Phone:

+91 44 4219 2151

Fax:

+91 44 4219 2321

E-mail:

Ian.Mason@fco.gov.uk Sujith.Thomas@fco.gov.uk

Website:

www.ukinindia.com

Meeting notes and comments from Ian Mason:

Ian said he was only in his post until February 2008. After that he would be working with Helen Yendall in the West Midlands as part of a UKTI Regional Trade team, so he could be a useful contact to have there. His replacement, Rob Kelly, would be arriving in the New Year. He seemed to think I was seeing the right people and he reiterated that Feedback – the company UKTI had used to undertake a report on the Indian construction sector, appended to the CEA Report – was a good company to use to do a research report. Ian said that Komatsu were building a complete knock down facility in Chennai to manufacture dump trucks and tipping trucks. He also mentioned a company called Kaparo who are an automotive manufacturer in Chennai which is owned by Lord Paul. The factory is run by his son, the honourable Angur Paul. I mentioned that I had been approached by one of the leading contractors with the suggestion that we might like to set up some sort of engineering graduate exchange which would be to send qualified engineers that had graduated in the UK to work in India and send Indian engineers back to the UK for technology transfer. He thought that was a good idea and it might be something that both the British Council and UKTI would be interested in getting in involved in. Ian said that corporate social responsibility was very important in India and that there were some generous funding programmes available. He suggested other companies worth going to visit would be Ashok Leyland, who have an R&D Technology Transfer facility and are looking at supplying into the defence sector from their Indian base, TAFE who manufacture tractors and farm equipment and are part of the Amalgamations Group and ELGI Components and Precal who make automotive components. He then told me about the services he could offer if the CEA came with a group. He would expect that I would either commission an OMIS (Overseas Market Introduction Service) or that the members of the group would commission one - this would cost £1,500 each. He said he could organise a reception for me, for around £400 plus the cost of the reception. When told it would be on a UKTI funded programme, he said he would not charge the £400, just the reception, which included sending out invitations.

Company Name: Builders Association of India

Name and Position of Contact:

Mr Raj Pal Arora - Hon Secretary

Address:

203 Ashirwad Complex, D-1 Green Park, New Delhi, 110016

Phone:

+91 11 2592 0423

Fax:

+91 11 2592 0423/4

Mobile:

+98 1006 0478

E-mail:

rpcc101@vsnl.net rajpal@constnindia.com

Website:

www.baidc.com www.constnindia.com

Activities, structure and history:

Founded in 1941, the Builders Association of India (BAI) has over 30,000 members with a head office in Mumbai and a regional office in Karampura, New Delhi. BAI has around 95 branch offices all over India with BAI representatives. BAI represents construction companies, builders, contractors, architects, designers, consultants and latterly construction equipment manufacturers. Its activities include training programmes, government liaison, exhibitions and technology. BAI publishes a Members’ Directory and a Construction Materials and Machinery Directory – listing manufacturers of construction equipment, distributors and contractors, in addition to building supplies. BAI publishes a monthly magazine, Indian Construction, which is a good source of information for construction projects and tender opportunities. BAI has just founded a manufacturers section of its association – the Indian Construction Mechanisation Association (ICMA), which focuses on OEMs, component manufacturers, contractors and other end users. BAI, through Mr Raj Pal, are on the organising committee of the International Road Federation Regional Conference. They were involved in running the 2007 event held in New Delhi. The conference is supported by World Highways magazine Mr Raj Pal, also a construction consultant, is the chairman of the BAI Exhibitions and Seminars Committee. BAI organises the annual Building Materials Construction Technologies (BMCT) exhibition held at Pragati Maidan in Delhi. Although there is a section for equipment, BMCT does appear primarily to be an exhibition for building products rather than construction equipment. However, Raj Pal said that they were trying to expand on the equipment element of the exhibition. Pragati Maidan, the main international exhibition centre in Delhi, has 100 acres of exhibition space and is close to the city centre. Visitors to the show

are mainly contractors and they are interested in buying and evaluating products. The exhibition is supported by the government, by sending ministers and giving it a high profile, but not financially. BMCT 2008 will feature stands from Sany, Telcon, Beml and Universal Equipment.

Opportunities / comments from Mr Raj Pal Arora:

Mr Raj Pal thought that there was a need to do an Indian survey at grass roots of who the manufacturers and component manufacturers were. This was something that BAI was trying to do, but didn’t have the funding. He was interested in trying to do something jointly with the CEA. He didn’t have a time frame for the project. He thought it would take at least a year to collect the data and then possibly another year to analyse it. I recommended he contact Off-Highway Research India who already held the data on the OEMs. He said that on the manufacturing side, there are approximately 500 companies in India producing construction equipment and its components. These are broken down into roughly 100 OEMs and 400 component manufacturers. He said that it was difficult to do research into these companies as it was hard to get access into the factories, because there was the resistance to people coming and asking too many questions because of taxation. The laws relating to labour and employment rights varied from companies employing fewer than 100 people to companies employing over 100 people. There were tax breaks for smaller companies, so he felt that there might be some companies who didn’t want to disclose the full size of their company because it would be detrimental to them, both fiscally and with their workforce. He said that manufacturing companies tend to be split up for tax purposes, so four companies may be trading but they are really just one company. The complicated structure of the Indian tax system means it’s often more beneficial for there to be several companies rather than just one. He confirmed that most large infrastructure projects were handled through government and through the National Highways Authority of India for road projects. Housing and commercial buildings, rail, ports and airports, were all initially handled through government. To take part in the tender process for government contracts, contractors have to be pre-approved and on the government contractors tender list and they must be class 1 to class 5 contractors. He said the tender process was fairly transparent. Tenders for the construction of new motorways tended to be given 20km strips as opposed to the whole stretch. This is because the government feels that there are not really that many large contractors who could actually deal with more than 20km. Some of the major contractors like L&T and Hindustan Construction Company are given larger sections, but that’s the exception rather than the norm. Not many of the major contractors took work outside of India because they had got plenty of work in India to keep them occupied, given the construction boom. He did cite L&T, Hindustan Construction Company and Punj Lloyd as contractors who were operating outside of India. Small contractors tend to have their own fleet of equipment, major contractors often only have large capital equipment on their inventory and then hire in the smaller equipment. There is a shortage of machinery in the Indian market and also a shortage of trained operators and service engineers. Indian production standards and quality of the finished product in components was much higher than in China and also Indian laws to protect counterfeits and intellectual property were much stronger. The Indian government was being lobbied to look at Chinese imports of CE.

I asked why there wasn’t a stronger trade association for construction equipment. He felt that there was a reticence because of Indian tax laws for companies to disclose their actual turnover and production and so they did not want to join associations where they may have to disclose this information. (This wasn’t substantiated by other people I spoke to but this was his view).

Other Opportunities:

Opportunity for UK companies to advertise in the directories for publicity and to join new CE association.

Company Name: Continex Tradeline India PVT Ltd

Name and Position of Contact:

Mr MC Srinagesh (known as Nagesh) - Director India Operations

Address:

61-131 1st floor, GN Chetty Road, T.Nagar, Chennai, 600017, India

Phone:

+91 044 281 50925

Fax:

+91 044 4550 2235

Mobile:

+99 4006 7960

E-mail:

sri.nagesh@continex.in

Website:

www.continex.in

Activities, structure and history:

Continex offers sourcing and strategies for the automotive, construction and engineering sectors. It has developed access to all the key suppliers of engineering and automotive components from Chennai, Coimbatore, Bangalore, Nasik, Pune, Ludhiana and Delhi and is backed up by a team of professionals with wide ranging expertise in sourcing, international trading, design engineering and trade development. Continex also offers wide ranging consulting solutions. Continex is headed up by Mr Sri Nagesh, former UK Trade & Investment lead on both construction and automotive sectors at the British High Commission Consulate in Chennai and previously heading up the British Trade Office for four years at Hyderabad after setting it up in 2001. Continex source engineering and automotive components for manufacturers based in UK. Their primary customer is SDC Trailers who is also the parent organisation. They offer business consulting solutions; representing MIRA in India (I subsequently spoke to MIRA UK who gave Continex a very good reference) and are responsible for their business development, strategic support and account management in India. They have made strong relationships in India in the vehicle manufacturing sector. They work closely with the British High Commission network.

Opportunities for the UK:

Nagesh submitted a proposal for Continex to represent the CEA and its members in India covering the following scope of work: 1. Facilitate and organise at least three promotional seminars or workshops and three receptions for CEA members exclusively or jointly in a calendar year. This would include screening of key contacts, preparing lists of contacts to be invited, posting invitations, receiving RSVPs and making all arrangements at the venue, including designing backdrops, brochures, liaison with catering service providers and hotels and liaison with government, key speakers and the press. 2. Facilitating 12 individual or group business visits, booking, arranging meetings, validating contacts and support with market research to find potential partners.

3. Accompanying business visits wherever required to add value for first time meetings. 4. Informing the CEA of the latest developments in the Indian construction equipment market by a quarterly update of important events in India. 5. Arranging all logistics, including hotel bookings and internal flight bookings as required and as mutually discussed depending on the requirements. 6. Representing the CEA in India to negotiate with Indian companies, exhibitors, government and other institutions where required. These services would be provided with a flat monthly fee to the CEA and member companies. Expenses, travel, etc, would be recharged at cost. Additional services which could be provided include: 1. Representing the CEA’s members to develop their business in the Indian market, including market research of products, market entry, finding prospective partners, validating and background checks of companies in India to be mutually agreed with individual CEA members. 2. Design and development of brochures, websites and corporate videos to suit the Indian market.

Follow up required:

The CEA Management Council has agreed in principal to work with Continex on the organisation and promotion of two or three UKTI funded Meet the Buyer Seminars in Pune, Chennai and possibly Bangalore. If these were satisfactory then a more permanent arrangement with Continex would be established. The CEA will contact member companies interested in establishing a presence in India to establish the potential of a longer-term contract with Continex.

Company Name: JCB Backhoe Plant at Ballabgarh

Name and Position of Contact:

Amit Gossain - General Manager - Marketing Attul Kataria - Chief Manager - Purchase Pradeep Ghai - Manager - Materials (CMD) Sanjeev Arora - Executive Vice President Product Engineer Jiveshdeep Singh Sandhu - Manager - Marketing Vineet Jaiswal - Chief Manager - Marketing

Address:

JCB India Ltd, 23/7 Mathuria Road, Ballabgarh, 121004 Haryana, India

Phone:

+91 129 429 9000

Fax:

+91 1292 3090 50

Mobile:

AG - +91 9891 9605 30 AK - +91 9871 3573 57 PG - +91 9811 2067 55 SA - +91 9810 1043 53 VJ - +91 9810 5064 95

E-mail:

amit.gossian@jcb.com attul.kataria@jcb.com pradeep.ghai@jcb.com sanjeev.arora@jcb.com jiveshdeep.singh.sandhu@jcb.com vineet.jaiswal@jcb.com

Website:

www.jcb.com

Activities, structure and history:

JCB is the largest manufacturer of construction equipment in India, with a machine park of over 30,000 machines. One out of every two pieces of equipment sold in India is a JCB. They have been present in the Indian market for 27 years, beginning with a joint venture with Escorts. In 1999 JCB bought out a 60% share of the JV and in 2003 they bought Escorts out completely and are now 100% stakeholders. JCB has a 75% share of the backhoe market in India, the rest is taken up by Hitachi, Telcon, Terex and L&T Komatsu. They are hoping to produce 17,000 backhoes in India in 2008, of which only about 600 will be exported – to countries within the region: Nepal where they have a dealer, Sri Lanka where they have a dealer, Bhutan where they have a dealer and Bangladesh. They don’t presently export to Pakistan and they think this might be because of the political situation between Pakistan and India. They are looking at marketing with military applications. JCB has three manufacturing plants in India – Ballabgarh in Haryana state, about 45 minutes from Delhi, and two at Talegaon near Pune in Maharashtra state. JCB India produces backhoes, wheeled loaders, tracked excavators and skid steers. The JCB Vibromax has just started production in Pune. JCB have a research and development and design office in the Ballabgarh plant. The factories all practice Lean Manufacturing.

Their components at present are 95% locally produced - they are hoping to make 100% locally produced, but did not give a time frame for that. JCB will be setting up an engine plant in Ballabgarh by 2010 to manufacture engines for the backhoes, but they won’t be exporting engines. They are also going to be producing transmissions, wheels and tracks. JCB only sell through their Indian distribution network, they don’t sell direct or in any other way. The dealership main strengths are that they are exclusive JCB dealerships and they have an extensive network. They have 44 main dealers in India and a number of sub dealers and they offer 24/7 back up for service engineers. They have 264 outlets for parts and service in India and service engineers operate both from the dealers and the regional offices – claiming that “you are never more than 100km away from a JCB service engineer”. Most machines are financed. There is no JCB leasing as in the UK, but there are a number of finance agencies available. They have no in-house testing for their equipment, they use third party testing, some of which is done in the UK, but they are going to set up an in-house testing facility in Delhi.

Sourcing & Components:

JCB have many component manufacturers in common with the automotive sector. They develop a supply chain with preferred suppliers that are pre qualified to supply JCB. Component suppliers supplying JCB India need to manufacture in India or in another low cost economy to meet prices realistic for domestic models. Castings are made locally by Indian companies. Fabrications are made in India - some done in-house by their fabrications plant. Backhoes currently use domestic Kirloskar engines. Excavators and wheeled loaders use Kirloskar and Ashok Leyland engines. Wheeled loaders use Cummins and Ashok Leyland engines. In-house products include critical machining, transmissions and hose assembly. JCB have a global sourcing policy on hydraulics, mainly from Husco and Parker. Cabs and seats are sourced locally. Tyres are manufactured locally at good value and also exported to other JCB plants. Component suppliers are added or changed to meet increased demand and new products, but they do try and establish long-term relationships with them. 60% of their components are purchased on a ‘just in time’ basis. For special models a one-day inventory is kept. There is 2% annual inflation on steel costs and the price of steel is erratic so it’s quite difficult to budget for fluctuations. JCB are having a national marketing campaign on the benefits of buying genuine JCB spares and not ‘will fit’ parts - highlighting that by not fitting genuine parts owners invalidate their warranty. A UK global purchasing team is working from the Pune plant tasked with sourcing global supplies form India.

Other Comments: Jiveshdeep Singh Sandhu is engaged to look at market statistics and to try and work out JCB s marketing strategy within the domestic market. Amit Gossain is in charge of marketing and their expansion programme.

JCB are actively trying to promote the profile of JCB in India to make it a household name – and the generic name for backhoes and excavators as in the UK. It was noticeable as there are lots of posters up and roadside hoardings – they have also sponsored road signs and roundabouts. At Pune airport there are lots of JCB hoardings. They have also had an excavator campaign to raise awareness of their heavy excavator line and to show that JCB don’t just make backhoes. They are also working with engineering institutes and sponsoring engineering students. They also sponsor a JCB prize for automotive engineers to target student engineers and to try and raise JCB’s profile. They are trying to source service engineers from the armed forces, as they believe there are a lot of skilled people leaving the armed forces and retiring early who have a very good technical background. JCB are not very active in the mining and quarrying sector. Agriculture is an undeveloped market for JCB as currently it is not highly mechanised and much farming is done on a subsistence level. There are a lot of AG tractors in India, estimated at about 300,000 units but mostly with very small 30 hp engines. However, there is a need to recruit people into promoting JCB in the agricultural sector as agriculture gradually moves from intensive manual labour and becomes mechanised All Indian airports are being upgraded so there are opportunities there. Most airports are state owned but are gradually being privatised. All the ports are being upgraded on an ongoing programme and JCB report a 35-40% annual growth rate for construction equipment requirements for infrastructure projects. JCB will have approximately 110,000 units working in India by 2010 - the main problem being the shortage of qualified operators. JCB run training (not for profit) programmes for operators to support the product in market. Heavy excavators and wheeled loaders tend to be bought by large contractors. Backhoes are primarily bought by smaller operators on a ‘buy to rent’ basis. Once they have bought the machines they can send the operators to a training school at the JCB dealerships. JCB India maintains a database of trained operators for people who buy their equipment, but they are always looking for new people to train as operators. JCB estimate that 40% of their customers are medium to small contractors who just have two to four machines, which they hire out by the hour. There are almost no owner operators in India. 30-40% of their customers are large contractors with up to 200 machines and the rest of sales are to new buyers with no customer history. Defence and the Indian government take 6-7% of their sales, but defence sales have slowed down. Machines in India have to work harder than they would in the UK. A backhoe, on average, is worked 14-16 hours a day with three different operators, so it is kept in use most of the time. An excavator would work for 1,000-1,500 hours between service intervals and they are trying to make the owners understand that it’s important to get regular service because if they don’t and the machine breaks down causing loss of revenue. Unorganised renting takes up 40% of the market and large rental companies like Quipo are unusual. They don’t feel the rental sector is growing particularly quickly. Currently JCB don’t do any remanufacturing, they feel that the machinery is

generally so ‘used and abused’ that it is really at the end of its working life by the time the first owner gets rid of it. Indian labour costs are increasing rapidly with the wage inflation and it is very hard to retain good staff because of this. It’s cheaper to produce goods in China, but harder to get the quality and shipping is a problem as the cost of freight is increasing very rapidly. The freight companies seem to operate like a cartel so that all the prices are fixed and extortionately high. Engine emissions at present are not really regulated by the Indian government, but they should be going onto tier 2 shortly. At present the engine emissions are equal to tier 1, but by 2011, they will have to be at tier 3. JCB engines meet all the emission standards, but they think they can also find locally sourced engines which will meet tier 3 emissions. There was an urgent need for a national construction equipment trade association in India. They said there was a small one run by the CII, which had not really achieved national coverage and was not too active. There are opportunities in solid waste management. Recycling is increasing rapidly.

Company Name: JCB Manufacturing Ltd

Name and Position of Contact:

Plant I - Buta Atwal - Operations Department Manish Mahajan - Materials Department Plant II - Mark Turner - MD JCB Heavy Products Ltd (Excavators) Ajay R Patil - Head - Purchase

Address:

Talegaon Floriculture & Industrial Park, Village Ambi, Navlakh, Umbhre, Tal.Maval, Talegaon, Dabhade, Dist. Pune, 410507, India

Phone:

+91 2114 304000

Fax:

+91 2114 304021/22

Mobile:

BA - +91 9970 1519 17 MM - +91 9850 8452 43 ARP - +91 9860 4121 47

E-mail:

buta.atwal@jcb.com manish.mahajan@jcb.com mark.turner@jcb.com ajay.patil@jcb.com

Website:

www.jcb.com

Activities, structure and history:

JCB have two factories at Talegaon Pune. Plant I deals with fabrications and Plant II builds excavators and other heavy equipment. Both are under two years old and very modern in design and layout.

Sourcing and components – Ajay Patil:

JCB are looking to bring over from the UK, to set up production close to the JCB plant, manufacturers of cabs, hydraulics and other key components. This would be a good opportunity for manufacturers struggling with costs in the UK but who could succeed in the lower cost base of India. JCB are very interested in meeting new component suppliers from the UK to supply items not presently manufactured in India or who were interested in setting up in India. They are interested in meeting companies that the CEA could bring out from the UK, and are particularly interested in high-end hydraulics, electrical components, electronics and undercarriages. They also expressed an interest in Gate7 decals as they are always open to look at any new component supplier if they could compete on quality and price with the ones they already use. JCB are always looking to add to their suppliers. On the fabrication side they have about 70 suppliers to that factory of which 20 are components, 4 steel mills, 15-20 consumables and spare parts and 10-12 imported parts. They import special grade steel from Corus foundries in Poland and steel

castings from Spain and China. They have eight laser cutting machines, and four plasma machines for components. There is an international purchasing team based in Talegaon to look at sourcing components in India for export to the UK. They are currently using Isuzu engines on the heavy excavators, but they are looking to source some locally produced engines, possibly from Cummins. They won’t be putting the JCB engines in the heavy excavators.

Other opportunities:

They felt there were opportunities for companies to look at the re-engineering of engines and transmissions, not for JCB use, but thought there was a gap in the market for that. They felt there was a gap for a trade association or somebody in power to be able to lobby the government because at present, lobbying tended to be in the hands of an elite wealthy class who had access to government ministers.

Other Comments from Buta Atwal:

Buta Atwal gave a tour of the offices of the fabrication plant and then around the fabrications plant. JCB were well known for good quality in India and they were trying to make sure that that continued with a marketing campaign. It was very noticeable going up the road from Pune to Talegaon that there were lots of JCB adverts along the road. Plant II is manufacturing excavators for both the domestic market and for export. At present they are exporting to Asian countries and Eastern Europe. From the fabrications plant, about 50% of the value of the equipment produced there goes back to the UK, 30% goes to JCB Ballabgarh and 20% to the excavator division at Pune. From the excavator factory, 70% of the output is for the domestic market and 30% for export. Both factories are set up to produce goods of export quality. The excavator plant is currently producing 50 units per day - excavators and wheel loading shovels. Production is just beginning of the Vibromax rollers in Pune. Vibromax were previously manufactured under a JV with L&T. JCB are very strong on ensuring that their service market is well served. They train designers, engineers and technology graduates and they are preparing to set up robot cells on the factory floor. It is very different setting up a new factory in India to setting up in Europe - there is a vast amount of Indian government bureaucracy to overcome and one also needs to get contacts with local politicians and the local head men in the villages surrounding the factory. Involvement in community activities is key, as is knowing who the strong community leaders are. This is especially true in country areas such as Talegaon than in an urban conurbation like Ballabgarh. JCB are trying very hard to engage with the villagers because they are providing a lot of the labour force. They are supporting a local village. They said that the Talegaon Development Zones had made it simpler to set up in India and helped reduce some bureaucracy. There is government support for setting up new companies in various states, but that wasn’t the sole reason for choosing Pune. Talegaon is reasonably close to the port at Mumbai for exports and fairly central within India for road deliveries, particularly with the development of new Golden Quadrilateral road structure.

Pune is well known for its university and for turning out a high standard of graduates. It is known as the Oxford of India, so there is a good local supply of graduate engineers. Talegaon has a reasonably good power supply from the national grid - apart from Thursdays when there is no power because they have a power down day! Because of this JCB has had to install generators to run the factory on Thursdays and also as a back up when the power goes down on other occasions – as it did during my visit. Like all manufacturers, JCB is quite badly affected by wage inflation and by lack of worker retentions, as people were head hunted and offered higher salaries. To have a senior engineer or a senior management person of very high calibre, you would probably be paying around £60k per year. Wages have risen very steeply in the last few years. Although very committed to continuing manufacturing in India, because of the spiralling wage costs, JCB are looking to train their workforce to use the resources they have better and to make workers much more productive. Although they have introduced working practices like Lean Manufacturing and Six Sigma there was a feeling that workers did not implement them as well as they might and that there was still some way to go to streamline working practices. Productivity is lower in India, generally due to the heat. The shop floor in India might be 30 degrees so people would be working a lot slower than in Rocester where the shop floor was only 16 degrees. JCB reported growth rates from the Pune plants of 68% in just 6-8 months and they were looking to achieve a 300% growth rate over the next 2 years. It is hard to find good quality new component suppliers from outside the JCB existing suppliers list and they are very interested in training up suppliers to meet their demands and then working with them on a long term basis. They are trying to get as many suppliers as possible within a 20km area of the plant. This is not viable at present as Talegaon is only just developing as a manufacturing centre. But the long term is to establish a supplier base to ensure just in time supply. JCB lobbied the Indian government directly on issues affecting the sector because there wasn’t a trade association to act for them. As JCB in India was working at full capacity they didn’t really have any need for statistics at present, but would in the future as the market levelled off. They would very much welcome a directory of Indian component suppliers so that OEMS could get joint agreements. There was an opportunity for a consultancy to help UK companies get established in India, as it was difficult to do, especially from a distance. There was plenty of scope for transfer technology and information technology transfer. Again, something possibly trade associations or universities could get involved in. Indian labour laws are very difficult for employers as it is almost impossible to dismiss an employee. Labour laws are heavily enforced by both trade unions and by local influence from the villages and the community leaders. Because it is so hard to dismiss anyone, employers tend to hire temporary employees, or they just use contract labour, because the permanent contract laws are so strict. Employers need to be sure of the merits of an employee before offering them a long term contract. The Indian work ethic is good and the Indian workforce tends to be very

Ajay Patil: Mark Turner:

motivated. JCB have a good health and safety record and they are presently trying to improve working temperatures by installing air conditioning on the shop floor. Ajay Patil said that Indian component suppliers provided good value and high quality components, but needed some good customer education. He said that components that didn’t require particularly high specification could be sourced in volume from China, but that Indian suppliers were preferable. The ideal model, from his point of view, for a component supplier was a UK company that had relocated to India as they had gone through the learning curve with JCB and he said that they understood the JCB practices. He said component manufacturers didn’t need to have an exclusive contract with JCB, but they would probably look for them to have an exclusive JCB production line. There is an agency called the Associated Commerce Manufacturing Association, a bit like the CII, which was sometimes helpful in sourcing components. Mark Turner advised that Indian shipping tariffs had gone up by 40% in two years and the sea freight was in short supply for large equipment as there were not many RORO ships operating out of Mumbai. The alternative port was Chennai or Calcutta – both a long distance away. It was more expensive to export products from Mumbai than it was from the UK. He noted that the shipping agencies appeared to be working to fix the prices of containers and heavy goods. The infrastructure to the South of Mumbai needs improving. It takes a long time to ship anything via road due to the very poor conditions. He cited the example of General Motors, who are building a factory close to JCB in Talegaon. They were relying on the Indian government building a rail link from their plant to link into the main railroad to Mumbai. They had been told it would be ready when the factory was opened in November 2007 – but have now been told there will be a two year delay, due to problems purchasing the land the railway was going run across from the local farmers. There needs to be more of a government overview to encourage the companies investing in the development zone. He said the automotive industry continued to be strong which was good because it brought in and improved strategic suppliers. He reiterated that power was a big problem as one day a week without power is not conducive to effective manufacturing!

Company Name: Larsen & Toubro Ltd ECC Division

(Engineering Construction & Contracts)

Name and Position of Contact:

Vinod H Bellubbi - Joint General Manager Plant & Machinery K Sridharan - DGM (Corporate Communications) Due to see V.S. Ramana - Head - Corporate Communications - unfortunately unavailable due to signing a contract for the new Mumbai Airport

Address:

ECC Division, Mount Poonamallee Road, Manapakkam, P.B. No. 979, Chennai, 600089, India

Phone:

+91 4422 5266 55

Fax:

+91 4422 4933 17

Mobile:

VHB - +91 9444 3985 69 KS - +91 9444 3982 39

E-mail:

bvinod@lntecc.com ks@lntecc.com vsramana@lntecc.com

Website:

www.lntecc.com

Activities, Structure and History:

Valued at US$5 billion, Larsen & Toubro (L&T) are the largest contractors in India with over 60 years of experience. L&T ECC and L&T Komatsu are the primary areas dealing with construction equipment. They also have interests in a number of other areas, including ship building, oil and gas, hydrocarbons, electronics and IT. L&T ECC recorded a revenue increase in 2006/07 of 16% to RS 10,068 crore. 85 of this increase was due to export revenues for off shore projects. L&T ECC take on lump sum turnkey construction projects (LSTK) with single source responsibility. To achieve this status in India is unusual and only the very largest contractors are awarded single source projects. In the F/Y 2006/07 L&T ECC projects sales were broken down into the following sectors: Buildings & Factories 28% Industrial Projects & Utilities 23% Power & Transmission Distribution 20% Transport Infrastructure 13% Hydrocarbon & Power 8% Hydro & Nuclear Powers & Foundation 6% L&T make platforms for the oil and gas sector in Gujarat. Agco valves are made in Chennai. L&T has a joint venture with L&T Komatsu in Bangalore, manufacturing excavators and a joint venture with Case in Delhi, manufacturing backhoes.

Their construction division, which is essentially the contracting arm of L&T, employs 14,000 engineers and professionals. They also employ 1 lakh of workmen through sub contractors. To reduce workforce attrition, L&T rotate the employed engineers around different locations, both in India and on their overseas projects to try and keep them motivated and keep them interested in what is going on. Their heavy engineering division supplies oil and gas and hydro carbons equipment to Saudi Arabia, Kuwait and Oman. In the UAE, L&T are primarily building residential housing. L&T are just signing a contract for the redevelopment of Mumbai airport and that would be worth 7,000 crore. Once the brief introduction was over, I was given a 45 minute tour and a 15 minute film of the L&T museum situated in a brand new award winning building on part of the huge L&T Chennai campus. The museum records the company’s 60 years rise from when its founders - Mr Larsen and Mr Toubro - came to India from Denmark. The museum featured, not only the history of the company, but records of all the major programmes they had undertaken in the past 60 years. In recent years, they appear to have covered about every infrastructure programme from roads, rail, airports, bridges, water, pipe laying to deep water ports, etc.

Sourcing:

The fleet size for the contracting side of L&T was worth $400m in equipment. L&T are adding another $16m worth of equipment in 2007/08. L&T source globally for major capital goods, but tend to use subcontractors for smaller equipment. They use their UAE office to procure tower cranes from Europe and also batching plants and ready-mix concrete equipment. They source equipment in the Gulf for projects that they are carrying out in the Gulf. They would also hire in smaller equipment from their local regional contractors. They use their own brand of excavators, L&T Komatsu, and they buy tunnelling equipment from Japan and Germany. Most of their crushing and screening equipment is Metso. They have started sourcing some equipment from China and they have opened an office there to look at equipment, but they are not planning any major orders, because as Indian manufacturers, they are concerned about dumping of Chinese equipment and they have been lobbying the Indian government about potential problems with dumping. Preferred suppliers of new crane / lifting equipment include: Demag, American Hoist, Manitowoc and Terex. Potain cranes from China had been purchased for their Dubai projects on a ‘buy back’ agreement. They felt these were of a very good quality and were lasting well. L&T own the biggest batching plant in Dubai at 2,400 M3, they also own a number of crushers, all of which are Metso. They have heavy duty cranes - over 100 tonnes up to 600 tonnes and they are buying some of those from Chinese manufactures. They have 90 cross-country pipeline pipe layers from China. They stated Chinese machines cost 75-100% less than buying a western machine, that the Chinese quality was much improved and that they were providing a market back up, which made it much more competitive.

Sales opportunities:

For the manufacturers of capital equipment, eg crushing and screening, paving and heavy excavators, there may opportunities for them to approach L&T directly. They have 3-4 airport projects at present, and they need road making batching plants for those. Most of their paving equipment is Wirtgen, Bitelli and Gomaco. They have Case and Volvo rollers, who have tie ins with Bomag. For smaller equipment, sales would be to the sub contractors. Details of Indian sub contractors can be found on the Builders Association of India website – http://www.bainet.org/directories.htm and registering as a user for $15 per annum.

Other Comments from Mr Sridharan:

They have an international operations office in Sharjah responsible for winning contract work in the region - worth about $45m per year. The office covers Saudi Arabia, Kuwait, Qatar, Sharjah and Abu Dhabi. They have an in-house equipment management service and they train operators to both service and operate the equipment. They work with the Construction Industry Development Council to try and offer opportunities for training and skills to fill the trained labour market gap. They said that part of the problem with not being able to get operators was that the Indian government now offered higher education on a wider basis. This resulted in workers whose fathers might have been small time contractors or just operators of machinery, weren’t now following the family trade, which was the tradition in India, they are getting a higher education and going to work in different industries. L&T run a school for construction skills training as part of their Chennai campus, and they also have L&T projects in all seven major metro centres in India. They approach unemployed youths to train them for seven key skills required in the construction industry, including how to become a builder, a plumber, a fitter, an electrician, etc. I mentioned the possible UK / India graduate exchange idea and they were very interested in that. They said that you could exchange students in the UK with the L&T institute interns as they already had that set up and they did have an existing programme, on a smaller basis, with an American university. They presently participated in the Japan Friendship Association who send student engineers to India. They thought that a UK initiative was a very good move for all concerned and felt that L&T would definitely support it. They said they tended to work with local contractors in the Gulf, because the Gulf States have their own site passport scheme for operators. This meant that it was difficult to bring Indian operators over to the Gulf because they wouldn’t have the right accreditation to get on site. They use agents based in the Gulf to find them suitable sub contractors. Because they are such a large contractor, they have individual business units within L&T that deal with tendering for various jobs. These include separate divisions for ports, airports, roads, factories, hydro carbons and form work. They already have equipment in place in the Gulf, so that gives them added credibility when they are tendering for projects in the Gulf. L&T are looking to increase their revenue at 20% per annum to come from overseas projects. In addition to the Gulf region, they are doing work in Kenya, Tanzania, Sri Lanka and Malaysia. L&T were asked about the replacement policy for their equipment. They said they had plant managers in seven regions in India and they were responsible

for the depreciation policy which was standardised throughout the company. When the book value has reached zero, or when the performance is significantly reduced, they are disposed of. They tend to use online auctions for disposal. There are no real problems sourcing replacement equipment quickly, as it can always be found in China or in the Indian domestic market, as it’s reasonably buoyant. The big problem is finding the manpower to operate it. A machine operator’s salary is 16,000 rupees a month plus benefits and that can go up to 25,000 rupees a month for a good operator that you want to retain. They said that if the Chinese wanted to be taken seriously as big players in the Indian market, they needed to get a lot more service and support engineers in the market and have a larger spares and stock inventory kept in India. They said with their capital equipment, some of their larger equipment is purchased on a ‘buy back’ agreement for the manufacturers to take back and refurbish and then sell on. They said that in addition to national organisations like CII there were also a number of state level organisations. They said that the Builders Association of India - and the Contractors Association that was part of it, were very good and that they would lobby on behalf of their members. They are talking with other manufacturers to form a manufacturer’s forum to lobby government against dumping by China and they are asking for increased duties and import taxes to be levied against the Chinese equipment manufacturers. They said that because they are a manufacturer as well as a contractor, this gives them an interest on both sides of the equation, but they are concerned that the Indian trade association was not in a position to effectively lobby the government. They said the CII was very effective for lobbying government on issues like taxation, import duties and sales tax, etc. However, they did not appear to have consulted them on the anti-dumping issue. They reiterated that there is no loyalty in the job market. There are abundant opportunities, which are a relatively new thing in India, people will offer more money and your labour force changes jobs very quickly. It’s interesting that although there are strict labour laws governing employees’ contracts, it doesn’t work the other way. Although it’s almost impossible to sack somebody once you have employed them, they can always go off after being offered more money and get another job. They confirmed (as heard elsewhere) that the Chinese government were exporting their prisoners to work on overseas contracts for Chinese contractors, particularly in the Gulf. They cited an example in Oman where prisoners had been sent as very cheap labour thus giving Chinese contractors the edge over anybody else.

Company Name: Mott MacDonald

Name and Position of Contact:

Mr Gaurav K Srivastava - Divisional Director

Address:

A-20, Sector-2, Noida, 201 301 (U.P.), India

Phone:

+91 120 254 3582

Fax:

+91 120 254 3562

E-mail:

gaurav.srivastava@mottmac-india.com

Website:

www.mottmac.in

Activities, Structure and History:

Mr Srivastava told me that Mott MacDonald took full control of the present company in 2001, but the Mott MacDonald consultancy had actually been present in India for 35 years. Mott MacDonald work as consultants on projects in: infrastructure (highways, ports and airports), tunnelling, oil and gas, power projects (including hydro thermal power, oil and gas generation), environmental infrastructure (such as water and sewerage), building (industrial and commercial) and building management. They also specialise in producing impact assessments. They have 100 crore turnover. They have 1,200 staff split between Mumbai, Chennai and Delhi. They are among the top 10 consultants globally. They work with the National Highways Authority of India who is their major client. They also work on the airport redevelopments with the airport developers; because a number of the airports are now being run as PPPs and BOTs (build, operate, transfer). From the India centres they also run consultancy activities in Nepal, Bangladesh, Bhutan, Sri Lanka and the Maldives where they are doing a sewerage project on behalf of the red cross.

What they want from UK:

Mott MacDonald is active in tunnelling – a very important and large market in India. They noted that there are no domestic manufacturers of tunnelling equipment, so opportunities exist for manufacturers.

Other Comments from Mr Srivastava:

All the global Mott MacDonald design is done in India. They employ architects, engineers, civil engineers, process engineers and quantity surveyors in India. As the privatisation of the Indian airports programme increases, Mott MacDonald is called in more often to be the lead technical supervisor on the redevelopment project. They are currently working on the redevelopment of Delhi airport and Delhi metro. They are very strong in this sector and have just won an award for

one of the new Delhi metro stations. They tender for government projects as pre-qualified consultants. In addition to general consultancy, they also offer design and build, quantity surveying, project management on highways, but not, so far, on the metro. They said that other big contractors they work with are L & T, Afcons, Gammon, the Hindustan Construction company and China Light & Power. I asked how quickly projects got underway once they were put out to tender. He said if the Indian government want things to happen quickly, it can be turned round on a very short timeframe. He cited the example of one of the Delhi metro stations, where the tender document went out and within a month, consultants had been appointed and then the contractors were appointed equally quickly. The Special Economic Zones (SEZs) are government priority, but they are finding it difficult to acquire enough land. India, as a democracy, differs from China where land acquisition is a formality. In India, land is mostly privately owned by farmers, and some of them are very reticent to sell. He said it was easier when building national highways, because they were designated by an Act of Parliament so land was compulsory purchased. He said that completing projects on time can be a problem, due to a shortage of good quality people and also due to problems with land acquisition. They are finding recruitment and retention of suitable employees difficult. India trains 300,000 engineers per year, but many go to IT and software companies, which are seen as a more prestigious posting. Many trained engineers that could work in the construction sector actually go to the Gulf where they could earn a lot more than in India. He said approximately 35 companies would tender for a highway contract, but Mott MacDonald tend to get the ones they want because of their reputation and track record. Around 10 companies would apply for a tender for the metro, as not so many companies are qualified to work on metro systems and so only 10 would be pre-qualified to bid on such a contract. He said aid funding is very significant in India for big projects. The Japanese government is funding the New Delhi metro system with soft loans and that will be done on a BOT system. Many of the improvement plans are aid funded and it is the aim that all areas should have access to running water, which is a programme of the Asia Development Bank (ADB). The improvement of rail systems and upgrading of freight corridors is an ADB and joint World Bank project. He mentioned that Bechtel were very active in India as consultants, contractors and developers, but their activity levels varied by sector. Mott MacDonald tends to focus on getting repeat client work because they feel they have a very good success rate. The Indian government appoint contractors separately from Mott MacDonald, ie the contractors are appointed totally separately to the consultants. However, if a project is particularly technical, then the person running the contract might approach Mott MacDonald for advice before appointing a contractor. He said that in some contracts, particularly the government where the work is very difficult, possibly in tunnelling or bridge building, contracts may state that machinery used on the project must not be more than one year old. He said that Health & Safety is a growing concern in India. It’s not quite as strict as it is in the UK, but legislation is strengthening and it’s much greater than it would be in some other Asian countries. He did say that the environmental impact of any project is a very strong concern. There is a requirement to carry out an environmental impact survey before any project is started.

The Indian government is very keen on making sure that all new projects are of a low environmental impact and to try and keep the air quality as good as possible. He said that Mott MacDonald have a very high safety standard with their employees. Safety is a priority, as is the training of operators to make sure they are operating in a safe environment.

Company Name: National Highways Authority of India

I was unable to make a personal visit to NHAI due to their week long conference held during my visit. Listed below are some details of the NHAI extracted from its website. The NHAI was cited by a number of companies that I visited as a key agency in the awarding of infrastructure projects.

Address:

G-5 & - Sector -10 Dwarka New Delhi, 110 075 India

Phone:

+91 11 250 93503

Fax:

+91 11 2509 3505

Website:

www.nhai.org

Activities, structure and history:

The National Highways Authority of India was constituted by an act of Parliament, the National Highways Authority of India Act 1988. It is responsible for the development, maintenance and management of National Highways entrusted to it and for matters connected or incidental thereto. The Authority was operationalised in February 1995 with the appointment of full time Chairman and other Members. Lists of contractors who have been awarded contracts by NHAI can be found on their website at http://www.nhai.org/listnhdpphase1.asp.

The Indian Road Network:

The main ongoing road building projects underway in India are the Golden Quadrilateral, linking Delhi, Mumbai, Chennai and Calcutta and the North/South (Srinagar to Cochin and Kanniakumari) and East/West Corridors (Porbandar to Silchar). Indian road network of 33 lakh Km.(one Lakh = 100,000) is second largest in the world and consists of : Length(In Km) Expressways 200 National Highways 66,590 State Highways 1,31,899 Major District Roads 4,67,763 Rural and Other Roads 26,50,000 Total Length 33 Lakhs Kms (Approx) Modal Shift About 65% of freight and 80% passenger traffic is carried by the roads. National Highways constitute only about 2% of the road network but carry about 40% of the total road traffic. The number of vehicles has been growing at an average pace of 10-16% per annum over the last five years.

Status of India’s National Highways as on 30th April 2008 Single Lane/Intermediate Lane 32% Double Lane 56% Four or more Lanes 12%

NHAI – Mandate:

TheNational Highways Authority of India (NHAI) is mandated to implement the National Highways Development Project (NHDP), which is India's largest ever highways project. World-class roads with uninterrupted traffic flow. The National Highways have a total length of 66,590 km to serve as the arterial network of the country. The development of National Highways is the responsibility of the Government of India. The Government of India has launched major initiatives to upgrade and strengthen National Highways through various phases of the National Highways Development project (NHDP), which are briefly:

• NHDP Phase I: NHDP Phase I was approved by Cabinet Committee on Economic Affairs (CCEA) in December 2000 at an estimated cost of Rs.30, 000 crore comprises mostly of GQ (5,846 km) and NS-EW Corridor (981km), port connectivity (356 km) and others (315 km).

• NHDP Phase II: NHDP Phase II was approved by CCEA in December

2003 at an estimated cost of Rs.34,339 crore (2002 prices) comprises mostly NS-EW Corridor (6,161 km) and other National Highways of 486 km length, the total length being 6,647 km. The total length of Phase II is 6,647 km.

• NHDP Phase-III: Government approved on 5.3.2005 upgradation and 4

laning of 4,035 km of National Highways on BOT basis at an estimated cost of Rs. 22,207 crores (2004 prices). Government approved in April 2007 upgradation and 4 laning at 8074 km at an estimated cost of Rs. 54,339 crore.

• NHDP Phase V: CCEA approved on 5.10.2006 six laning of 6,500 km

of existing 4 lane highways under NHDP Phase V (on DBFO basis). Six laning of 6,500 km includes 5,700 km of GQ and other stretches.

• NHDP Phase VI: CCEA approved in November 2006 for 1000 km of

expressways at an estimated cost of Rs. 16680 crs (1 crore =10 million). Further details can be found at http://morth.nic.in/index1.asp?linkid=63&langid=2

NHAI Policy Initiatives for Attracting Private Investment:

• Government will carry out all preparatory work including land acquisition and

utility removal. Right of way (ROW) to be made available to concessionaires. • NHAI / GOI to provide capital grant up to 40% of project cost to enhance

viability on a case to case basis. • 100% tax exemption for 5 years and 30% relief for next 5 years, which may

be availed of in 20 years. • Concession period allowed up to 30 years. • Arbitration and Conciliation Act 1996 based on UNICITRAL provisions. • In BOT projects entrepreneur are allowed to collect and retain tolls. • Duty free import of specified modern high capacity equipment for highway

construction.

Tendering and Procurement:

The NHAI controls the tendering and procurement process for all infrastructure projects under its auspices. Full details can be found at www.nhai.org/procurement_current.asp - which is updated daily.

Lists of contractors who have been awarded contracts by NHAI can be found on their web site at http://www.nhai.org/listnhdpphase1.asp.

Types of Projects and Bidding Process’s:

Types of Projects the NHAI undertakes 1. Build Operate and Transfer (BOT): In order to promote involvement of private sector in construction and maintenance of National Highways, projects are offered on BOT basis. Concession period, which can range up to thirty years, road is transferred back to NHAI by the Concessionaire. Projects of Delhi - Gurgaon Section (Access Controlled 8/6 Lane) and Nellore - Tada etc. are being executed on BOT basis. 2. Externally Aided Projects: NHAI is the implementing agency for executing projects for which loan assistance is available from Multilateral Development Agencies like ADB and World Bank or JIBC. In case of these projects, majority of the funds are transferred by Ministry of Road Transport & Highways to NHAI through budgetary route and NHAI receives agency charges for executing these projects. 3. NHAI funded Projects: NHAI receives funds for augmenting its capital base from the Government through annual budgets or by Market borrowing. Bidding process : General procedure for selection is a two-stage bidding comprising of:

• Stage 1: Pre-qualification - on basis of technical and financial expertise of the firm and its track records on similar projects.

• Stage 2: Commercial bids from pre-qualified bidders. There is a time lag between stage 1 and 2.

Wide publicity is given to NHAI tenders so as to attract attention of leading Contractors / consultants. Notice inviting tenders is posted on this website and published in leading newspapers. Final selection: If a project is funded by a Multilateral funding agency like World Bank, ADB, selection is with consultation / concurrence of the funding organisation. For other types of projects selection is as per standards work procedures. Different Procurement Procedures International Competitive Bidding(ICB) Projects financed by international lending agencies & for larger projects for which sufficient nos. of domestic consultants /contractors/consortium are not available. Local (National) Competitive Bidding (LCB/NCB) Projects financed by NHAI (in general) Consultancy Services What are Consultancy Services?

• IT Services • Feasibility studies and project preparation • Construction Supervision • Highway Sector Studies • Others

Procurement of Consultants is mostly on

• Quality and Cost based selection • Quality based selection • Single Source Selection (sometime)

What Constitutes a Consultancy - Technical Proposal (TP) & Financial Proposal (FP)? Technical Proposal

• Background information ,experience in similar works • Approach & methodology, work programme • Manning schedule ,bio-data of key-personnel • Comments on TOR & Associated arrangements if any

Financial Proposal

• Lump Sum, Cost plus fee basis ,out-of-pocket expenses ,man month rates

• Travelling & transport, Office accommodation, Stationery • Computer & Equipment charges, supply of equipment • Support Staff

Steps in Quality & Cost Based Selection of Consultants - Preparation of Terms of Reference (TOR)

• Preparation of Short List o Open Advertisement On & of entire pre-qualification document o Long List from : Lending Agencies & Available with NHAI

• Issue of Letter of Invitation and TOR and Draft Agreement • Receipt of Technical Proposal (TP) & Financial Proposal(FP) • Evaluation By Committee of TP • Opening of FP of Consultants who qualify in TP

o In the Presence of Representatives of Consultants o Marks obtained in TP are informed prior to opening of FP

• Combined Evaluation of TP & FP • Negotiations on technical issues with highest ranked consultant • Work Award

How and When Quality & Single Source Selection of Consultants

• Quality Based Selection : Adopted by ADB & JIBC o After Evaluation of Technical Proposal , the financial proposal of

Highest ranked consultant is negotiated, by a committee o After Successful negotiation, work is awarded

• Single Source Selection : In Urgent Cases Only o Where Work An Extension of Existing study, by same firm... o Where rapid Selection is Essential o Where the firm has excellent experience in the particular field

Steps in Civil Works Contract Procurement

• Invitation to Contractors to Pre-Qualify o Pre-Qualification of Contractors o Issue of Tender (BID) documents to pre-qualified contractors o Receipt of tenders &opening of tenders in the presence of

tenderers o Evaluation of Tenders o Award of Contract

Details of Civil Works Contract Procurement

• Pre-Qualification of Contractors o Press Notification & Entire PQ Document on www.nhai.org o Submission of PQ Applications o Evaluation Parameters

Financial • Average annual turnover, bid capacity, liquid

assets o Technical

Personnel Organization ,plant and equipment o Experience in Similar Works Track Record

Satisfactory timely completion &litigation o Evaluation of Tenders

Bid Security, Completeness and signed, correction of computational errors.

o Technical Security

Substantial Responsiveness • A tender which confirms to all the terms,

conditions and specifications of the tender documents , without material deviation

o Only Substantially bids are compared Award of work to the lowest evaluated bidder

What generally Constitutes a BID document?

• Volume I o Instructions to Bidders ,conditions of contract ,special conditions

• Volume II o Technical Specifications

• Volume III o Form of BID, bill of quantities, schedules, model forms

• Volume IV o Drawings

Key parameters of procurement of civil works under International Competitive Bidding

• Currency Conversion o All amounts are converted into single currency at the exchange

rate on the date of BID opening. • Price Preference

o Price preference for domestic bidders.

Company Name: Off-Highway Research, India Private Ltd

Name and Position of Contact:

Nitin Sareen Chief Representative

Address:

Off-Highway Research India Private Limited Suite 605, Paharpur Business Centre 21, Nehru Place Greens New Delhi – 110019 India

Phone:

+91 11 2620 7644-48

Fax:

+91 11 2620 7643

E-mail:

mail@offhighway.co.in

Website:

www.offhighway.co.in

Activities, structure and history:

Off-Highway Research is a management consultancy specialising in the research and analysis of international construction, and agricultural equipment markets, and is the largest of its kind in the world. The consultancy was formed in 1981 as part of The Economist Intelligence Unit (EIU) and is now privately owned. Off-Highway Research offers international research expertise to the construction, earthmoving, mining, industrial and agricultural equipment industries. This specialist capability, offered by offices in the UK, China, India, the USA and Japan, is available through a combination of Subscription Services and Private Client Research. The company is staffed by industry specialists with a wide range of industry, language and consultancy skills, and is supported by a unique database of information. Over the last five years, Off-Highway Research has worked for over 600 clients in 37 countries. Off-Highway opened its China office in 2002. Following this successful model Off-Highway Research India was founded in 2007, recruiting an industry specialist, Nitin Sareen, from Terex Vectra and formerly JCB to head up the office.

The Indian Service:

This research service is available on annual subscription and provides subscribers with detailed analyses of equipment markets and the major manufacturers of equipment. Alternatively reports can be bought individually. The Service was launched on 1 January 2008, and Reports are now available on subscription:

• Backhoe Loaders - March 2008 • Agricultural Tractors - April 2008 • Hydraulic Excavators * • Compaction Equipment - May 2008 • Wheeled Loaders *

• Asphalt Finishers * • Dump Trucks * • Mobile Cranes * *Due/Update 2008 – 2009

Company Profiles - Objective analyses of major construction equipment manufacturers or component suppliers. Typical coverage includes: Company Structure, Ownership, Financial Analysis, Manufacturing Facilities, Marketing and Distribution, Production, Component Sourcing, Research and Development and Employees:

• JCB India * • Voltas * • Caterpillar India * • Mahindra and Mahindra * *Due/Update 2008 – 2009

Monthly Market Reports are also available. These reports include the monitoring of important regional developments. Topics include:

• Mergers and Joint Ventures • Company Profiles • Product and Market Trends • New Products • Financial Results • Economic Trends

Opportunities for UK Companies:

Off Highway Research India can undertake specific individual client studies for companies wishing to research the Indian market in more depth. They can also assist UK manufacturers looking to set up in India or find partners.

Company Name: Punj Lloyd Ltd Name and Position of Contact:

Mr M P Venkatachalam – Advisor - Plant & Equipment Mr Sandeep Garg – President - Plant & Equipment

Address:

Punj Lloyd Ltd Corporate Office II, 95 Institutional Area, Sector 32, Gurgaon 122001, India

Phone:

+91 124 262 0123

Fax:

+91 124 262 0777

Mobile:

+91 9818 6020 02

E-mail:

mpv@punjlloyd.com sgarg@punjlloyd.com

Website:

www.punjlloyd.com

Activities, Structure and History:

One of the leading contractors in India. Mr Venkatachalam was introduced to me by Jimmy Poll of BSP. Punj Lloyd is involved in the following types of construction projects.

• Infrastructure • Water • Real estate • Ports • Airports • Roads • Pipelines

They operate primarily in India, but have implemented projects in Qatar and Indonesia.

Opportunities for the UK:

He said there was a good opportunity for companies to import used equipment and then recondition it in India. This would be subject to prevailing tariffs and regulations - which the Indian government varies.

Partnerships:

They sub contract some work to smaller contractors to meet deadlines. Punj Lloyd has a wholly owned UK subsidiary - Simon Carves Ltd.

Sourcing:

The Punj Lloyd inventory of equipment was currently worth between US$270m and US$280m – an inventory list is available. Rather than having a long term strategy for asset acquisitions they said that, as there is such a shortage of new machinery in India they just have to purchase what is available now. The long delivery dates from global

manufacturers did not help their cause when selling into India. He said that manufacturers both in India and globally hadn’t been prepared for the phenomenal growth rate of the construction sector in India and so there was a shortage of machines. Most people were working on short term strategies and not long term. When asked about their acquisition and replacement policy, they said they weren’t getting rid of any of their machines as they needed to use everything they had. This meant having machines serviced and repaired rather than replaced. He said their policy was based on acquisition cost and not life cycle cost. India is a very price sensitive market and the cost of the equipment is very important. Punj Lloyd did not buy any new machinery until they had been awarded the contract. Punj Lloyd used to buy regularly from global OEMs, but because they were not prepared for the rapid rise of the Indian construction equipment sector, they were just taking too long to deliver and were failing to meet any of the deadlines required by contractors. Chinese manufacturers were stepping in as they had over-capacity and were now exporting large amounts of Chinese manufactured equipment to India. Punj Lloyd was purchasing this equipment because a) the price could be up to 50% cheaper than buying a similar machine manufactured in Europe, Japan or America. b) it was delivered very quickly. c) the Chinese were providing service engineers to support the product in the short term. d) the Chinese manufacturers were also supplying loan machines free of charge if any of the machines broke down, meaning no downtime while the machine was being repaired. This obviously raises some questions on anti-dumping laws and as both China and India are signatories to WTO, there are concerns raised that the Chinese are dumping equipment on the Indian market. He said that Chinese quality was not the best, but the quick delivery and the price differential made the equipment very attractive to them. When asked whether the lower quality of the Chinese products was a problem with regard to downtime, he said as well as them supplying loan machines and service engineers, down time was not a huge issue in meeting time constraints in projects. What tended to be the biggest constraint to meeting deadlines was time lost to outside factors like planning appeals, land acquisition and government bureaucracy. He said the Chinese kept a large amount of excess inventory in market so supply was never a problem. He quoted that Shantui had given him five motor graders in case of breakdown when he purchased 15 motor graders from them. European machinery was far too expensive, partly because the euro and the pound were too strong and the costs of manufacturing in Europe were getting higher. He couldn’t see, in the short term, how it was ever going to be possible for him to buy European equipment where there was another cheaper alternative. They would like to buy locally produced machines by global manufacturers to avoid the 35-36% import duties that were presently levied on capital goods. He also said the other problems that prevented them buying European and American equipment was that shipping costs were very high and it was also hard to meet deadlines for delivery as it was increasingly difficult to get space

on ships. Western equipment tended to be too technical and had too much computerisation in the cabs. Most of the workforce were either illiterate or had a very low level of education and so lacked the technical ability to actually operate these machines. He said there was a big resistance in the domestic labour pool to operate a high tech global standard machine because they were frightened of breaking them and then they would lose their jobs. There was a demand for less sophisticated equipment actually designed for the local market that could also be repaired on site instead of having to be taken off to a high tech workshop. The one problem with Chinese equipment that he could foresee was that, although they had good short term follow up with service engineers, they might not be able to actually supply enough service engineers once they were selling higher volumes of equipment. This meant contractors could be stuck with machines that broke down and have nobody to repair them. They are buying machines from XCMG in China and he thought that they would be better at supporting their equipment as they had already got service engineers in India. Punj Lloyd bring in all cranes second hand from Japan. This is because in Japan cranes are only allowed to work so many thousand hours before they have to either be reconditioned or stop being used in Japan. Therefore they are shipped to India and reconditioned and then bought by contractors. Brands included Tadano cranes and Sumitomo. Punj Lloyd are also buying equipment from Russia, which they felt was a booming source of construction equipment. He visited Russia almost every month to talk to new suppliers. He said the big problem with buying anything from Russia, as also in China, was that they can’t speak any English, but the fact that Russian equipment was 50% cheaper than global kit got round that problem. They were buying tractors and 110 pipe-laying machines from Russia.

Other Comments from Mr Garg and Mr Venkatachalam:

It was hard to have a long term planning strategy for the company because the sector was subject to continuous change. Every time the national or a state government changed, then projects tended to get halted and altered, so it was very difficult to have any kind of long term vision for the company. Interest rates were substantially higher in India than in western countries meaning that the cost of financing equipment was quite high. Punj Lloyd was growing rapidly at an average of 40% per annum and so have an ongoing need for capital equipment. There is a very small resale market because a) contractors are not selling any of their assets and b) the equipment that was finally got rid of by contractors tended to be virtually worn out and needed completely reconditioning because of the working conditions in the market. The machines tend to work in extremes of temperature and they are pushed to the very limits of their working tolerance. Indian contractors were very busy and there were a lot of smaller contractors entering the market. However, Indian government pre-qualification rules for tendering meant the contractors had to be of a certain size and experience. Smaller contractors were going to Malaysia and other ASEAN countries and either buying or forming joint ventures with existing contractors in those countries to get round the size issues for pre-qualifying. He said these smaller companies then bid for contracts and many are successful on the smaller Indian contracts.

He said the global companies that were successful in India were the ones who were also manufacturing there, or who made equipment that wasn’t made in the domestic market or that the Chinese hadn’t really started producing in bulk yet. He mentioned niche companies who had been successful in India, including Metso Minerals, Sandvik and Wirtgen and other companies making crushing and screening equipment which attracted much lower import tariffs. He also mentioned batching plants, hotmix plants and other road building equipment. He said Apollo Hotmix was a big player in India and also Komatsu had done very well through their joint venture with L & T. International project purchasing policy – usually plant sourced locally or sub contracted it in from local contractors. Sometimes it was cheaper to buy it in India and ship it rather than buying it in the Gulf. The average factory wage for somebody working in a construction equipment factory was $100-$200 per month. He reiterated that India was a very price sensitive market which required good after market support. If that wasn’t forthcoming, then the customers wouldn’t forget that and wouldn’t go back to those suppliers. So perhaps a glimmer of light at the end of the tunnel for UK manufacturers, if the Chinese manufacturers don’t actually supply the after market support expected. However he did say the Chinese were going to great lengths to learn to speak English so they could service the machines more efficiently in India! There was definitely a need for bringing in used equipment and either refurbishing it or remanufacturing it in India. He thought the Italians were already refurbishing equipment in India in bonded warehouses in the SEZ (Special Economic Zones) so it wasn’t attracting any duty until it was ready to go out of the bonded warehouse and into the market.

Company Name: Quippo Infrastructure Equipment Ltd

Name and Position of Contact:

Sanjay Khanna - Vice President Sunil Kanoria - MD of Srei - Construction Equipment Financing

Address:

D-2, Southern Park, Saket Place, Saket New Delhi, (110 017) India

Phone:

+(91)-(11)-30615600 +91 931 0920021 +91 098 30078645

Fax:

Fax :+(91)-(11)-30615699

E-mail:

sales@quippoworld.com

Website:

www.quippoworld.com www.srei.com

Activities, Structure and History:

Quippo has been sponsored by SREI, an Indian non-banking financial institution. It started its operations in early 2002. Quipo is involved in the financing of infrastructure, construction and mining equipment, infrastructure project finance and renewable energy systems. Quippo is claimed to be India’s largest infrastructure equipment rental company, servicing construction, mining, oil and gas, telecom and energy. In addition to its assets for construction and other infrastructure sectors, Quippo has a large pool of fully trained operations and maintenance personnel spread across various sites in India. Quippo, through its subsidiaries, is involved in the renting of towers to Indian telecom operators. It’s oil and gas subsidiary rents on-shore drilling rigs to oil majors and provides associated services. It has a strategic tie up with a global service provider in the oil and gas business. Other emerging businesses of Quippo include a JV with Henry Butcher, a UK company that provides plant and machinery valuation and conducts equipment auctions. Another JV of Quippo is with Larsen & Turbo and others for its operations in the southern states of India. It has an energy rental business using small gas-based generators for a combined power and heating or chilling solution. Quippo has recently broken into the mining sector with large mining projects announced in coal, iron ore and bauxite fields as Quippo Mining Division. Presently the total assets of Quippo are approx. 500 Crores (USD 125 Million) and Revenues generated are Rs 130 Crores (USD 32 Million). Divisions Construction Equipment Rental

• Rents earthmoving, concreting and general construction equipment on

daily, weekly, monthly and yearly basis. • Provides trained, qualified and experienced operators with the

equipment. • Provides onsite repairs and maintenance. • Advice on equipment suitability based on applications. • Bid support Provides OEM and quality in-house maintenance of

equipment. • Supported by in-house genuine spare parts inventories to ensure

minimum maintenance and down time. Energy Rental

• Rents environmentally friendly gas based power solutions on short-medium terms.

• Each modular unit is of 600 KW - 1300 KW housed in rugged containers.

• Provides power plants up to 10 MWs combining multiple units. • Comprehensive solutions including engineering management,

maintenance, operators and spares/ consumables. • Heat recovery and chilling solutions.

Quippo Mining QUIPPO Mining Division is aimed at bridging the needs of the mining industry. Potential areas of interest and cooperation include:

• Mining equipment rental. • Mining systems and technology platform. • Mining JV for execution of large contracts. • Mine develop and operate (MDO). • Coal or hydropower project development.

Subsidiaries Quippo Oil & Gas Infrastructure Limited

• Provides state of the art drilling equipment. • Provides trained, qualified and experienced operators. • Provides advisory services for equipment suitability and equipment

purchases. • Provides banking facility for idle equipment. • Current portfolio includes 3 state-of-the-art rigs.

Quippo Telecom Infrastructure Limited • Provides complete "Plug-n-Play" service for telecom service operators. • Holding IP-1 License for Passive Infrastructure Service. • Only Indian company with successful on-ground experience in tower

rental and co-location. • Upgraded world's first ever multi technology, multi shared tower, used

by six operators. • Has 600 projects on air along with contracts with Bharti, Idea, Spice.

Joint Ventures / Associates Asset Valuation & Disposal A 50:50 JV between Quippo Infrastructure Equipment Ltd and GoIndustry Henry Butcher International.

• Provides plant and machinery valuations. • Provides online, offline auctioning and disposal services for plant and

machinery. • Only Indian company focused on valuation and disposal of plant and

machinery.

NACIEL • Rents high value, multi-purpose, specialised and general purpose

equipment. • Provides trained operators with the equipment. • Provides on-site repairs and maintenance. • Accepts deposits of idle equipment from various sources, deploys

them effectively and provides returns thereon to equipment owners on their idle assets.

Quippo stock inventory includes:

• JCB - 3D, 3DX and 20 JF210 Excavators x 40 • CAT Motor graders x 10, 320 Hydraulic Excavator x 20 • Komatsu - TC200/10 x 20, Motor graders x 10 • Concrete pumps - Schwingsetter & Putzmeister x 80 • Transit concrete mixers x 250 • Tandem rollers x 50 - various brands • Soil compactors x 60 - Ingersoll Rand and Escort brands • Variety of cranes, including mobile cranes from Kato, Sumitomo,

Grove, Thorn, Leibherr and Demag and they have them in 20 tonne, 25 tonne, 35 tonne, 45 tonne, 60 tonne, 65 tonne, 100 tonne, 110 tonne

• Piling rigs from Mate and Drive Soil • Scissors lift - JLG x16 • TATA dump trucks x 50 • CAT wheeled loaders with 1.7 cubic metre bucket x 15 • Russian built 180hp dozers • Walk behind rollers • Potain tower crane x 1 • Ace tower cranes - several

Opportunities for the UK:

Quippo are looking to expand their rental operation and might be interested in buying any equipment from the UK that is not already covered in their fleet.

Other opportunities, etc:

Leasing - for Quippo to represent manufacturers in the UK. To offer finance packages for UK manufacturers selling into India.

Other Comments Mr Khanna and Mr Kanoria:

Quippo presently have 16,000 customers, which include construction equipment companies, contractors and small own to rent operators. They work with major manufacturers to support their products and offer finance to people buying OEM products in India. They also work with global OEMs including Volvo, Caterpillar, Komatsu, Ingersoll Rand and JCB. They have approached John Deere and are hoping to represent them with finance. They are starting to represent Chinese companies including XCMG and Sany and they are looking for new manufactures to represent. Quippo are renting equipment to major Indian contractors, including L&T, Hindustan Construction and Simplex on a rental and dry-lease basis. Their fleet is valued around US$60m and they have a network of rental depots throughout India. They are represented in all the major metro centres. They offer a fully trained maintenance team and will also provide operators

when the equipment is rented, if necessary. Their rental fleet does not presently include any Chinese machines; they prefer to represent global brands.

Company Name: Sundram Fasteners Ltd - part of TVS Group

Name and Position of Contact:

Achal Raghavan - Vice President - Business Development

Address:

18/1 Vanivilas Road, Vasavanvugdi, Bangalore-560004, India

Phone:

+91 80 265 72149

Mobile:

+91 9880 8886 44

E-mail:

raghavan@mail.sfl.co.in

Website:

www.sundram.com

Activities, Structure and History:

Sundram Fasteners is the flagship company of the TVS Group - a US$3 billion conglomerate. 2007 revenue - Rs.1577 crore (US $ 364 million). Sundram Fasteners has a turnover of $400m per year of which $100m is international trade and $80m is exports from India. Sundram is a winner of TPM Excellence / TPM consistency award. They were the first Indian company to be ISO 9000 certified. All operations are ISO 9000, IS 14001 & TS 16949 certified. 20% of TVS is publicly owned. They have a unique industrial relations record - not a single working day lost to strikes since inception. TVS Sundram wholly own Cramlington Precision Forge in Northumberland, UK. TVS bought the company from Dana Corp. TVS plan to keep manufacturing in the North East. Cramlington Precision Forge manufacture couplings and gears and hot forge and machining components for commercial vehicles. They manufacture for the UK and European markets. Clients included MAN, Scania. They have recently invested in the plant and put in a new 4000 tonne press. TVS Sundram also own a German company called Peiner Unformtechnik GmbH, previously owned by Textron. In China they own a company called Sundram Fasteners (Zhejiang) Limited. Sundram started by manufacturing fasteners for the automotive sector. They now manufacture:- Products

• Fasteners • Radiator Caps • Powder Metal Parts • Cold Extruded Parts • Hot Forged Parts • Pumps & Assemblies

What they want from UK:

TVS Sundram are interested in acquisitions for companies within their sector.

Sourcing:

They are very much looking for further acquisitions and want to expand their position as a global player in the component sourcing market.

Selling Components:

They are always interested to meet potential new customers and are interested in working with UK OEMs and Tier Ones.

Other opportunities etc:

Opportunity for UK companies to:

• find a partner in India to source components and be prepared to work with them to design components and

• merge or have a joint venture with an Indian company. This might be the right one if they are in a similar sector of the market.

Other Comments from Mr Raghavan:

If they bought an acquisition overseas, their company strategy was to keep it going and not ship the business to India. They were very keen on motivating the staff in the local market factories. Their Indian manufacturing plants are mainly in the south of India, but they are starting to expand into the north of the country. The infrastructure of India provides a challenge for the ‘just in time’ supply that their customers want. They are presently supplying in the Indian market:- Beml, Volvo and L & T Komatsu. Very interested in talking to JCB in Pune. Looking to actively diversify their portfolio of customers to balance geographical regions against customers. Historically they have only supplied the automotive sector because construction equipment has been too low volume to make market entry feasible. He cited that some of their machines are extremely high volume - making 400 parts per minute. They now believe that they have opportunities to supply into the global CE supply chain as models become standardised around the world so that parts become higher volume. Trying to improve their manufacturing process by becoming more flexible. They are instigating flexible production cells on the shop floor to look at high variety and low volume products. Looking at construction equipment as another source of income because they think the commercial vehicle market has plateaued because of the governments plan to put a break on economy to prevent inflation. Domestic sales provides the bread and butter of their income analogy - it’s the ground floor that provides the stability for the company which gives them the opportunity to expand their international business to really take off to the top floor of international business which cannot flourish unless the ground floor is stable. Like all the other companies, it was very difficult to find good trained engineers to work and also to retain them. He asked if we would be interested in starting some sort of programme of global talent exchange, possibly with a working title of ‘Global Presence/Global Talent’ to try and help reduce the attrition rate of the domestic workforce. Engineers in the UK would come and work in India for 1,2 or 3 years, then Indian engineers would come back to the UK in exchange - both learning a lot from the process. The CEA and CII would be the conduits of this and work as a clearing house for the two way exchange of employment. This would probably be web based. (Note – The British Consulate in Chennai

were interested in this approach and asked CEA to come up with proposals). Raghavan teaches at a management graduate school in Chennai, which he does free of charge. He sees it as a source of employees for his business and he thinks it’s important that Indian industry takes ownership for making sure there are enough trained engineers - it’s no good sitting back and waiting for something to happen. JO explained how the RDAs worked in the UK and suggested he contacted One North East to see if there was any funding he could get for R & D for his Cramlington factory. He said he would possibly be interested in coming to events in the UK if there were the right sort of people he could meet. He would definitely be interested to coming to events in India to meet with new customers.

Company Name: Telco Construction Equipment Co Ltd Telcon – a Tata Hitachi Joint Venture

Name and Position of Contact:

V R Raje - Vice President & General Manager (Sales and Marketing) Vijay Kumar M - Chief (Marketing) Suresh Nair - Assistant General Manager (Business Developments)

Address:

Jubilee Building, 45 Museum Road, Bangalore 560025 India

Phone:

+91 80 2558 3345

Fax:

+91 80 2558 3343

E-mail:

vraje@telcon.co.in vk@telcon.co.in Suresh.Nair@telcon.co.in

Website:

www.telcon.co.in

Activities, structure and history:

Telco Construction Equipment Co Ltd is a joint venture company between the Indian automobile giant Tata Engineering Ltd, Mumbai and the Hitachi Construction Machinery Co Ltd, Japan. Telcon has plants in Darhawad - 400km form Bangalore, Jamshedpur nr Calcutta and a third plant planned for the end of 2008. Telco started operations in 1961 with the manufacture of friction machines in collaboration with P&H, USA. It is now spreading its reach overseas and has already supplied equipment to Asian, African and Middle Eastern countries. Telcon has associations with other CE manufacturers such as Hitachi, John Deere, Euclid, Tadano, ZF. Telcon is a joint venture between TATA and Hitachi. TATA own 60%, Hitachi own 40%. The joint venture started in 1999 and before that Telcon was a division of TATA motors. The Telcon turnover in 2006 was $500m. They are aiming to increase that turnover to $2 billion by 2011/2012. Telcon:

• Manufacture 14 models of Hitachi excavator from 2 tonnes to 220 tonnes. • Manufacture wheel loaders of their own design of 12 tonnes with a 2.5

cubic meter bucket. • Manufacture backhoes in a joint venture with John Deere. • Manufacture motor graders, compaction equipment 10 tonne to 12 tonne. • Manufacture compaction equipment of under 4 tonnes with Hitachi. • Importing agents for Sumitomo Crawler cranes, also Tadano rubber tyred

and all terrain cranes from Japan, Takraf surface miners (previously manufactured by Mann, Germany).

• Import or make Euclid trucks - 35 tonnes, developing a 60 tonne truck. • Crawler cranes - 50 and 75 tonnes. • Leaders in hydraulic excavators in India - 55% share. • No 2 in wheel loader in India - 30% share. • No 2 in backhoe - 12% share. • Plants in Darhawad - 400km form Bangalore, Jamshedpur nr Calcutta and

3rd plant planned for end 2008. • They are predicting to produce 10,000 in 2007 and have a year on annual

growth rate of 45% on average. • 95% machines sold in domestic market with 5% balance exported in the

local region and the sub continent to Sri Lanka, Maldives, Bangladesh, Nepal with a little bit to Middle East and Africa.

Focusing not on export, but to domestic markets. This is because Hitachi already has the rights for exports in other markets so in effect they would be competing against themselves. They will manufacture components for the export market, initially to other Hitachi plants, fabrications, gears etc. Looking for tie ups with:

• Manufacturers of paving equipment. • Flip form and asphalt pavers. • Skidsteer loaders. • Forklift trucks. • Mining equipment. • Manufacturers of concrete pumps to represent. • Interested in hearing from companies manufacturing hydraulics, backhoe

axles and transmissions. • Already use Wylie safeload indicators in their equipment, but would be

interested in talking to other manufacturers who are manufacturing retrofit products.

• UK manufacturers of rock breakers so they can represent them in India. • Manufacturers of cabs, with a view to possibly setting up a joint venture in

India, because they feel the quality and design is not up to an international standard.

• Manufacturers of cab seating. • Manufacturers of site dumpers. • UK companies for talks regarding designing, styling and improving the

aesthetics of their vehicles. • Interested in coming to the UK and meeting potential partners.

Selling Components:

Telcon Equipment - Sourcing of components - 80% of components are imported primarily from Hitachi, Japan in the first year of the machines development. As a machine gets established and gets older in the Indian domestic market, then the percentage of imported components tend to drop to 35-40% after 3-4 years as components are progressively manufactured in India. The 35-40% stays steady for about the next 4 years of the model’s life. Products which are nearly always imported tend to be for critical components like hydraulics, electric switches and switch motors.

Other opportunities:

Telcon would be interested in participating in an exchange programme of engineers and service engineers. Hitachi has a shortage of service engineers in their global dealerships so Telcon have set up a school in India to train service engineers. They have a pool of around 700 trained service engineers to support Hitachi equipment. Around 100 new service engineers are inducted into this programme every year. Once trained, they then go out into the field to work on the Hitachi equipment. Telcon might be interested in expanding this programme to train engineers to service other manufacturers’ equipment. They felt that because it’s hard to retain good staff in India, the opportunity for travel to other countries and some sort of global exchange programme might help with the retention of service engineers.

Other Comments from Mr Raje:

Telcon are concerned about the Chinese manufacturers dumping cheap goods in the Indian market. Mr Raje is active in the CII who are making representations to the Indian government through the Indian Construction Equipment Manufacturers

Association / CII to investigate anti-dumping laws. Sany, Liugong, Fushan Cranes already active in India. XCMG now have a tie in with BEML in India. Chinese equipment is good for the first 7,000 -10,000hrs, but after that they aren’t so sure about how the maintenance will be supported if there aren’t enough on site service engineers. The Chinese machinery is better than it used to be, but support and infrastructure for keeping it on the road is not yet in place in India. Indian end users that are currently buying construction equipment in Europe will keep with established players rather than just buying Chinese equipment even though it’s 25-50% cheaper, as it may be a false economy. If the equipment is off the road for a long time waiting for a service engineer – the purchase price is not so important. He cited the example of some Korean rock breakers they used to be the importing agents for and had 45% of the market share. They found that as the equipment got older, it broke down more often than globally produced equipment, even though it was 25% cheaper. Users were now returning to established global manufacturers for replacement equipment.