Emerging Market Sessionon India

Amit Gossain

President, ICEMA

India- The Dimension

Median age 25 World’s largest democracy 28 States + 7 Union Territories 15 official languages & 200+ dialects 2nd largest English speaking population 2nd largest pool of Certified Professionals Highest number of Qualified Engineers in the world 3rd largest investor base in the World Well developed financial & banking system

“India to have the highest increase in working age population (16-64 years) globally ( 2010-20) at 119 million, and will be a source of Competitive Advantage”.

Frost & Sullivan – Mega trends in India to 2020

India: Macroeconomic Scorecard

Growth Drivers Domestic led, provides relatively high insulation from global disturbances Services led, services contribution to GDP is 59.3% Consumption led, growing middle class consumption driving growth.

Contributors to GDP Agriculture 13.7 % Industry 27.0 % Services 59.3 %

3rd largest Economy in terms of PPP

10th largest GDP (in nominal value)

IMF growth estimate: 5.4% in 2014-15 and 6.4 % in 2015-16

World Bank growth estimates: 6.2% in 2014-15 and 7.1% in 2015-16.

India & Global Economic GDP Growth

India is under-penetrated in terms of infrastructure availability compared to other nations

India

0.6%

Mexico

12.9%

China

3.5%

US

8.2%

India

12%

Pakistan

20%

Indonesia

34%

55

US China

628

India

204

Brazil

23

Mexico

19

India

23%

Brazil

92%

China

68%

US

88%

Presence of Multilane Roads (km of multilane roads as % of overall

road length)

Area irrigated by canals(as a % of total arable land)

Airport congestion(000’s of passengers per airport)

Access to improved water – piped on premises (% of total population)

India is yet to be built ...

Emerging

markets

1,500

1,000

Cement consumption per capita kg av. ’05-’11

500

0

GDP per capita kg av. ’05-’11 (constant 2005 $)

20 400 1008060

Africa

North Africa

RoW

Maturity curve

Note: Some African markets show only time frame 2005-09Source: Global Cement Report 2011; EIU; Jeffries building materials report February 2012; BCG analysis

CHINA

INDIA

The cement maturity curve

India's investment in infrastructure as a % of GDP is amongst the highest in the world

Colombia

0 12

Real GDP Growth

2005-2010 (%)1

0

2

4

France

8

Infrastructure investment

over GDP (%)1

2 4 6 8 10

UKItaly

South

Korea

US

China

India

Argentina

Indonesia

Brazil

Chile6

Nominal GDP US$ (2010)

Note: 2010 data; Investment over GDP does not include Oil & Gas investments: Estimated 2010 data; Source: World Economic Forum Report, 2010; Economist Intelligence Unit (EIU), International Monetary fund (IMF), World Bank

Private sector contribution in investment

4,000

2,000

0

+15%

2011-

12

5,283

2,084

1,483

1,716

2010-

11

4,601

1,692

1,348

1,560

Rs Bn

4,028

1,399

1,226

1,404

2008-

09

3,591

1,211

1,140

1,240

2007–

08

3,038

1,043

1,006

989

6,000

2009-

10

PrivateStatesCentre

~15

~10

~19

CAGR

(%)

Note: Investment amounts are at 2011-12 pricesSource: Planning Commission, Press Releases

~35%

(Share of private sector)

~40%

(Share of private sector)

Estimated infrastructure investment by sector (12th plan, 2012-2017)

60000

40000

20000

0

Sector

Projected

Infrastructure

Investment

(Rs Bn)

Total

12400

Others

12000

7200

Irrigation

1800

Telecom

700

Airports

6500

Ports

4700

Railways

4600

Roads

6900

Power

56800

Water

Supply &

Sanitation

22% 21% 3% 11% 8%13% 1% 8% 12%

Note: 2011-12 pricesSource: Planning Commission Data

~ 60%

Indian ECE market has the potential to grow at

20-25% to reach 330,000-450,000 unit sales by 2020

20-25%Wheel Loaders

Forklift

2020

Mobile Cranes

330-450

40-55

11-14 3-4

140-190

95-120

25-3510-15

12-16

2016

160 – 180

22-247-102-3

65-75

35-40

14-184-6 7-8

2012

76

Others24 1

32

Transit mixers15

9

24

Batching plants

BackhoeLoader

Crawlerexcavator

9

Equipment category

Growth drivers

1. Including concreting equipment (batching plants, transit mixers etc)2. Others include mobile compressors, compaction equipment, asphalt finishers, boring machines, motor graders, skid steerloaders, crawler dozers, mini excavators, pavers etc

~$3bn $7-8bn $16-21bn

• Focus on large scale infrastructure projects with tight schedules

• New areas of application especially in rural areas – irrigation, agriculture

• Higher urbanization

• Higher concrete usage in infra projects

Projected ECE1 equipment sales in India(Sales In ‘000 units)

Infrastructure Sector in India

- An Overview

Road SectorIndia’s road network, spanning across 4.69 million km, is the third largest road network in the world

Road Network in India

Source- Ministry of Road Transport & Highways, Government of India

Road projects to be awarded (in Kilometers)

Public Private Partnership over the next five years (2012-2017)

India Brand Equity Foundation

Execution Delayed

Railway Sector• 2nd largest railway network in the world• Total route network of 64,600 kilometers (km)• 7,146 stations • 19,000 trains operated every day• Over 30 million passengers travel by trains everyday• 2.8 million tonnes (MT) of freight transported everyday

Dedicated Freight Corridor Corporation of India Ltd. (DFCCIL)

DFCCIL, a special purpose vehicle, was set up for implementing the Dedicated Freight Corridor along the Eastern and Western parts of India and is under the administrative control of the Ministry of

Railways.

Total length: 3,300 kilometersTotal estimated cost: USD16.7 billion

Project scheduled for completion in FY17

Freight Corridors Under Implementation

Western Corridor Route length = 1499 km Feeder Route length = 2082 km States covered: Uttar Pradesh – Delhi –

Haryana – Rajasthan – Gujarat –Maharashtra

Eastern Corridor Route length = 1839 km Feeder Route length = 2072 km States Covered: Punjab – Haryana –

Uttar Pradesh – Bihar – West Bengal

Implementation Period2009 to 2017

Proposed freight corridor

Future Freight Corridors

East – West Corridor Kolkata to Mumbai Route Length = 2000 Kms.

North-South Corridor Delhi to Chennai Route Length = 2173 Kms.

East Coast Corridor Kharagpur to Vijayawada Route Length = 1100 Kms.

Southern Corridor Chennai to Goa Route Length = 890 Kms

Mining Sector

Rank Mineral Total Production (‘000 tonnes)

2nd Barite 1,0002nd Chromite 3,8003rd Coal 537,0003rd Limestone 240,0004th Iron Ore 260,0004th Bauxite 18,0004th Zinc Metal 7505th Manganese Ore 1,1006th Lead Metal 957th Aluminum 1,40010th Copper 161

India’s Rank in Global Production Across Key Minerals

Major Players in Mining

• Exploration and Production of Coal / Lignite– Coal India Ltd, Neyveli Lignite Corporation, IISCO etc.

• Exploration of Metals (Copper, Bauxite, Iron Ore, Chromite, Lead - Zinc)– NALCO, BALCO, Mineral Exploration Corporation Ltd, Bharat Gold Mines Ltd, ONGC, Ircon, Hindustan

Zinc Ltd, Hindustan Copper Ltd, Sikkim Mining Corporation.• Iron Ore Sector

– National Mineral Development Corporation, Kudremukh Iron Ore company, Steel Authority of India Ltd, Orissa Mining Corporation.

• Bauxite Mining and Aluminium Production– National Aluminium Company.

• Copper - Ore Mining– Hindustan Copper Ltd.

• Rock - Phoshate and Barytes Mining– Rajasthan State Mines and Minerals Ltd, Andhra Pradesh Mining Development Corporation.

Port Sector

Cargo Traffic (in MMT) at major ports increased at a CAGR of 3.9 % during FY07–12

Mechanization growing in Indian Ports

Being developed as a ‘Global Manufacturing and Trading Hub’

A band of 150 km to 200km has been chosen on both the sides of the Freight corridor to be developed as the Delhi-Mumbai Industrial Corridor

11 Investment Region (IR) ( with a minimum area of 20,000 hectares) and 13 Industrial Area (IA) with a minimum area of over 10,000 hectares will be developed

Delhi Mumbai Industrial Corridor (DMIC)

DMIC & DFCC Project Influence Area

Challenges in the infrastructure space

• Social issues (relocation of affected parties)

• Lack of robust initial planning

• Subjectivity in clearance process• Involvement of multiple agencies

Multiple challenges need to be addressed for the ECE industry to achieve ‘long term’ potential

Financial viabilityLong term funds

Land acquisition Procedural clearances

Infrastructure challenges

Planning Governance

• Low pvt participation• Central outlay spread thin

• Low cost recovery• Long working capital cycles

Lack of integrated long-term planning Low coordination between center, state and local agencies Lack of empowerment of Urban Local Bodies

Challenges in ECE ecosystem

Skill Development

(CE Operators, Mechanics)

Ecosystem challenges

EquipmentFinancing

Components and

Aggregates

Deployment of unskilled labour the field by contractors; low demand for qualified manpower

Lack of coordination among multiple stakeholders trying to enhance operator skills

Lack of accreditation norms (safety, operations, training)

Lack of easy financing access Poor rental penetration Unfavourable taxes and

regulations

Variability in OEM demand Gaps in technology adoption

vis-à-vis market demand Stiff margin pressure

In addition, challenges being faced in the ECE ‘ecosystem’ will also need to be addressed

Thank you !

Indian Construction Equipment Manufacturers' Association (ICEMA)

23, Institutional Area, Lodhi Road, New Delhi, India

Landline: +91-11-24892229

Email: president.icema@cii.in / s.g.roy@cii.in

Website: www.i-cema.in