Construction equipment players to gain from govt’s push

The government’s infrastructure push — with the recently announced Bharatmala project — means gains for construction companies like JCB, Caterpillar and Tata Hitachi. The firms are eyeing a string of highway contracts to be offered by the government.

The infrastructure sector is a demand and job multiplier, Vipin Sondhi, chief executive officer and managing director of JCB India, said. JCB is a key player in the construction equipment industry.

“There are five sectors — road, rail, irrigation, urban rejuvenation and real estate — that drive business for construction equipment companies. Infrastructure is one of the key drivers,” Sondhi, who also serves as the chairman of the board of Excon, said.

In October, the Union Cabinet cleared the Bharatmala project to construct 20,000 km of highways connecting western and eastern parts of the country at an estimated investment of ~7 lakh crore. These corridors will permit faster movement of cargo vehicles. According to the government’s estimates, construction of 10,000 km of highways annually has the potential of generating 40 million mandays of employment.

As many as 42,710 units were sold between January and September, this year, against 37,346 units in the same period, last financial year. The construction equipment industry that is growing at a rate of 14 per cent is expected to touch the 25 per cent-mark by the end of the current financial year (2017-18).

According to an industry expert, who did not wish to be quoted: “Since the real estate sector is down for a while, the business for the construction equipment makers would mainly come from the rail and road sectors. If these two sectors see a growth of about 60 per cent, 30 per cent of that should translate into business for the construction sector players.”

The leading players in the construction equipment space include Hyundai, Caterpillar, Tata Hitachi, Escorts, ACE and BEML, industry estimates show. According to such estimates, the total size of the construction equipment industry was $3 billion in 2016 and is expected to touch $5 billion by 2020.