150 CAGR: 16.8% 125.4 100 Increasing industrialisation and economic development to drive capital goods & engineering market 57.6 50 0 2012 2017 2012 Capital goods & engineering turnover expected to reach USD125.4 billion by 2017 from USD57.6 billion in 2012 2017 150 CAGR: 14.2% 100 50 Expansion in the electrical equipment industry 105 24.2 0 2011 2011 60 2022 2022 CAGR: 19.0% Electrical equipment market size forecasted to reach USD105 billion by 2022 from USD24.2 billion in 2011 45 40 Engineering research & design segment revenues to increase fourfold by 2020 20 11.2 0 2012 2020 2012 ER&D revenues projected to reach USD45 billion in 2020 from USD11.2 billion in 2012 2020 Source: Dept of Heavy Industries, India Electrical and Electronics Manufacturer Association, NASSCOM, Aranca Research Notes: CG - Capital Goods, ER&D - Engineering Research & Design 30 22.7 CAGR: 28.8% 20 Indian construction equipment market to grow sevenfold from 2012 to 2020 10 3 0 2012 2020 2012 40 Construction equipment market projected to reach USD22.7 billion by 2020 from USD3 billion in 2012 2020 37 CAGR: 9.7% 30 20 Indian telecom equipment market to more than double by 2020 16 10 0 2011 2020 2011 2020 10.7 11 10 Increased production of Central Public Sector Enterprise (CPSE) Telecom equipment market to reach USD37 billion by 2020 from USD16 billion in 2011 9.3 9 8 2013 2014 2013 Production of CPSE under DHI to aggregate USD10.7 billion by 2014 from USD9.3 billion in 2012-13 2014 Source: Booz & Company, Volvo India Ltd, Estimates, Ministry of Heavy Industries and Public Enterprise, Aranca Research Notes: DHI - Dept. Of Heavy Industries, CPSE - Central Public Sector Enterprise Attractive opportunities Growingdemand demand Growing FY13 • Engineering exports from India: USD56.7 billion • Capacity creation in sectors such as infrastructure, power, mining, oil & gas, refinery, steel, automotives, and consumer durables driving demand in the engineering sector • • Rising demand for electrical and construction equipment Nuclear capacity expansion to provide significant business opportunities to the electrical machinery industry Rapid increase in infrastructure investment and industrial production to fuel further growth FY14 Engineering exports from India: USD62.3 billion Advantage India Policy support Higher investments • • Comparative advantage vis-à-vis peers in terms of manufacturing costs, market knowledge, technology and creativity Highly organised sector, dominated by large players employing over four million skilled and semi-skilled labour • De-licensed engineering sector; 100 per cent FDI permitted • Cumulative FDI at USD19.4 billion over April 2000–March 2014 due to policy support Source: Government of India, Ministry of Heavy Industries, Department of Industrial Policy & Promotion, India Electrical and Electronics Manufacturer Association, Aranca Research Notes: FDI - Foreign Direct Investment, FY - Indian Financial Year (April – March), USD - US dollar Heavy electrical Heavy engineering Heavy engineering and machine tools Automotive Engineering Low technology products Light engineering High technology products • Boilers The Indian boiler industry has the capability to manufacture boilers with super critical parameters up to 1000 MW unit size • The industry’s market size was USD5.1 billion in FY12 and is expected to reach USD5.8 billion in FY17 and USD11.7 billion in FY22 • Turbines and generator sets The industry manufactures various turbines in the range of 800–7000 MW per annum, and generators ranging from 0.5 KVA to (ones even higher than) 25,000 KVA • Total production of turbines and generators stood at US2.2 billion in FY12 and is estimated to reach USD6.6 billion by FY17 and USD13.4 billion by FY22 • Transformers Switchgear and control gear A whole range of power and distribution transformers, including special type of transformers required for furnaces, electric tracts and rectifiers, are manufactured in the country • The transformers market in India was valued at USD2.7 billion in FY11 and is expected to reach USD5.9 billion in FY17 and USD11.1 billion in FY22 • • About 32.6 million switchgears and control gears were produced in FY12 The switchgear market size touched USD2.0 billion in FY12 and is projected to reach USD4.4 billion in FY17 and USD8.2 billion in FY22 Source: Ministry of Heavy Industries and Public Enterprise Annual Report 2012-13, Aranca Research Notes: MW - Mega Watt, KVA - KiloVolt - Ampere • Machine tools This segment churns out basic machinery for all major industries and determines competitiveness in other sectors such as automobiles, heavy electrical and defence • Nearly 200 machine tool manufacturers are operational in the organised sector along with 400 small-scale units • Production of machine tools totalled USD900 million, while exports stood at USD288.7 million in FY12 • Textile machinery It comprises over 1,446 units involved in churning out machinery and components; another 600 units manufacture complete machinery • The industry is de-licensed with FDI permitted up to 100 per cent • The industry has an installed capacity of USD1.7 billion and produced goods worth USD1.4 billion in FY12 • In FY12, total exports from textile industries stood at USD368.8 million • Cement machinery Cement plants based on raw mill grinding, pre-processing and cement grinding process technology (for capacities up to 10,000 TPD) are being manufactured in India • Currently,100 per cent FDI is allowed under the automatic route • With an installed capacity of around USD125 million, the industry is capable of catering to the domestic demand • Material handling equipment With around 50 units in the organised sector, the material handling equipment industry is engaged in the setting up coal/ore/ash handling plants and manufacturing associated equipment • The sector’s total imports stood at USD331 million in FY12, while exports aggregated USD31.9 million Source: Ministry of Heavy Industries and Public Enterprise Annual Report 2012-13, Cabinet Committee on Infrastructure report, Aranca Research Note: TPD - Tonnes Per Day Plastic processing machinery • • • • There are 11 major and nearly 200 small & medium manufacturers Domestic manufacturers cater to 95 per cent of the processing industry’s needs Total production stood at USD0.6 billion in FY12 Exports increased 17.1 per cent to USD124.1 million in FY12 Dies, moulds & tools industry • • • • It includes over 500 commercial tool manufacturers Nearly18 governments tool rooms as well as training centres are operating in the country Total production of dies, moulds & tools stood at USD2.8 billion Exports aggregated USD604.7 million in FY12 • • • Over 200 manufacturers are engaged in the production of process plant machinery Nearly 65 per cent of the total manufacturers are small and medium enterprises Production and exports totalled USD4.1 billion and USD788.1 million, respectively, in FY12 Process plant equipment • Earth moving and mining equipment Currently, 20 large and global manufacturers, and 200 small & medium manufacturers operate in the industry • Production and exports totalled USD3.8 billion and USD274.9 million, respectively, in FY12 Source: Ministry of Heavy Industries and Public Enterprise Annual Report 2012-13, Aranca Research • Passenger and utility vehicles Currently, there are 16 manufacturers of passenger cars and multi-utility vehicles, 13 manufacturers of commercial vehicles and 16 manufacturers of two-wheelers and threewheelers • Total production in the automobiles sector stood at approximately 20.4 million units in FY12 and 20.6 million units over FY13 • Total exports stood at 2.9 million units during FY12 and 2.9 million units over FY13 • Auto components The auto components industry has more than 500 companies in the organized sector and about 10,000 entities in the unorganized sector • The industry’s turnover expanded at a CAGR of 19 per cent to USD43.9 billion from USD22.2 billion between FY08 and FY12 and is expected to reach USD145 billion in 2016. • During FY08–12, exports increased at a CAGR** of 22 per cent to USD7.0 billion • • Agriculture machinery Agricultural tractors dominate the agriculture machinery sector The Indian tractor industry is the world’s largest and accounts for one-third of the global production • More than 250,000 tractors are manufactured every year by 13 manufacturers • Indian tractors are exported to the US, Malaysia, Turkey and Africa Source: Ministry of Heavy Industries and Public Enterprise Annual Report 2012-13, Cabinet Committee on Infrastructure report, Aranca Research Notes: *From April 2012 to November 2012, **CAGR calculated on Indian Rupee • Casting and forging The Indian casting industry produces 6 MMT of various grades of casting and ranks sixth in the world • The forging industry comprises around 10 organised players, with nearly 100 players in the small and medium sector • The industry exports a substantial part of its production apart from catering to the local demand • Medical and surgical equipment The medical and surgical equipment industry manufactures a wide range of medical equipment such as ECG and X-ray scanners • The industry is highly fragmented and dominated by small players • The indigenous industry caters to 40 per cent of demand, while the remaining is met through imports • • Industrial fasteners The fastener industry in India can be classified into high tensile and mild steel fasteners Mild steel fasteners are primarily manufactured by the unorganised sector, while the high tensile steel segment is dominated by the organised sector • Total exports of industrial fasteners stood at USD621.9 million in FY13, up 13.8 per cent from FY12 Source: Ministry of Heavy Industries and Public Enterprise Annual Report 2012-13, IVG Research, Aranca Research Note: MMT - Million Metric Tonnes India’s engineering exports (USD billion) Indian engineering exports stood at USD 62.3 billion in FY14 70.0 Over FY08–14, exports registered a CAGR of 10.8 per cent CAGR: 10.8% 60.0 58.6 56.8 62.3 FY13 FY14 49.8 Engineering exports include transport equipment, capital goods, other machinery/equipment and light engineering products such as castings, forgings and fasteners 50.0 40.5 40.0 33.7 32.6 30.0 To boost engineering trade, the Engineering Export Promotion Council (EEPC) held “India Engineering Sourcing Show 2013” in March The show had participants from 64 countries, and 320 exhibitors, including 60 overseas companies Respondents received 418 business enquiries worth USD38.0 million 20.0 10.0 0.0 FY08 FY09 FY10 FY11 FY12 Source: Reserve Bank of India, Engineering Export Promotion Council, Ministry of Commerce & Industry Estimates, Aranca Research Transport equipment is the leading contributor to engineering exports. The segment accounted for 32.5 per cent of the total engineering exports in FY13 Exports performance of principle commodities (FY13) Machinery and instruments is the other major contributor, with a share of 26.8 per cent The metal manufactures retained its 18 per cent share in overall exports from the country which is the maximum in terms of sectoral contribution Transport equipment 14.1% 32.5% 9.0% Machinery and instrument Manufactures of metals Primary and semi furnished iron & steel 17.7% Others 26.8% Source: Engineering Export Promotion Council, Aranca Research Company Revenues (FY14) Products Larsen & Toubro USD14.2 billion Engineering & construction, cement, electrical & electronics Bharat Heavy Electricals Ltd USD6.3 billion Power generation, transmission, transportation Siemens India Ltd USD2.1 billion* Power generation and distribution equipment, transportation systems, communication and healthcare products ABB India Ltd USD1.3 billion** Crompton Greaves Ltd USD2.2 billion Transformers, switch gears, control gears Power generation and transmission equipment Source: Company Reports, News Article, Bloomberg, Aranca Research Notes: * Revenue for CY13, ** For year ended 2013 Company Revenues (FY14) Products USD0.3 billion Highways & bridges, mass rapid transport systems construction, specialist materials manufacturing Kirloskar Oil Engines Ltd USD0.4 billion* Engines, engine bearings & valves, grey iron casting Cummins India Ltd USD0.7 billion Power generation, construction and mining equipment, fire pumps & cranes, compressors Thermax USD1.0 billion* Boilers and heaters, air pollution and purification, absorption cooling BGR Energy USD0.6 billion Boilers, turbines, generators Engineers India Source: Company Reports, News Article, Aranca Research; Note: *FY13 • Diversification Several companies in the engineering sector have diversified, either geographically (mainly to Middle Eastern countries) or sector-wise • BHEL plans to foray into Ukraine • Simplex Infra has moved to the Middle East • Larsen & Toubro (L&T) has diversified into power equipment manufacturing • Thermax entered the power utility segment • Shift to value-added products Rising competition is driving domestic players to focus on improving their capabilities, become more quality conscious, and upgrade their technology base in line with global requirements • More than 2,500 firms in the engineering sector have ISO 9000 accreditation • Companies are increasingly focusing on R&D and product development • Entry of international companies With 100 per cent FDI allowed through the automatic route, major international players such as Cummins, ABB and Alfa Laval have entered the Indian engineering sector due to growth opportunities • Entry of new players has raised the industry’s competitiveness Source: Aranca Research Note: BHEL - Bharat Heavy Electricals Ltd Competitive Rivalry • • • Competition is intense among major players Companies basically compete on pricing, experience in a particular field, product quality, and capability of handling projects Small companies are also trying to revamp their scale and size Threat of New Entrants • Threat is low considering the capital intensive nature of the industry and reputation attached to the existing players Bargaining Power of Suppliers • • Bargaining power of suppliers is low due to cut-throat competition Suppliers have a strong hand in the high-end technology segment Threat of New Entrants (Low) Substitute Products • • Threat is low because of the nature of the industry Even if the buyer wants to revamp or renovate its existing stock, it is likely to go to the same players Bargaining Power of Customers • • Bargaining power in techoriented segments is low Competition in power generation and T&D equipment sector gives bargaining power Bargaining Power of Customers (Medium) Competitive Rivalry (Medium) Substitute Products (Low) Bargaining Power of Suppliers (Medium) Source: Aranca Research Leveraging Indian operations • Bigger companies are currently focusing on process improvement and a smaller set of key strategies • ABB has set up global R&D centre in Bengaluru, and is also aiming at making India as production hub for markets worldwide due to its labour cost advantage • Cummins has also opened R&D centre in Pune, for providing designing and technical abilities worldwide • Companies are understanding the need of operations management following the crisis period • Good set of operational structure in place helps them target future business opportunities with better precision • There is emphasis on human resource management, automation and higher labour productivity • Most Indian companies are increasing their global footprints • Cheap cost of labour in India is giving them an edge over companies in higher wage economies • Besides targeting the developed economies of Europe and US, Indian companies are currently diversifying in the developing markets of Africa, South America and the Middle East • Most of the companies are targeting R&D to increase scope for growth • Competitors from China and South Korea are competing with those in India, making R&D one of the key areas to focus on to develop cheap products without compromising quality Operational efficiency Geographical expansion Enhancing R&D ecosystem Source: Aranca Research Note: KPMG report on Engineering sector • Demand-side drivers • • Capacity addition for power generation Increase in infrastructure spending Rise in exports Growth drivers • • • De-licensing Reduction in tariff and customs Supportive government policies leading to higher investments • Policy Investment • • Increasing FDI inflows Higher M&A Easy credit facilities for manufacturing companies India’s energy requirement increased at a CAGR of 6.5 per cent to 1,048.5 billion units over FY06–14 Energy requirement (BU) 1200.00 Demand for energy grew 5.1 per cent during FY14 vis-à-vis the previous year CAGR: 6.5% 1000.00 739 800.00 Higher demand for energy has led to increasing capacity additions for power generation that, in turn, boosted demand for power generation and transmission equipment 632 777 831 937 998 1,049 862 691 600.00 400.00 200.00 0.00 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Source: Ministry of Power, Annual report 2012-13, Load Generation Balance Report 2014-15, Aranca Research Note: BU - Billion Unit Addition in generating capacity (‘000’ MW) Investments to increase capacity have led to rising demand for power generation and transmission equipment 32.9 35.00 Capacity increased by 23,467 MW in FY13 from 20500 MW in FY12 30.00 23.5 25.00 22.3 20.5 20.00 17.1 15.00 8.1 12.1 10.00 5.00 0.00 FY90 FY97 FY02 FY07 FY11 FY12 FY13 Source: Ministry of Power, Annual report 2012-13, Aranca Research Note: MW - Mega watt The Infrastructure Index (part of the wider Index of Industrial Production) comprises eight core industries: coal, crude oil, natural gas, petroleum refinery products, fertilisers, steel, cement and electricity Infrastructure index and growth rate 180 150.7 160 129.9 140 The index rose to 145.3 in FY12, implying a CAGR of 5.2 per cent since FY07 The infrastructure index rose to 150.7 in FY13, implying a growth rate of 3.6 per cent 120 112.6 118.5 138.4 9 8 145.3 7 121.8 6 100 5 80 4 60 3 40 2 20 1 0 0 FY07 FY08 FY09 FY10 FY11 FY12 FY13* Source: Reserve Bank of India, Aranca Research Notes: The base year for Infrastructure index has been changed from 1993-94 to 2004-05 India has one of the largest road networks (4.7 million km) consisting of national highways, expressways, state highways, districts and village roads The length of the highways is expected to reach 85,000 km during the 12th Five-Year Plan During the 11th Five-Year Plan, development of roads and bridges accounted for 15.3 per cent of the total USD456.9 billion investments in infrastructure Demand for related machinery has increased significantly due to large-scale public and private investments in roads Share in roads network (FY13) 3.3 Total highway length added during Five-Year Plans (KM) 40000 1.7 36,500 35000 30000 State highway National highway 25000 23,814 20000 15000 Districts and rural roads 10000 7,091 9,044 10th Plan 11th Plan 5000 0 95 9th Plan 12th Plan* Source: National Highway Authority of India, Ministry of Road Transport and Highways, Aranca Research Notes: * - Physical Achievements under National Highways Development Project during 11 th Five Year Plan up to Sept, 2011 • De-licensing Tariffs and custom duties Focus on power generation and infrastructure The engineering industry has been de-licensed and 100 per cent FDI has been permitted in the sector • Foreign technology agreements are allowed under the automatic route • • The government has eliminated tariff protection on capital goods It has reduced custom duties on a range of engineering equipment The government has an ambitious mission of ‘Power for all by 2012’ and has planned capacity additions of 120 GW in the 12th Five-Year Plan • Governmental infrastructure projects such as Golden Quadrilateral and the North-South and East-West corridors fuelled growth in the engineering sector • • Special Economic Zones (SEZs) National Manufacturing Policy (2011) The government approved a significant number of SEZs across the country for the engineering sector • Delhi Mumbai Industrial Corridor (DMIC) is being developed across seven states; it is expected to bolster the sector • Government of India launched the National Manufacturing Policy with the aim of enhancing the sector’s share in GDP to 25 per cent within a decade and creating 100 million jobs by 2022 Source: DHI Annual report 2010-11, Ministry of Power Annual Report, Aranca Research Note: GW - Giga Watt 15 per cent investment allowance to boost capex Cut in excise duty to aid the auto industry Increase in allocation to JNNURM to aid infrastructure and capital goods Higher allocation to the defence sector Budgetary support • The government would provide 15 per cent exemption on tax to manufacturing companies that invest more than USD18.4 million in plant and machinery over FY14–15 • A cut in excise duty on truck chassis from 14 per cent to 13 per cent would increase profit margins for major automobile companies such as Ashok Leyland and Eicher Motors • The government has increased the allocation to JNNURM from USD1.3 billion in FY13 to USD2.6 billion in FY14; this is expected to benefit companies in capital goods, infrastructure and automobile sectors • Allocation to the defence sector was raised to USD37.5 billion, which includes USD16 billion for modernisation-related expenditure. This could further increase investments in the defence equipment industry • In the interim budget FY14-15, custom duty on a range of capital goods was slashed from 12 to 10 per cent, to support the sector Source: Interim Union Budget FY14-15 Notes: Capex - Capital Expenditure, JNNURM - Jawaharlal Nehru National Urban Renewal Mission Developer Location Product Ranga Reddy, Andhra Pradesh Aerospace and precision engineering Nalgonda, Andhra Pradesh Light engineering Hazira, Gujarat Engineering Gujarat Industrial Development Corporation Ltd (GIDC) Gandhinagar, Gujarat Electronic products N.G. Realty Pvt Ltd Ahmedabad, Gujarat Engineering Vadodara, Gujarat High-tech engineering and related products Amreli, Gujarat Engineering Ahmedabad, Gujarat Engineering Ansal Properties and Infrastructure Ltd Sonepat, Haryana Engineering Raheja Haryana SEZ Developers Pvt Ltd Gurgaon, Haryana Engineering Ansal Kamdhenu Engineering SEZ Ltd Sonepat, Haryana Engineering Shimoga, Karnataka Engineering Mangalore, Karnataka Port-based for high-tech engineering products Andhra Pradesh Industrial Infrastructure Corporation Limited (APIIC) Deccan Infrastructure and Land Holdings Ltd M/s Essar Hazira SEZ M/s Synefra Engineering and Construction Ltd E. Complex Pvt Ltd Dishman Infrastructure Ltd Karnataka Industrial Areas Development Board Suzlon Infrastructure Ltd Source: SEZ India, Aranca Research Developer Location Product Quest Machining and Manufacturing Pvt Ltd Belgaum, Karnataka Auto, aerospace and industrial engineering Viraj Profiles Ltd Thane, Maharashtra Stainless steel engineering products Navi Mumbai, Maharashtra Light engineering Satara, Maharashtra Engineering Pune, Maharashtra Engineering Maharashtra Industrial Development Corporation (MIDC) Aurangabad, Maharashtra Engineering & Electronics Orissa Industrial Infrastructure Development Corporation (IDCO) Jajpur, Orissa Metallurgical engineering Vividha Infrastructure Pvt Ltd Patiala, Punjab Engineering Mahindra Worldcity (Jaipur) Ltd Jaipur, Rajasthan Light engineering New Chennai Township Pvt Ltd Kanchipuram, Tamil Nadu Engineering Erode, Tamil Nadu Engineering Kanpur, Uttar Pradesh Engineering Navi Mumbai SEZ Pvt Ltd Maharashtra Industrial Development Corporation (MIDC) Township Developers India Pvt Ltd Perundurai Engineering SEZ by SIPCOT Uttar Pradesh State Industrial Development Corporation (UPSIDC) Source: SEZ India, Aranca Research Cumulative FDI inflows in engineering sector (USD billion)* Cumulative FDI inflows increased to USD19.4 billion in FY14 from USD8.9 billion in FY10 The government’s increasing focus on attracting foreign investors in manufacturing and infrastructure is likely to boost FDI in the sector 25.0 19.4 20.0 18.5 14.7 15.0 10.0 8.9 11.1 5.0 0.0 FY10 FY11 FY12 FY13 FY14 Source: Department of Industrial Policy & Promotion, Aranca Research Notes: * - Cumulative from April 2000 to March 2014 and so on FDI inflows includes Automobile industry, Electrical equipment, Miscellaneous mechanical and engineering industry, Industrial machinery, Machine tools, Agriculture machinery, Earth-moving machinery and Industrial instrument M&A deals Acquirer Target Type Acquisition date Caterpillar Global Mining LLC Acquisition February 2014 3Cap Technologies GmbH Acquisition January 2013 Joy Mining Services India Pvt Ltd Acquisition May 2012 Larsen & Toubro Ltd Thalest Ltd Acquisition April 2012 Titagarh Wagons Ltd Titagarh Marine Ltd Acquisition March 2013 JBM Cadmium Pvt Ltd Tesco GO Acquisition January 2012 Utkal Galvanizers Ltd Acquisition April 2011 Aircon Engineering Services Majority stake May 2011 Bharat Wire Ropes Ltd Acquisition July 2010 Igarashi Group-Agile Electric Drives Technologies and Holdings Majority stake December 2010 Tractors India Pvt Ltd Geometric * Simplex Infrastructures Ltd Diamond Power Infrastructure Ltd Yash Birla Group Gaji Mercantile HBL Power Systems Source: Grant Thornton, Aranca Research, Thomson Banker Note: * - Acquired by its German subsidiary- Geometric Europe GmbH • Defence Budget for the defence sector is expected to grow 8 per cent until 2014; of this, 54 per cent would be earmarked for procuring manufactured items, which is likely to translate into a market opportunity of USD91 billion over 2010–2014 • Government initiatives, such as allowing private sector participation, have been reinforced by opening up the sector to 26 per cent FDI, and its offset policy is expected to enhance private sector (including SME) participation India’s nuclear capacity is expected to be strengthened by 3.8 GW by 2012; an additional 12,000 MW has been planned under the 12th Five-Year Plan (2012–17) • It represents business opportunity worth USD312 million for the manufacturing industry, which is likely to garner 61 per cent • Civil nuclear sector • Auto components Global auto majors are rapidly ramping up the value of components they source from India, steered by the country’s advanced engineering skills, established production lines, a thriving domestic automobile industry and competitive costs • Industry sales are expected to increase to USD40 billion by 2016, with about USD20 billion generated from exports Source: Aranca Research Notes: GW - Giga Watt, SME - Small and Medium Enterprises • Power Transmission and Distribution (T&D) T&D expenditure is set to increase on growth in power generation and privatisation of distribution • By the end of 2012, the transmission network was expected to be about 60,000 circuit km, with a potential demand for 630,000 transformers • Material handling equipment The material handling equipment sector is expected to gain from robust demand from steel, power, mineral and other infrastructure industries • Market demand for material handling equipment is estimated at USD30 billion over 2007– 14 • Machine tools Demand for machine tools from the capital goods sector (especially automobile and textile industries) is projected to remain high • Considering the industry's demand for higher productivity, superior precision and accuracy, as well as low-cost manufacturing solutions, computer numerically controlled (CNC) machine tools are set to be in greater demand Source: Aranca Research 2009 2020 By 2020, the ESO market in India is expected to reach USD40–50 billion, propelled by increasing onshore to offshore movement of services Total Spend ~ USD850 billion 2009 • The global engineering services spending estimated to be around USD850 billion is • About USD40 billion is expected to flow through the outsourcing channel into vendor countries Projected Spend USD1100 billion ~4.5% 15-20% Offshore Expenditure Onshore Expenditure • India accounts for about 20 per cent of the outsourced market ~ 20% 25-30% 2020 • The global engineering services projected to reach USD1100 billion spending is • About USD180 billion is estimated to flow through the outsourcing channel into vendor countries • India can account for about 25–30 per cent of this outsourced revenue India Competing countries India Competing countries Source: Booz Allen Hamilton, Nasscom, Aranca Research Note: ESO is Engineering Services Outsourcing India’s electrical equipment industry significant growth in the last few years has witnessed Major electrical equipment registered a CAGR of 21.8 per cent from USD11.4 billion to USD25 billion between FY08 and FY12 Major electrical equipment manufactured include capacitors, energy meters rotating machines, transformers, cables, switchgears, transmission line towers and conductors Based on the expected capacity and investments, domestic demand for electrical equipment is targeted to be USD100 billion by FY22 Demand for T&D equipment is projected to reach USD75.0 billion in FY22 from USD18.4 billion in FY11 Indian Electrical Equipment Industry posts marginal 3.5 per cent growth in 2013-14, out of which capacitors and energy meters showed the maximum growth of 41.1 per cent and 10 per cent Growth in industry size of major electrical equipment (USD billion) 30.0 25.0 25.0 CAGR: 21.8% 20.0 15.0 13.2 11.4 10.2 11.0 FY08 FY09 FY10 10.0 5.0 0.0 FY11 FY12 T&D equipment demand projection (USD billion) 80 70 60 50 40 30 20 10 0 75.0 39.9 18.4 FY11 FY17 FY22 Source: Indian Electrical and Electronics Manufacturers Association, Department of Heavy Industries Notes: T&D - Transmission and Distribution, BTG - Boilers, Turbine, Generator The generation equipment (BTG) segment is projected to grow to USD25 billion Production of generation equipment (boilers, turbines and generators) in India is estimated at around USD5.7 billion by 2022 Demand for generation equipment is projected to rise to USD25.1 billion in FY22 from USD6 billion in FY11 Cables contribute 27.3 per cent to the electrical equipment market, followed by transmission lines (23.4 per cent), transformers (19.3 per cent) and switchgear (15.2 per cent) Generation equipment-wise demand projection (USD billion) Market share of electrical equipment (FY13) 30 Rotating Machines 10.0% 25 23.4% 6.7 20 15 6.7 3.3 10 0.6 5 3.3 1.6 3.8 11.7 5.8 Boiler FY17 Turbine Generator 15.2% Cables Transformers 3.9% 0.9% Capacitors Energy Meters 19.3% 27.3% Transmission Lines 0 FY11 Switchgear FY22 Source: Indian Electrical and Electronics Manufacturers Association Note: BTG - Boiler, Transmission and Generation India’s Earthmoving and Construction Equipment (ECE) industry has enjoyed strong growth over the last seven years due to rapid economic development The organised construction sector in India (for example, roads, urban infrastructure) accounts for approximately 55 per cent of the ECE industry. Mining, irrigation and other infrastructure segments (power, railways) account for the remaining During FY10–14, sales of construction equipment is expected to increase at a CAGR of 10.6 per cent to USD6.5 billion Earthmoving sector is continuing to make headways and could command a share of 56.2 per cent, followed by concrete equipment and material handling equipment Product segment-wise CE market by 2014 Expected unit sales by 2014 Equipment Sold in 2010 Forecast 2014 Excavators 10500 14000 Backhoes 23000 32000 Loaders 2500 4500 Asphalt pavers 1150 1650 Mobile cranes 8000 11750 Tower cranes 200 700 Transit mixers 3800 9000 3.0% Earth moving 13.2% Road constrution equipment Concrete equipment 19.0% 56.2% Material handling 8.5% Material processing Source: Indian Construction Equipment Manufacturer’s Association, NBM media Notes: CE - Construction Equipment, ECE - Electrical and Construction Equipment Net sales (USD billion) Salient features 12.0 • One of the largest engineering and manufacturing companies with ‘Navratna’ status • One of the major Integrated Power Plant Equipment (IPPE) manufacturers in the world • Profit-making company since 1971–72 • Installed base of more than 120,000 MW • Fifteen manufacturing units, two subsidiaries and seven joint ventures • Accounted for over 59 per cent of the total generating capacity in FY12 • Net sales totalled USD6.3 billion in FY14 10.4 10.0 9.0 8.0 7.1 5.8 6.0 4.0 3.9 9.2 6.3 4.5 3.0 2.0 0.0 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Source: Company Reports, Indian Express, Aranca Research Note: ‘Navratna’ is the title given to nine Public Sector Enterprises (by the Government of India) having distinct comparative advantages Recent awards and recognitions • CII-ITC Sustainability Award (2012) • AIMA Managing India Award for Outstanding PSU of the year (2012) • India Pride Award for Excellence in Heavy Industries 2012–13 from Union Minister of Petroleum & Natural Gas • Golden Peacock Award 2011 for Occupational Health and Safety (2011) • SCOPE Meritorious Award 2010–11 for Best Practices in Human Resource Management • Intellectual Property Award from the Government of India (2011) • Essar Steel Infrastructure Excellence Award (2011) • DSIJ Gentle Giant Award from the Government of India (2011) • CII-Thompson Reuters Innovation Award (2010) • Conferred the PSE Excellence Award by the Indian Chamber of Commerce (ICC) in 2013 • Conferred the ICAI National Award for Excellence in Cost Management in 2012 Boiler efficiency Lower auxiliary power consumption Key success factors Lower lifecycle cost Lower design heat rate Better PLF Acquisitions in various countries FY14 USD1099 million turnover Transmission parts Entry into new markets such as US and Greece Hubs Joint ventures and technical partnerships Organic growth & integration Front axle beams Awarded Sword Of Honour for Safety Success Crank shaft ISO accreditations Closed die forging Won a Euro 250 million multi-year contract FY05 USD245 million turnover Open die forging 1960 1970 1980 1986 1990 1996 2000 2004 2005 2006 2007 2008 2011 2012 2013 2014 Source: Company reports, Aranca Research Net sales (USD billion) Salient features • One of Asia’s largest aerospace companies with ‘Navratna’ status • Produced over 3,700 aircraft, including 15 types of indigenous designs and over 4,300 engines • Nineteen production units and 10 research & design centers across eight locations in India • Promoted and established 11 joint venture companies in collaboration with leading international and Indian aviation organisations • Offers services for aircraft accessories, foundry and forge, engine, helicopter, industrial & marine gas turbine division and transport aircraft division 3.5 2.9 3.0 2.5 3.0 2.6 2.4 2.1 2.3 2.0 1.5 1.0 0.5 0.0 FY08 FY09 FY10 FY11 FY12 FY13 Source: Company reports, Aranca Research Notes: ‘Navratna’ is the title given to nine Public Sector Enterprises (by the Government of India) having distinct comparative advantages, HAL - Hindustan Aeronautics Limited National Automotive Testing and R&D Infrastructure Project (NATRiP) NBCC Place, South Tower, 3rd Floor,Bhishma Pitamah Marg, Pragati Vihar,Lodhi Road, New Delhi - 110003 Tel: + 91-11-49215555 Fax: +91-11-24369333 E-mail: firstname.lastname@example.org The Automotive Research Association of India Survey No 102, Vetal Hill, Off Paud Road, Kothrud, Pune - 411 038 P.B. No 832, Pune - 411 004 Tel. No: +91-020-30231111 Fax No: +91-020-25434190 Email Id: email@example.com Fluid Control Research Institute Kanjikode West, Palakkad - 678623. Phone: 91-491-2566120/2566206 Fax: 0491-2566326 E-mail: firstname.lastname@example.org Engineering Export Promotion Council (EEPC) ‘Vanijya Bhawan’, 1st Floor International Trade Facilitation Centre 1/1, Wood Street Kolkata, West Bengal–700016 Phone: 91-33-22890651, 22890652 Fax: 91-33-22890654 E-mail: email@example.com BTG: Boilers, Turbines, Generators BHEL: Bharat Heavy Electricals Limited MHI: Mitsubishi heavy industries DHI: Department of Heavy industries BHEL: Bharat Heavy Electricals Ltd ICEMA: Indian Construction Equipment Manufacturer’s Association HAL: Hindustan Aeronautics Limited IEEMA: Indian Electrical and Electronics Manufacturers Association EEPC: Engineering Export Promotion Council TPD: Tonnes Per Day NHAI: National Highway Authority of India MORTH: Ministry of Road Transport and Highways CEA: Central Electrical Authority HVDC: High Voltage Direct Current USD: US Dollar FY: Indian Financial Year (April to March) Wherever applicable, numbers have been rounded off to one decimal Exchange rates (Fiscal Year) Exchange rates (Calendar Year) Year INR equivalent of one USD Year INR equivalent of one USD 2004–05 44.81 2005 43.98 2005–06 44.14 2006 45.18 2006–07 45.14 2007 41.34 2007–08 40.27 2008 43.62 2008–09 46.14 2009 48.42 2009–10 47.42 2010 45.72 2010–11 45.62 2011 46.85 2011–12 46.88 2012 53.46 2012–13 54.31 2013 58.44 2013–14 60.28 Q12014 61.58 Average for the year India Brand Equity Foundation (“IBEF”) engaged Aranca to prepare this presentation and the same has been prepared by Aranca in consultation with IBEF. 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