Mr. Sumit Mazumder, Vice Chairman & Managing Director, Tractors India Limited, describes his concern as a service driven engineering company. In an interview to P.P Basistha he highlights the competitive positioning of TIL as an equipment manufacturer and distributor and on the present growth trend of the construction sector.
How do you view the present growth trend of the Indian construction sector. Do you expect present the slowdown to pass through necessary corrections to gain its earlier momentum?
The present slow down has been led primarily by the cost escalations of raw materials, notably steel and cement, which constitutes the vital input for construction both in real estate and core construction. However, I well understand that the slowdownphase would be very much temporary as the government remains committed to achieve the 9% GDP growth target. It is very heartening to see that to achieve the growth target the government has been taking full scale measures to reign in inflation in terms of duty adjustments and combating upward price movement in cement and steel. But however, I would like to point out that, till the situation gets corrected led by slew of measures from the government, ongoing projects face a slow down in project executions, as funding interest rates continue to rise. Moreover, led by inflation there is skepticism in certain funding quarters on the commercialviability of the project. This in turn is leading to slow release of funds by banks and financial institutions to the contractors. The issue should be addressed at the earliest by the government as it is a matter of concern.
Concurrently, led by wholesome fine tuning of measures to curb inflation, initiative has to be undertaken by the government to further integrate the rural and urban infrastructure growth. This would make the growth of the construction sector total and in turn drive the whole some demand of construction equipment. I understand the initiative is well underway by governments’ initiative to develop the rural roads through initiatives like “Pradhan Mantri Gram Sadak Yojana and for urban infrastructure through Jawaharlal Nehru Urban Renewal Mission etc. But being a member of the construction equipment manufacturer and distributor fraternity, I would like to highlight that to execute greater number of projects, the contractors have to continuously bring in newer technologies for project execution. This will lead to development of more projects, which in turn would drive the demand of equipment in a bigger way.
Do you find that there is further scope in making policy adjustments in sector specific to facilitate further private sector participation for infrastructure development.
I would say that whatever policy adjustments are being made has to be wholesome by taking into considerations all the stake holders interest in development and operation of the project specific across the sectors (as the government has been laying emphasis on PPP and BOT projects). Overall, I would say that the policy adjustments have to be market driven rather than politically driven.
As you mention that contractors have to bring in newer technologies for faster project execution, which will make the project turn round faster resultantly, enabling the contractors to focus on newer projects. How do you propose to develop the market on the same through offering technologically advanced products?
Ever since its existence since 1944, the endeavour of TIL has been made technologically advanced products for the market based on product offerings through technological and distribution tie-ups with world leaders in material handling, construction and mining equipment and power solutions. Taking the practice further, the tie-ups would allow us to place cutting edge technology products.
Our material handling division enjoys wide range of collaboration with global leaders such as Grove World Wide, USA (part of Manitowoc Crane Group USA) to provide manufacture, Paceco Corp, USA (part of Mitsui Engineering and Shipbuilding co Japan, and Famak (Poland) and the much recently entered Hyster USA, making composite technology and sourcing point for customized material handling solutions. Through the tie-ups TIL leverages the industry standing of its international technology associates to provide a wide product range across 20 models in mobile cranes, lorry loaders, reach stackers, electrical luffing cranes and rubber tyred gantry cranes.
On the other hand our construction and mining equipment division and power solutions division acts as a dealer for Caterpillar products across the geographic locations of North and East India, Bhutan as well as Nepal. Through the distribution tie-up, TIL leverages the industry standing of its principal Caterpillar and provides the widest range of products (estimated at 40 models) across the down stream segments in construction through: excavators, motor graders, wheel loaders, dozers, tandem rollers, paver and backhoe loaders and in mining through: dumpers, dozers, wheel dozers and graders. A select number of products from this division enjoy the largest market shares in their respective product niche. The motor graders enjoy a market share of over 87 percent while the wheel loaders enjoy a market share in excess of 51 percent to mention a few. The competitive strength of the division lays in its advanced technology product offering having less equipment downtime, enabling the customer reap maximum benefit on his return on investment.
This is coupled with wide range of responsibility covering the entire client engagement lifecycle ranging from procurement, marketing logistics, commissioning and after sales service.
While the power systems solutions division distributes diesel and natural gas gensets. The superior and world class brand image of Caterpillar and the vast product portfolio represent reliability, durability flexibility with the product range from 12kW to 10,475 kW in diesel an 11kW to 6,500 kW rating in natural gas gensets. I would reassert the tie-tieups would allow us to offer technologically advanced products. On sustained offering of technology advanced products, I would like to inform that Caterpillar, our principal, has announced a 2020 vision for its increased presence in India, which will translate into a wider portfolio of products that will be marketed through us in addition to extensive business support.
How would you balance offering of advanced technology products dovetailed by competitive pricing?
For our own products, that is the material handling equipment, we have laid emphasis in incorporating advanced manufacturing techniques. This has to a great extent allowed us to pass the cost benefit to customers apart from increasing our production capacity. In addition to bringing in new manufacturing process, we have continuously brought in new state- of-the-art technologies like plasma cutting machines balancing machines, this has improved the product quality and its pricing. Additionally, we have laid emphasis on product indigenisation through product reengineering. Indigenization has been done in hydraulics, motors, pumps, apart from modifications in design etc allowing us to pass cost benefit to the customers.
However, our distributed Caterpillar product comes with a global brand equity, making them expensive but superior in quality. We lay emphasis in informing and educating the customers on the initial high cost of the machines checked by its low operating costs owing to its advanced technological features. I believe the customer gets convinced on the same and opts to go for a quality product.
On business expansion. what are future plans in the direction?
We have well laid business expansion plans. We are setting up a new material handling equipment plant near Kolkata on an area of 200-250 acres. Land acquisition process for the plant is underway. The plant will produce port handling equipment, rubber tyred gantry cranes etc. The new plant has become a dire necessity for us to capitalize the burgeoning demand requirement of cranes from the market, as capacities in the existing plant has almost reached a saturation point.
Next, I would like to highlight that we are bullish on the equipment rental market. The construction equipment rental market in the country is presently largely unorganised, this presents ample scope to provide qualitative services in terms of quality maintenance offering for the equipment, in which TIL has a strong edge over others apart from diverse nature of equipment offerings. Through our rental stores, we would retrofit and rent out Caterpillar equipment across the value chain.
Presently, we have seven rental stores across the country , in places consisting Delhi, Udaipur, Chandigarh, Lucknow, Bhuwan– eshwar, Kolkata, and Assam. Besides, we are in the process of coming up with two more outlets at Barbil and Ranchi. Across our rental stores, we have a total fleet of 130 equipment. We intend to enrich the fleet size by bring in range of other equipment for a wider customer base, apart from our present Cat distributed products. This would consist, Caterpillar compaction equipment, concrete equipment, power trowel, walk behind rollers, pressure washers etc.
Service backup placement?
With being synonymous of being a core engineering company, we are much service driven company led by well placed service networking skills. This is imperative to service global as well our own equipment brands across the value chain. Our four regional offices in Kolkata, Delhi, Mumbai and Chennai and 45 sales and support locations offer us a strong standing from the sales and service point networked by Oracle ERP software solution. The service network is backed by 400 strong engineers.
Our service component involves, pre-purchase consultancy, equipment investment analysis, engineers on call for site visits, component repair, complete machines rebuild, ready parts availability and capability development. Out service component also includes, maintenance and repair contract to provide guranteed equipment availability at a fixed cost with the objective to deliver the highest asset utilization over the product lifecycle.