EXPANDING BEYOND HORIZON!

Slower progress in infrastructure development projects adversely impacted demand generation. Rising input costs led to margin pressures/ erosion for CE industry. BS-IV emission standards introduced in the industry brought opportunities for Indian manufacturers to tap developed overseas markets wherein major OEMs are looking at expanding their production capacity to target the export markets.

The construction equipment industry has seen 8% YoY de-growth in over-all sales. Overall construction equipment sales has been 85,385 units b/w Apr’21- Mar’22 with exports driving a ~9% share in the overall sales. Exports for construction equipment grew at 60% of FY 22, reports the Annual Sales Report of Indian Construction Equipment Manufacturers Association (ICEMA).  

‘Earthmoving equipment’ category continues to command dominant share of overall sales while Concrete Equipment has seen a growth of 57% over last year which is followed by Material processing Equipment category, which has also experienced growth of 56% over last year.

Roads and Highways

In the roads and highway sector, INR 7 lakh crores worth of projects have been planned. Under Bharatmala Project, Govt. sanctioned 4 road construction projects worth INR 4,518.04 crore.

In Sept 2021, govt. announced road infrastructure projects worth INR 1.5 lakh crore for J&K. 12,731 km of NH projects awarded in FY22 as compared to 10,964 km in FY21.

With a few headwinds, In FY22, INR 8,361 crore was raised via monetization of national highways, which is 64% against targeted revenue of INR 13,000 crore.

In FY22, 10,457 km NHs was constructed compared to 13,327 kms in FY21. Due to Covid -19 National highways construction slowed to only 28.64 kms in a day in FY22.

Mining and quarrying

In the mining and quarrying sector, INR 40 – 50 K crore investments were made by Coal India over the next 4-5 years.

Vedanta Ltd. planned to invest INR 10,000 crore in setting up an aluminum park in Odisha.

Coal India registered production of 622.6 million tonne in FY22, which is a 4.4% increase over FY21. During FY22 (until Jan 2022), iron ore production reached over 204 million tonnes, registering an increase of 27.25% YoY. The index of mineral production of mining and quarrying sector for the month of Jan, 2022 (Base: 2011-12=100) at 124.7, was 2.8% higher as compared to the level during the same period 2021.

With a few headwinds – Delay in CIL’s 39 coal mining projects due to not obtaining green clearances timely & issues related to rehabilitation and resettlement (R&R). Ministry of Coal was allocated Rs 393.24 crore for the next FY in the Union Budget. The allocation is 38.9% lower in comparison to the revised estimates of Rs 644.09 crore in 2021-22.

India received no bids for 48 of the 67 mines up for sale as part of its plan to open coal mining to private companies, low investor appetite due environmental concerns and low margins.

Real Estate and Infrastructure

In the Real Estate and Infrastructure sector, INR 27 lakh crore investment in infrastructure projects lined up under NIP by 2025.

Union Budget FY22 supported ‘Housing for All’ and ‘Smart Cities Mission’ by allocating INR 13,750 cr to AMRUT and Smart Cities Mission. Tax deductions up to INR 1.5 lakhs on interest on housing loan and tax holiday for affordable housing projects extended till the end of FY22. Strong impetus to build digital fiber infrastructure.

With a few headwinds – As of Oct -21, 563 central sector infrastructure projects, comprising 65 per cent of total 862 having definite timelines, were running behind schedule largely due to COVID-induced lockdowns in states and delays in land acquisition. Due to increase in steel prices by over 70% companies faced cost impact of 12-13%.

Cost overruns of INR 4.4 lakh crore reported for 445 infrastructure projects till Dec 2021.

Port and Waterways

In the Port and Waterways sector, INR 3 lakh crore estimated investments in the port projects with a 10-year blueprint under Maritime India Vision (MIV) 2030.

In H1 FY22, cargo traffic handled by major ports reached 406.98 MT, a 14.59% increase over H1 FY21. Subsidies worth INR 1,624 crore announced in budget 2021 for Indian shipping companies to encourage merchant ship flagging in the country. 400 projects worth INR 2.25 lakh crore investment potential were identified.

MIV 2030 envisages developing mega capacity ports in high potential areas of Gujarat, Maharashtra and Odisha-West Bengal Cluster at an investment of over INR 80,000 crore. Major Port Authorities Act came into force on 3 November2021.

With a few headwinds – Production of new containers has slowed since 2019 along with a simultaneous rise in disposal of containers Thus, the overall growth in number of containers has fallen from 11% in 2019 to 5% in 2021.

Drewery’s Composite Index stood at $9,698.33 per 40 ft container as on 20 Jan’22. This was $6,656 higher than the five-year average and 82% higher than last year.

Slow progress in some major projects announced over last two years including potential corporatization (and stock market listing) of a major port and about seven projects worth more than INR 2000 crore to be offered on PPP. Exporters are facing 2-3 month delay in shipments and consequent liquidity issues as they must wait longer to receive payment for exported goods.

Airports

In the Airports sector, INR 90 K crore planned investment in airports by FY25. Delhi, Hyderabad and Bengaluru airports will undertake major expansion plans to the tune of INR 30,000 crore by 2025. Airport count to rise to 220 by the year 2023-24 from 136 currently. Govt. approved 21 greenfield airports of which 8 are now operational. AAI identified 154 airports under the regional connectivity scheme (RCS) including 14 water aerodromes and 36 helipads so far under UDAN. To attract more investments, govt. announced a new policy for aircraft MRO services in 2021.

With a few headwinds, Budget allocation for Ministry of Civil Aviation in FY22 was ~15% lower, at INR 3,225 crore, compared with INR 3,798 crore in FY21. In 2022-23, RCS has been allocated INR 601 crore, which is 60% lower than the revised estimates of 2021-22 (INR 994 crore). Only 43% of the total number of routes awarded by AAI had been operationalized under UDAN as on 9 March 22.

Railways

In the Railways sector, INR 13.6 lakh crore Capital Expenditure in Indian Railways between FY20- FY25.

Under PM GatiShakti programme, IR plans to establish ~500 multi-modal cargo terminals with an estimated outlay of INR 50,000 crore in 4-5 years.

Under Union Budget FY22, Govt. allocated INR 110,054.64 crore to Ministry of Railways. In Oct, India and Nepal signed an MoU, for a proposed US$ 3.15 billion railway line project, to connect Kathmandu and Raxaul. The actual capital expenditure by Ministry of Railways stands at INR 95,703 crore up to Feb FY22, an increase of 177% from Rs 34,501 crore in Feb FY21.

With a few headwinds, due to land acquisition issues and pandemic Ahmedabad- Mumbai bullet train project faced cost overruns. The initial project deadline Dec 02023 has been extended to 2026.

In FY22, railways revenue is estimated to be 7% lower than the budget estimate primarily due to 27% lower passenger revenues. Only 2 offers were received from IRCTC and Megha Engineering and Infrastructure leading to scrapping bids worth INR 30,000 crore.

Earth moving equipment…

The earth moving segment has witnessed a ~14% YoY de-growth in sales. The primary driver for de-growth has been the domestic backhoe loader sales (34% decline YoY) especially impacted by the 70-80 HP category. However, exports have seen a significant growth compared to last year (~69%YoY), with increase in Backhoe loader (~73%YoY) and Crawler Excavator exports(~67%YoY)being the primary drivers.

Road Construction Equipment…

The road construction segment has witnessed a ~10% YoY de-growth in sales, primarily due to fall in domestic sales, showcasing a ~14% YoY de-growth. The primary driver for domestic de-growth has been the decline in Compaction Single Drum Roller sales (~17% YoY) and Compaction Double Drum Roller sales (~16%YoY). However, exports have grown at 31% as compared to last year due to increase in exports from Non-SAARC regions.

Material Processing Equipment…

The material processing equipment segment witnessed a ~56% YoY growth in sales, primarily driven by growth in domestic sales of Screeners which saw a growth of ~235% YoY. Static VSI crushers also registered a domestic sales growth of ~169%. There has been no export sales for material processing equipment segment in FY22.

Material Handling Equipment

The material handling equipment segment witnessed a ~2% YoY growth in sales, primarily driven by domestic sales in in largest category, Pick and Carry Cranes by ~1% (YoY) and domestic sales of Telescopic Handler ~3% YoY.

Exports contributed to ~3% of overall sales for the category and has seen a growth of ~38%YoY due to increase in Pick and Carry Cranes (~38%YoY).

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