The equipment industry will record double digit growth in next few years and the construction equipment rental, which is one of the emerging growth areas of the Indian construction equipment industry, is expected to get tripled at 21% in just two years time. The services segment in the construction equipment business is still nascent and offers good opportunities of growth. "We at Era Machine Mart are fulfilling the construction equipment needs of Era Infra group companies and external construction companies for their ultra mega projects. We intend to be the part of infrastructure led growth by adding capital expenditure of around `5000 million in next two years," says Mr. Sandeep Chichra, Business Head, ERA Group, in an interview with S.A.Faridi.
The equipment rental industry is at a nascent stage in the country. Though we get the equipment on rent but it is largely unorganized except for very few players. With construction booming, how do you see things changing in the near future?
Though equipment rental industry is at a nascent stage and is largely in the hands of unorganized sector, but with the passage of time big corporates are entering into this business. As the size of projects getting bigger and being time bound capex size is increasing which shall force contractors to concentrate in their core specialization and outsource certain services such as equipment rental. Today, big corporates are looking for rental services across India which can be offered mainly by organized sector. All this is opening a way for matured companies to take over this business from unorganized sector and make it more systematic.
How big is the market size for the equipment rental industry and how do you see it in the next few years?
Currently, construction equipment market in India is of $2.3 billion (approx). The equipment rental industry is merely 7% of the present CE market. In a broader term, out of $2.3 billion CE sold in India, just 7% is sold to rental companies. This 7% remains low as compared to global average of 50%. In the similar trends, China’s equipment rental share is approx 35%, USA’s 65% and Japan’s 80%.
As per current report, in coming few years, we will be witnessing investment in Indian Infrastructure development at $450 billion. Because of this investment, Construction equipment market will grow at-least five-times from its current size of approximately $12-13 billion by 2015, growing at 24% compound annual growth rate.
While the equipment industry will grow double in next few years, the construction equipment rental which is one of the emerging growth areas of the Indian construction equipment industry is expected to get tripled at 21% in just two years of time. The services segment in the construction equipment business is still nascent and offers good opportunities of growth.
Could you elaborate on what is preferred more by the contractors, purchasing the equipment or hiring of the equipment? What are the advantageous difference between hiring and purchasing of equipment?
Well, most of the contractors prefer owning equipment rather than taking it on rentals as building a base of capital equipment gives an edge to a contractor over other companies while bidding for any tender.
Major advantages of hiring an equipment vis-à-vis purchasing them are as under:
- By hiring equipment from a vendor, a construction company is able to concentrate on its core competency i.e. the civil activities involved in the project. However, if a construction company plans to procure equipment then it has to maintain a special department to take care of the same and which is not its specialization.
- Procurement of equipment blocks a lot of capital of any construction company which otherwise can be utilized for several other activities.
- Equipment is generally utilized for a particular period during the project and for rest of the time it generally stands idle which directly or indirectly prove to be a loss preposition.
Era Machine Mart, Brand name of Equipment Rental arm of Era Infra Engineering Ltd has been managing construction equipment needs of Era Infra group companies and external companies. Equipment owned by Era Machine Mart has given an edge to Era group for fulfilling their equipment needs for their ultra mega projects.
Era Machine Mart had started external rental business in April-2008 by providing specialized equipment such as Hydraulic Piling Rig. Since then, there is a continuous inception of assets for Rentals to our clients.
Selection of right product mix of equipment is very critical in a rental business. Wrongly selected equipment can eat all the profit generated by other equipment. Our decision to go for specialized equipment rental provider had paved us the instant growth and success. Moreover, our Brand New rental fleet with good operation and maintenance personnel helped in establishing “Era Machine Mart” name in Rental industry.
Selection of right people from the industry with requisite experience and clear vision of management and support are key factors in division’s growth and success in such short period.
We at Era, believe in Quality Services. Since the starting of this division, we have established our-selves as One-Stop Equipment Solution Provider. We provide variety of construction equipment with a special thrust on high capital equipment. We have more than 40 Hydraulic Piling Rigs available for Rentals ranging from 130 kNm – 260 kNm, which is among the highest for any rental companies operating in India.
Other equipment for various sectors includes Soil Improvement equipment like Pile Driver Cum Extractor, Lifting & Access Equipment including Crawler Cranes (ranging from 35 Ton to 150 Ton), Aerial Work Platforms (60 Ft–135 Ft), Telescopic Handlers (40 TM and 50 TM) etc. Concrete Equipment including Concrete Placer Boom (36 M), Transit Mixers, etc, complete range of Road Construction Equipment from Sensor Pavers (9.0 M, 5.5 M), Motor Graders (145 HP, 135 Hp), Soil Compactors, Tandem Rollers, Earthmoving Equipment like Excavators (30 T, 20 T), Dozers (200 HP), Wheel Loaders (1.7 to 3 Cum) etc.
Era Machine Mart is one of the companies that provides Flash Butt Welding Machine on rentals. We are the proud owners of two machines which are working continuously to develop railway networks.
Response of market is really positive towards concept of equipment rental, as most of the construction companies get a support in executing their high value projects for which procurement of entire equipment range is not possible.
What are the terms of lease as far as maintenance, breakdowns, and costs of such equipment is concerned?
Any company taking the equipment on rental is bound to provide minimum 4 days in a month i.e. 1 day per week for maintenance of equipment thus avoiding any kind of major breakdown. Cost of maintenance varies from equipment to equipment.
What about training-do we really have trained manpower to operate the machines? Do you provide operators with the equipments or the training to operators?
Manpower is a major issue and scarcity of trained operators act as an obstacle in this business. However in order to overcome with this problem, we have designed special training programs wherein operators are trained by OEM’s on pan India basis.
What scope do you envisage for the rental industry in general and your company in particular?
There is huge scope of equipment rental business in coming days as most of the construction companies are opting for rented equipment for execution of their contracts. Most of the construction companies desire to take equipment from a vendor who can provide quality services and has their setup near to their project location and this is where our company has an edge. Era Machine Mart is having pan India presence with its four yards available in all regions i.e. North, South, East, and West. Hence, the kind of services, backup facility along with equipment replacement option which we can provide is unavailable with vendors of unorganized sector.
What is the road map of Era Machine Mart over the next five years?
There are lot of infrastructure projects which are to be started shortly, Era intends to be part of this growth by adding capital expenditure of around `5000 million in just 2 years time. Our targeted segment would be Energy, Highways, Mining and other major infrastructure projects as these are sectors which are going to see lot of activities in near future and we would gradually increase our presence in west and southern region apart from strengthening our presence in North and East Zones of the country we are also working for international presence of Era Machine mart in other countries such as Zambia and UAE which will further strengthen ERA as a world-class player in rental industry.