Construction equipment sale hits four years high

The fast paced projects delivery and their implementations in the road sector across the country pushed the sales of construction equipment to four years high in 2016. The sales of equipment such as backhoe loaders, pick-n-carry cranes, earth moving machines and excavators grew highest during the period. As a matter of fact, overall volumes of such machines expanded 41.5% to an estimated 52,100 units in 2016 as compared to 36,800 units in the previous year, Indian Construction Equipment Manufacturers Association (ICEMA) added that though the industry is yet to reach the peak of 2011 levels, the future looks promising. Commenting on the surge in equipment sales, Managing Director and Chief Executive at JCB India, Vipin Sondhi, attributed the high growth to the low base of the past four years. However, one sector where construction activities have intensified is the road and highways sector and the emerging scenario indicated that in a bid to ride the growth momentum, construction equipment firms are building manpower and technical capabilities. They are also entering newer segments and launching new products and the road sector has virtually emerged as the single largest growth driver for construction equipment sales. He further said adding that some states have done quite well with regard to irrigation projects and this augurs well. However, the industry also needs sectors such as urban development and railways to participate for the growth to be sustainable.

According to an analyst at Karvy Stock Broking, Vijay Goel, the total plan expenditure for key infrastructure-focused sectors grew at a muted compound annual growth rate (CAGR) of 1% during fiscal 2012-14 while it is expected at 21% CAGR during fiscal 2015-17, he said in a January report. The key infrastructure-focused sectors like roads, highways, and urban development have seen a significant increase in allocation post fiscal 2013-14 (42-44% CAGR during FY15-17E vs. 2-3% CAGR during FY12-14). Increase in investments in these sectors would drive the order inflows for construction companies. Except for the last two months, when sales were weighed down by the impact of demonetization, cumulative sales have been impressive. Tata Hitachi Construction Machinery Co. Ltd saw its sales rise 48% to 4,800 units in the first nine months of the current fiscal, said Managing Director, Sandeep Singh. Even a relatively smaller firm like Mahindra and Mahindra Ltd. which entered the market only in 2011, is benefitting from the uptick in demand. The company has already surpassed last year‘s volumes in the first nine months of the current fiscal year, President and Chief Executive, truck and powertrain business, Mahindra and Mahindra, Rajan Wadhera said and added that it sold 728 units in the first nine months of the current fiscal against 654 units in the fiscal that ended in fiscal 2016. The construction sector GDP is expected to grow at 2.9 percent in the current fiscal against an earlier estimated 3.9 per cent owing to the likely adverse impact of demonetization on the real estate sector involving residential and commercial properties, said CARE Ratings Research in a recent report.