Expansion time for construction equipment firms as demand picks up

Construction equipment companies are smiling as demand from core sectors like roads, railways, irrigation, energy and other sectors for their products is picking up, said top officials of industry majors.

Major industry players like Schwing Stetter India and Ajax Engineering are expanding their capacities to cash in on the impending surge in demand.

"It is smiling time for us. Business during September and October was better than the corresponding period of 2019. Similarly, November business is also looking good," VG Sakthikumar, Managing Director, Schwing Stetter India, told IANS.

According to Sakthikumar, the machines of the rental players have got deployed in projects.

"The demand for construction equipment is picking up for the past couple of months and it is expected to accelerate further owing to the demand from sectors like roads, railways, energy, irrigation and others," Jagadish Bhat, Managing Director and CEO, Ajax Engineering, told IANS.

Both Bhat and Sakthikumar said trade enquiries for their machines have picked up.

"The demand is from highways, railways, metros, and sectors. Bulk of the proposed $1 trillion investment mentioned in the National Infrastructure Pipeline will happen next year," Sakthikumar said.

The companies are hoping to close this fiscal with better revenues than what they had expected when the Covid-19 pandemic lockdown happened.

"Last year, we closed with a turnover of about Rs 1,730 crore. This year, we hope to close with a business of Rs 1,400-1,500 crore," Sakthikumar said.

Schwing Stetter India makes concrete mixers and other machinery used in construction works. It also sells earthmoving equipment of XCMG, China.

The Indian company is a wholly-owned subsidiary of German group Schwing Stetter. The German group is owned by the Chinese XCMG group, which is ranked sixth globally among the construction equipment machinery makers.

Sakthikumar said with the demand picking up, the company will take some time to shift some of its plant and machineries to its new Rs 230-crore plant being built in Tamil Nadu.

"The production is going on in full steam at our existing facilities while component suppliers are trying to match our needs," Sakthikumar said.

Queried about the market trend for Ajax Engineering Bhat said the company started seeing recoveries from August onwards and in October the performance was good.

"We see the recovery to be better than expected. During the first six months, the turnover was about Rs 250 crore. Going by the enquires and orders we expect to close this fiscal with a turnover of about Rs 800 crore," Bhat remarked.

According to him, apart from demand for self-loading concrete mixers, there is good demand for boom pumps and concrete pumps.

"These machines are bought under finance and the non-banking finance companies (NBFCs) have started loosening their purses. After October, there is a general momentum but has not touched the  pre-Covid levels. After November, increased disbursals are expected," Bhat said.

Ajax Engineering has decided to invest Rs 140 crore this fiscal in setting up a new plant for making slip form concrete pavers, batching plant and also in capacity expansion, Bhat added.

"As a part of Make-in-India or Atmanirbhar Bharat (self-reliant) programme we have built a slip form concrete paver which is now being field-tested. Currently, concrete pavers are imported, each costing about Rs 10 crore. Our product is thus an import substitute," Bhat said.

With about Rs 800 crore turnover, Ajax Engineering will start commercial production of the 12-metre slip form concrete pavers soon as the first machine was tested and validated in couple of road projects.

"We should be competitive by 20-25 per cent as compared with imported machines. We also plan to export the machines," Bhat added.

"Slip form concrete pavers are majorly built by German and American companies and Ajax Engineering is the first Indian company to do so," an industry official preferring anonymity told IANS.

Normally about 100-150 slip form concrete pavers are imported per year by India.

The concrete paver and the boom pumps will be made at the Rs 100 crore new plant proposed to come up at Doddaballapur near Bengaluru where Ajax Engineering has acquired 20 acres of land.

According to Bhat, another Rs 40 crore will be invested at its existing plant in Gowribidanur Industrial Area, Kudumalakunte village, Karnataka to increase production capacity of the transit mixers, and concrete batching plants.

The fresh investments will be made from company's internal accruals.

According to Bhat, construction of the new plants will begin in three or four months.