CERA’s - Transformative Measures for Rental Industry

Satin Sachdeva, Founder, CERA
Though the Indian equipment rental market has grown from 10% to the current 20% in the last few years, the rental companies continue to face challenges of low rental rates and delayed payments. Satin Sachdeva, Founder, CERA, shares his views on the prevailing scenario and what can be done to create a win-win situation both for the rental companies and the hirers.

What is the current scenario of the Construction Equipment Rental Industry?
It is true that the equipment rental market has grown by more than 15% in recent years, especially so after the formation of CERA (Construction Equipment Rental Association). However, rental companies continue to face challenges due to sluggish rates and delayed payment issues.

Demand in the Equipment Rental market is presently low in a few product categories, but the rental supply is high in road construction equipment. This has impacted their sales. ICEMA report also indicates that road construction equipment sales are down by a whopping 38% due to reasons like oversupply in the market and competition amongst rental companies.

However, many contractors are now purchasing their own machines because banks are providing easy and quick finance. So, it’s very easy to buy a machine upfront; but many of these contractors are not calculating and evaluating in terms of owning an equipment versus renting it. There are many expenses that they should calculate before purchasing a machine as there is the cost of depreciation, the cost of inflation, operation, maintenance, storage etc.

What measures is CERA taking to address the issue of delayed payments, bad debt, etc?
Rental construction companies are suffering from working capital and cash flow issues due to late recoveries and bad debt in the market. There are payment delays of 3-4 months, which, unfortunately, has now become a standard practice. The industry is also reeling under the pressure of low rental rates.

In view of all these setbacks, CERA India convened a special session on 19 Aug 2022 at Hotel Pride Plaza in Aerocity, Delhi. The aim was to discuss and understand the factors affecting the rental industry. However, many more deliberations are needed to counter these issues, especially of the low rental prices and delayed payments.

CERA has already created dedicated panels for addressing the issues of recovery and delayed payments and is in constant discussions with government councils like Assocham, PHD Council, FICCI, and CIDC and some legal entities to resolve the issue of bad debt, which is hampering the growth of Indian rental companies.

Along with many other associations, CERA participated at the launch of Construction Industry Arbitration – an online international conference on “Institutional Arbitration – a Boon for Dispute Resolution”, which was held on 19 and 20 September 2022.

CERA has undertaken many other initiatives to resolve the issues. We feel that all the primary stakeholders like the Rental Industry, the OEMs, Construction Companies, and the Financers should collaborate in finding a balance and in also maintaining a proper supply chain.

Please elaborate on the supply and demand trend of different product categories.
Rental demand trend of different product categories will vary from time to time as the rental business is led by the contractors and how they plan to meet the requirements of their projects. Presently, most of the equipment are deployed for use in constructing elevated roads, and in the bullet train and metro projects. Cranes, piling rigs, and boom placers are high in demand.

Road construction equipment and earthmoving equipment sales are presently down by more than 30%, which is certainly a matter of concern. Equipment oversupply in the market is another concern because of easy finance availability due to which contractors are overleveraging their resources which has created an imbalance amongst rental players and contractors. Overleveraging is also responsible for recent defaults and NPAs in the market. Working capital is also majorly disturbed due to the same.

How can CERA help rental companies leverage technology and digitalization so that they become more organized and efficient?
Rental companies comprise a major share of the total equipment sales. In recent years, many have started buying new equipment and adopting digitalized processes and operations. This is because the construction industry is witnessing a major shift in technological advancements. Now, many IoT based devices and GPS-enabled sensors are coming as standard in the equipment. Even the OEMs are making contractors and rental companies aware of the technology advancements and features in their products.

CERA organizes many conferences and exhibitions on the shifting trends in technology, and on the features of new and upgraded products so that contractors and rental companies become more aware of market demand and adopt the new technologies and products.

Awareness of the benefits of digitization and standardizing processes and operations will help rental companies become better organized. In fact, many rental firms are now keen to offer equipment which have integrated new technology and digitalization to enhance productivity and finish projects within the stipulated timelines, and thereby earn good profits and build a strong reputation in the market.

The rental industry can become more organized by using ERP, CRM, and other IT features which will ease operations. The rental companies should also follow standardized processes, adopt global best practices and technology advancements, and build good business relations with all the stakeholders in the ecosystem.

With some OEMs setting up a rental wing as well, how will this impact the business of rental companies?
Ideally, OEMs should sell equipment to equipment rental companies with the support of financers. Rental companies then provide the equipment to construction companies either on lease or on rent. This business model would help maintain the crucial balance in the demand and supply of equipment, and also enable the rental industry to strengthen and enhance its capacity.

Manufacturers should focus on product sales and after-sales services rather than entering the rental business by setting up a rental vertical. They should work in harmony with the rental companies as they are a major buyer and an important stakeholder in the Construction Equipment Industry.

More than 60% machines are sold to rental companies in India, which is quite encouraging, so manufacturers should complement and support the rental companies. It’s almost next to impossible for rental companies to compete with a manufacturer’s rental wing as the latter would be better equipped with a stronger infrastructure in place, and a well-established presence in the market. CERA members and associates are of the opinion that they need to deliberate on this matter urgently in order to dissuade OEMs from entering the rental business – either directly or indirectly.

Renting versus Buying: What are the pros and cons?
Deliberations over renting vs buying equipment have been taking place for quite some time now, which shows that the rental industry is steadily growing and has a good future. The benefits of renting experienced by construction companies and contractors is increasing rental penetration significantly.

The number of ongoing and upcoming construction projects is on the rise and labour costs are continuing to increase. Renting equipment instead of buying a new machine is a good way for construction firms, builders, and sub-contractors to reduce overhead costs. In fact, rental has become a more attractive option for business owners and individuals looking to complete projects.

Renting offers additional benefits like service and maintenance costs, as the costs are absorbed by the rental companies, plus they tend to use the latest machines with high-end technology. This means that the rented equipment is more reliable, and more productive, and is also well maintained by the rental provider. Other costs involved in buying include the cost of maintenance, storage and logistics.

With the rising inflation and machines becoming more and more expensive, it is more economical for a contractor to take a machine on rent rather than buy one and block his capital. A rented machine is also a better option for a short-term project as the contractor can return it once the project is completed, instead of adding a new purchase to his fleet and keeping it idle if there is no other project where it can be put to immediate use.

How has CERA grown in stature as an association representing the rental industry, and how effective has it become in voicing the concerns of its member companies and finding the desired solutions?
The equipment rental industry in India is progressing fast. It has grown to over 20 percent in last four years (from the 7-8 percent in 2017) at the time of inception of the Construction Equipment Rental Association (CERA). It is now aiming at maximum penetration of the rental concept in the next two years.

CERA’s objective is to transform the rental industry into an organized sector and promote the rental concept through seminars, talk shows, and conferences. Our goals have proved to be a game changer. We have focused on two things, viz. standardization and building relationship with all the stakeholders.

Recently, the Global Rental Alliance (GRA) acknowledged the significant role played by CERA and inducted CERA as its new member. GRA is a global networking organization for equipment rental associations. CERA is promoting the concept of rentals globally, working closely with OEMs, rental companies, financiers, industries, government bodies, and infrastructure companies on various policy issues. CERA is also promoting skilling of operators and other manpower for which it has partnered with several skilling organizations and councils.
NBM&CW DECEMBER 2022
Trimble: Revolutionizing Construction Projects with Smart Technology

Trimble: Revolutionizing Construction Projects with Smart Technology

With its smart technology, Trimble is helping contractors manage construction projects on time, improve equipment efficiency, bring higher productivity, worker safety, and complete project economically with desired quality.

Read more ...

Terex Brand Finlay: Application-Driven Crushing & Screening Solutions

Terex Brand Finlay: Application-Driven Crushing & Screening Solutions

Alan Witherow, Product & Applications Manager, Finlay in an interview with P.P. Basistha on the sidelines of Texcon 2023, informed that Finlay, a Terex product brand, is working towards making the crushing and screening solutions more

Read more ...

Jaso India Prioritising Customer's Satisfaction with Reliable Cranes

Jaso India Prioritising Customer's Satisfaction with Reliable Cranes

“Our cranes are designed as per FEM regulations and are equipped with all the necessary safety features required for safe operations. Our aim is to be trusted and reliable material lifting partner for our customers.” Vishal Sharma, Managing Director

Read more ...

Agrani Enterprises Waterproofing Infrastructure for Longevity & Safety

Agrani Enterprises Waterproofing Infrastructure for Longevity & Safety

“Embracing technological advancements can ultimately lead to more efficient and cost-effective construction practices. This is because the integration of technology in construction companies, particularly in waterproofing, repair, and retrofitting

Read more ...

3D Concrete Printing Workshop with Live Demos

3D Concrete Printing Workshop with Live Demos

Advances in robotics, materials science, and digital design have paved the way for the development of sophisticated 3D concrete printing systems capable of constructing large-scale structures with precision and efficiency. Dr. Vishal Thombare

Read more ...

Jal Shakti Restoring Water To The People of India

Jal Shakti Restoring Water To The People of India

Shri Gajendra Singh Shekhawat, Union Minister, Jal Shakti, shares with S.A.Faridi & Maria R, the challenges and initiatives being taken by the ministry towards effective water management and availability of safe drinking water for India’s burgeoning

Read more ...

Dam Safety Society: Scientific, Technological & Systematic Management

Dam Safety Society: Scientific, Technological & Systematic Management

Dams are critical infrastructure for storing water for a variety of uses like drinking, irrigation, power generation, industrial, domestic, and recreational uses. Managing the precious water assets requires systematic management and

Read more ...

Powerscreen: Strong & Reliable Electric & Hybrid Crushing Machines

Powerscreen: Strong & Reliable Electric & Hybrid Crushing Machines

Powerscreen is actively engaging with its customers to glean information on their job requirements and suggestions, and accordingly making enhancements in its products like Electric & Hybrid Crushing Machines, making them more

Read more ...

Sany India: Batch Mix Plants, Excavators, Cranes & Pilig Rigs

Sany India: Batch Mix Plants, Excavators, Cranes & Pilig Rigs

This achievement is a testament to SANY India’s commitment to provide high–quality, reliable and innovative equipment to the Indian market. Surpassing 30,000 machines operating across India fills us with immense pride. This significant milestone

Read more ...

Paving The Way for More Efficient And Timely Construction & Manufacturing Processes

Paving The Way for More Efficient And Timely Construction & Manufacturing Processes

Transformation of the infrastructure industry is vital for mitigation of climate challenges and the Blue-Green infrastructure offers a sustainable and self-healing solution for the problem at hand, informs Nikhil Jain, CEO, Qubik Group

Read more ...

MCOS Global: Solutions to Reduce Project Delays & Achieve Sustainability

MCOS Global: Solutions to Reduce Project Delays & Achieve Sustainability

Subhashis Kar, Managing Director, MCOS Global presents possible solutions and measures to effectively reduce delays in infra construction projects and bring sustainability in urban developments. MCOS Global is a prominent player

Read more ...

EXCON 2023: Showcasing Construction Industry’s Resilience and Vibrancy

EXCON 2023: Showcasing Construction Industry’s Resilience and Vibrancy

I am sure that a lot of excitement and enthusiasm is building up for the coming week when EXCON 2023, one of the largest construction equipment and technology trade fairs in the world, will open its door to welcome all the

Read more ...

Shri Gadkari discusses on road construction policies, technologies, challenges

Shri Gadkari discusses on road construction policies, technologies, challenges

In a prelude to EXCON 2023, Hon’ble Minister Shri Nitin Gadkari, Ministry of Road Transport & Highways, Government of India, discusses with S. A. Faridi,Group Managing Editor, various aspects of road construction including policies

Read more ...

ICEMA: equipment industry growth prospect, challenges, training etc

ICEMA: equipment industry growth prospect, challenges, training etc

V. Vivekanand, President - ICEMA and Managing Director - Caterpillar India, shares his views on the growth prospects of India’s construction equipment industry and the need for it to embrace higher technology standards to solidify its position

Read more ...

BAI working on construction technologies, sustainability, standardization

BAI working on construction technologies, sustainability, standardization

According to S. Narsimha Reddy, President, Builders’ Association of India, modern construction technologies, use of sustainable building materials and standardisation are important for achieving project completion timelines

Read more ...

COAOI creating favorable environment for crane rental companies

COAOI creating favorable environment for crane rental companies

COAOI engages with the government and relevant stakeholders to promote a more conducive business environment so that crane rental companies can operate efficiently and contribute to the nation’s infrastructure development while maintaining safety

Read more ...

CERA: rental co. instrumental in construction equipment industry growth

CERA: rental co. instrumental in construction equipment industry growth

Rentals are paving the way forward for the construction equipment industry, and to ensure long-term resilience and growth, we are championing initiatives like unity, standardization, and commitment to fair practices

Read more ...

JCB India: Hi-tech Excavators, Telehandlers, Backhoe Loaders & AWP

JCB India: Hi-tech Excavators, Telehandlers, Backhoe Loaders & AWP

JCB is a leading construction equipment manufacturer with a comprehensive range of products that include mini excavators, skid steer loaders, telehandlers backhoe loaders, access platforms, compactors, excavators

Read more ...

Volvo CE: Time-Tested Excavators, Compactors & Asphalt Pavers

Volvo CE: Time-Tested Excavators, Compactors & Asphalt Pavers

Volvo CE started its India operations in 1998 to manufacture crawler excavators, soil compactors, and asphalt pavers. In 2022, it introduced time-tested quality machines like the EC300DL BH, custom-built for quarries, and Volvo EC480D

Read more ...

Wirtgen: Advanced Road Construction, Crushing & Screeing Equipment

Wirtgen: Advanced Road Construction, Crushing & Screeing Equipment

With its various product brands WIRTGEN, VÖGELE, HAMM, KLEEMANN and BENNINGHOVEN, the WIRTGEN GROUP covers the entire road construction process chain from processing, mixing, paving, compacting, and road rehabilitation to

Read more ...

To get latest updates on whatsapp, Save +91 93545 87773 and send us a 'Saved' message
Click Here to Subscribe to Our eNewsletter.