According to Konecranes, the market for standard industrial overhead cranes in India is doubling in size every three or four years. It estimates the market was approximately 5,000 units in 2006 and had doubled to 10,000 by 2010. In 2013, Konecranes estimates, it will have just about doubled again to nearly 20,000 units.
Not only is demand growing for locally made Indian cranes, but more expensive European products are also seeing a really dramatic increase in demand. No wonder, therefore, that the Indian crane industry is rapidly reshaping, with world players growing their presence and local companies seeking international partners.
For companies that specialise in custom-made heavy-duty cranes, however, growth has slowed in recent years. Anupam Industries, for example, has seen only "nominal" growth, says managing director Mehul Patel. "The business in the last two to three years has not been very encouraging," he says.
Tushar Mehendale, managing director of ElectroMech, confirms: "In the last year, there has been a definite slowdown in the Indian economy."
He adds: "On account of high inflation, the government was forced to clamp down on lending and this led to a sustained increase in the lending rates throughout the year. As a result, many new investments were drastically affected." He also talks of "a policy paralysis" in government leading to a lack of infrastructure spending.He says that India is looking at a GDP growth rate of less than 8% for the first time since 2003. However, he is sure that this is only a temporary slowing.
"The growth story of India is still intact with the demographics strongly favouring sustained growth in the coming decade. Hence in my opinion, this slowdown is a temporary phenomenon which will get reversed in a flash the moment lending rates become more affordable and newer infrastructure projects are launched. Keeping this in mind a lot of multinational companies have continued investing in India and the new business generated from these companies offsets the slowdown faced by the indigenous companies to a large extent."
According to Mehul Patel, that turnaround is imminent since the government has announced 50 lakh crore ($10bn) of infrastructure work for the 12th five-year plan. He says: "There are a number of projects coming up in power, steel and other sectors. This will also open up tremendous opportunities for global investors over the next five years.
There will be huge spending on many projects such as the National Highway Development Project (NHDP), the National Maritime Development Programme (NMDP), Dedicated Freight Corridor and Airport modernization, steel industry, power plants, etc. As the government formulates a manufacturing policy to increase the share of manufacturing to 25% of the GDP, we are sure that it is going to create excellent opportunity for the crane business as well. There is going to be a huge requirement for cranes. We expect the crane business to grow at 20 to 25% each year."
With annual revenues of approximately $60m and 1500 employees, Anupam is one of the major players in India’s crane industry and follows a traditional model of producing its own components, focusing on large capacity cranes for power, steel and construction sectors.
Mehul Patel says that there are plans afoot to enter the market for standard cranes and components, but he is not yet ready to reveal more.
A new initiative at Anupam is a 51:49 joint venture with Mitsubishi Heavy Industries (MHI) of Japan for manufacturing port cranes for domestic and global markets. The new company, set up in November 2011, will be based in Anand in Gujarat and two manufacturing plants are being set up at Anand and Mundra.
Anupam-MHI Industries has already bagged its first two orders, says Patel: a $20m order for three rail-mounted ship-toshore container handling cranes from JNPT and a $40m order for six ship unloaders from Krishnapatnam Port.
The JV follows on from a 2010 agreement under which MHI licensed its crane technology to Anupam. Under this license agreement, the company has already delivered higher capacity forging and ladle crane orders. It has manufactured and installed two 350t/50t forging cranes for L&T Special Steel & Heavy Forging plant at Hazira in Gujarat — the first of its kind in India and one of the first in the world, Patel says. It has also produced a pair of 450t ladle cranes for Jindal Steel & Power in Angul. This is one of the largest ladle cranes manufactured and installed in India, he says.
Anupam also produces tower cranes under licence from Alfa of Italy. "We have been producing tower cranes since last three years, and our average yearly production is around 60 cranes, which is being increased up to 120 cranes in the current year," Patel says.
ElectroMech has also diversified from industrial cranes to tower cranes, in cooperation with Zoomlion of China. With an annual turnover of approximately $40m, it is somewhat smaller than Anupam, but it is more active in the higher volume, lower cost standard cranes business, producing 690 cranes in the year ending 31 March 2012.
"Our latest strategic alliance with Zoomlion is something that we are quite excited about," says Tushar Mehendale. "Zoomlion counts itself amongst the Top ten construction equipment companies globally and manufactures over 9,000 tower cranes annually. Considering the surge in demand for tower cranes in India, this association comes at the right time for us. We will be doing the tower crane business through a separate subsidiary company as it requires different marketing, sales and production capabilities. This way we can ensure that adequate focus is maintained for both the existing line of business of industrial overhead cranes as well as for the new business of tower cranes. We are initially looking at selling around 100 tower cranes in our first year of operations."
He adds: "We have always been a firm believer in tie-ups with market leaders which allows both the partners to effectively leverage each other’s strengths and derive synergies. Our oldest association is with Abus. Abus has been a great partner for us and has played a significant part in our growth over the past few years. This year we have sold 234 Abus cranes to various clients across various industries in India. All our clients appreciate the quality, reliability and efficiency of the Abus product and we are proud to get repeat orders from majority of our clients for the Abus products. European multinationals who are investing in India are already aware of the reliability of the Abus product and they like to have the same product in their Indian operations as well. Furthermore, Indian entrepreneurs have also started appreciating the benefits of the ABUS range of standardised products and have started adopting them in their projects in a significant way."
ElectroMech is also an agent for Stahl’s EX range of explosion proof products. "We are happy to state that we have made good progress in this business. The Stahl EX product is considered as a gold standard in the EX range of products and it is an inherently more sophisticated and safer product as compared to those available from local Indian manufacturers. As a result, the Stahl EX product comes at a premium. We are happy to state that many customers realize the benefits of going in for the Stahl EX product over those manufactured locally and have realised that the small premium they have to pay for this product is worth it as it substantially enhances the safety of their multi-million dollar investment in refineries."
A further relationship is with Sibcranex of Russia, through which ElectroMech is targeting cranes for the steel industry. "We are on the verge of making a breakthrough in this market pretty soon. This will open the steel cranes market for us which hitherto had been an unexplored market for ElectroMech," says Mehendale.
Another new market for the company is the nuclear sector. "We bagged an order for supply of 29 cranes for critical handling applications at Kakrapar atomic power project being set up by uclear Power Corporation of India," he says. "Some of the cranes are single failure proof cranes which will be used to handle critical components/equipment. Some of these cranes will also be handling spent fuel bundles."
Mehendale says that the crane industry in India is in a transition phase at the moment. This has seen the acquisition of local crane builders WMI by Konecranes of Finland and Armsel by Kito Corporation of Japan.
Patel says that he can foresee other Indian companies falling to foreign investors too. Anupam, however, will be looking to move in the other direction and make acquisitions overseas, he says.
Konecranes entered India in 2007 and the acquisition of WMI last year increased its presence from 360 employees to more than 1,000.
Based in Mumbai, with a second factory in Jejuri, near Pune, WMI Konecranes India — as it is now called — has an installed base of more than 4,000 cranes across India, built up over more than 50 years. The new owners are expanding the Jejuri plant, with a billion rupee ($20m) expansion to increase its crane building capacity to 1,000 units a year.
With annual sales of just $8m Bangalore-based Armsel is rather smaller than companies mentioned thus far, but has big ambitions. It was taken over by Kito In September 2010.
Preet Heri took over as managing director and CEO of Armsel Kito as the takeover took effect. His father, AC Heri, had founded the business in 1974 and selling the business was part of the succession planning, he says.
"My father was looking to retire," says Preet Heri. "To move the business to the next stage we needed a global company like Kito to take us forward. We are aiming to be one of the leading materials handling solutions providers in India." Armsel operates through three segments. It designs and produces its own custom built cranes for process industries; it offers standard cranes using SWF kits imported from Germany; and it now sells packaged products produced by Kito in Japan, such as electric chain hoists, lever hoists and blocks. Both of the crane segments have seen growth in the past year, Heri says, and the Kito product line has introduced a whole new revenue stream to the business.
Net sales in 2009/10 were INR265.5m. In 2010/11 this reached INR288m and in 2011/12 approximately INR430m. A medium-sized company like Armsel, he says, has plenty of scope for strong growth. And being under Japanese ownership has positioned Armsel well to benefit from other Japanese companies investing in India, meeting their materials handling requirements. For example, Armsel has recently shipped five double girder cranes of 10t to 25t SWL to the automotive group Toyota.
Heri says that future plans for Armsel are to expand geographically, one step at a time. The company has recently opened a sales and service operation in Delhi and is looking to open in Chennai. Armsel already has people in Chennai, he says,but no infrastructure or premises yet.
There is nothing too dramatic planned, just moving forward "step by step", he says.
With the world’s crane companies all looking hungrily to India, competition has grown stiffer. Demag, for example, has sought growth aggressively since establishing its own subsidiary in Pune in 1997. The accounts of Demag India show that its sales jumped a massive 58% in the financial year to 31 March 2011 to INR1,779m (approximately $35m). However, it appears to be buying market share, since it made a net loss of INR147.5m ($2.9m), more than double the INR65.8m net loss of the previous year.
The directors’ report confirms that crane projects were bid for at a loss, in some cases deliberately, to gain market share — particularly for process cranes — and in some cases accidentally, "due to errors in estimation process".
The directors note that the company’s net worth "has been substantially eroded" but add that more money has been injected from Germany. "With a sustained increase in sales and improvement of gross margin, the company will start generating profits in future," the company says.
