One of the most reputed brands in the construction and mining sector in India, L&T Construction & Mining Machinery is confident that the domestic CE industry would make a strong comeback in 2020, buoyed by the government’s ambitious infrastructure development projects, and build on it to grow at a CAGR of 10% over the next 10-15 years. N. Balasubramanian has the details in this exclusive interview with Vivek Hajela, General Manager & Head – Construction Equipment Business, Larsen & Toubro (L&T)
How has business been at L&T Construction & Mining Machinery this financial year? What have been the key highlights / milestones of your performance during the current year?
L&T registered a healthy growth across product categories ranging from 22% to 55% for two years during 2017-19. We saw the highest growth rate in the products related to road machinery and granite/marble/quarry. Besides, the new products launched saw a good debut and have been very well accepted by our customers. This helped us consolidate the manufacturing volumes in Komatsu, Scania and L&T manufacturing plants. While there has been a slowdown this year, we are very confident about a good recovery next year. We are working towards meeting the anticipated demand in the next few years and gearing up for the future.
This year, Komatsu introduced its new digitally-enabled 35-ton hydraulic excavator with advanced ICT Komtrax system – PC300LC-8M0 and PC350LC-M0 models. These products have a host of features with improvements in the engine to improve fuel efficiency, strengthened undercarriage and reinforced arm & boom. These models have already received acceptability in the earthwork, granite/quarry/marble industry where customers are looking for efficient machines and higher profitability. Our road machinery business is doing well with our customers appreciating the fuel efficiency and high performance of our soil compactors, asphalt compactors, pneumatic tyred rollers and mini compactors manufactured by L&T Construction Equipment Ltd. (LTCEL). The introduction of new models such as hydraulic paver and skid steer loader holds good promise in the road sector and real estate development.
Also, the newly-launched Scania G440 new generation mining tipper has brought in several benefits to our customers like improved powertrain, cabin, body adaptation, brakes & enhanced safety features.
We also plan to improve product versatility by offering various new upgraded attachments on our rock breakers, demolition tools, tunnelling attachments, super long front attachment, amphibious undercarriages, etc. We are continuously upgrading our products to global standards and plan to launch new products with best-in-class technologies during EXCON.
What would be the theme at the L&T pavilion at EXCON this year? How many new products would you be launching and what other products you would be showcasing at the show?
Digitalization and Innovation shall dominate our theme at EXCON 2019. We pioneered the launch of state-of-the-art ICT tools on our products seven years ago and are continuously improving on it to enable us move to the next level by providing cutting-edge technology to our customers. As usual, L&T will have a large outdoor pavilion and showcase the best in technology and productivity. We will showcase the entire range of hydraulic excavators in the construction segment from 7-ton to 45-ton, D85 dozer and GD535 motor grader, L&T’s indigenous products L&T 9020sx wheel loader, L&T 1190/L&T990/L&T 491 compactors, L&T pneumatic tyred roller, L&T asphalt paver L&T skid steer loader and attachments. In the new products, we will be unveiling the Scania G440 new truck generation and some new products from Komatsu.
Since L&T handles the sales of Scania mining tippers, could you give us an update on how the tippers have been received in the market, especially their recently-launched NTG range?
L&T has been handling Scania tipper trucks distribution in the Indian market since its launch in 2007. Ideal in the mid-mining segment, Scania P410 has been able to carve a niche in the OB removal market with its multiaxle high-performance tippers. The new truck generation G440 will provide the user with the ultimate experience by customizing solution. The NTG is integrated with an upgraded powertrain, resulting in higher load carrying capacity, fuel efficiency, higher uptime, better fuel economy and operator comfort. We expect the product to be a game-changer in the near future.
How are sentiments in the infrastructure sector at present? When do you expect the CE market to get back to growth phase?
The government’s focus on infrastructure development has led to substantial growth in the CE business. The proposed spending of close to 10% of the GDP has given a much-needed boost to the CE segment. Hydraulic excavator sales peaked to about 23,000 units in the last financial year. Road compactors, wheel loaders and dozers are also driving big demand in the road construction segment.
However, the demand for CE has contracted over the last few months mostly on account of a general slowdown in economy. Reasons of contraction are many – NBFC crisis, payment delays from various government departments, liquidity issues, local elections, etc. The segment was also hit by cancellation of contracts awarded earlier by some State Governments. However, we see robust order book with many principal contractors. The Union Government has also announced a slew of measures to rebound the economy. Hence, it gives us confidence that the last quarter of this FY should see good growth in CE demand.
What are your expectations from the government in order to drive growth and create a brighter future for the sector?
The CE industry is facing headwinds and challenges in the current fiscal year leading to lower demand and offtake in the market. With easing liquidity and credit growth, we are confident that the demand will bounce back soon. We hope the government is also able to fast track infra projects announced from time to time and remove bottlenecks which continue to plague many such projects delaying them indefinitely. Delay in payments to contractors is another reason which delays projects and creates stress among all stakeholders. While the RBI has intervened with monetary policy measures by reducing repo rate to boost demand, actual transmission in reduction in retail credit interest by banks is not proportionate. This is another area which needs to be addressed.
What is your outlook for the medium- to long-term for the Indian CE industry?
The infrastructure sector is the key driver for the Indian economy and is largely responsible for propelling the country’s overall development. India has emerged as the fastest growing major economy in the world. The Government is focused on infrastructure development and has taken a lot of policy initiatives to ensure creation of world-class infrastructure. There has been a sharp increase in the fund allocation for infrastructure development over the last three budgets. Steps have been taken to improve the regulatory environment and funding avenues. Many large infra projects are under various stages of execution – Bharatmala, Sagarmala, Jal Marg Vikas, AMRUT, Housing for All, the Diamond Quadrilateral for high-speed railways, and river-linkage programme, etc. Huge investments in infra over the next five years will provide ample opportunity to the CE industry and also generate employment for the youth. The industry is experiencing a few challenges currently but with the government actively taking measures to boost the economy, growth is expected to return shortly.
With the government’s impetus on building world-class infrastructure and giving high priority to large infra projects in various sectors – railways, roads & highways, ports & airports, etc., there is bound to be good growth in the CE demand in the foreseeable future; we expect a 10% CAGR over the next 10-15 years.