Sameer Malhotra, CEO, Shriram Automall India Ltd
Shriram Automall India Ltd (SAMIL) offers an exhaustive range of construction machinery. The company is a 100 per cent subsidiary of Shriram Transport Finance Company (STFC), a leading NBFC in India. It also has a pan-India presence with more than 550 branch offices. Sameer Malhotra, CEO, SAMIL, shares his views on the construction equipment (CE) sector and the company's offerings to the industry.
What are the ongoing market trends in terms of equipment purchase? What is SAMIL's role in this scenario?
Heavy construction equipment is used directly and extensively in capital-intensive projects; hence, fixed investments are extremely salient determinants of demand for such products. The increasing demand of new infrastructure enhances the demand of construction machinery across the globe. The CE industry has grown at a healthy rate, especially in growing economies.
People are very conscious now - they purchase only when there is a requirement of equipment to compute proper cost. In this scenario, it's important to weigh equipment options, like new equipment, used equipment and rental options.
SAMIL's role in this scenario is to provide an opportunity to its customers to drive away the pre-owned assets through transparent bidding platforms, which aids in reducing their capital expenditure and thereby reduces the burden of interest rates. Besides this, SAMIL helps existing equipment owners in finding the right unused and ideal equipment; therein increasing some cash flows for them.
How will you comment on the demand for used equipment?
Based on the projected GDP growth, an estimated amount of around $1,300 billion is planned to be invested in different infrastructure sectors during the span of eight to 10 years. Against this backdrop, the CE manufacturing industry estimates that CE demand will go up to around 100,000 units during 2014. The market for used CE is about Rs 25,000 crore and there has been a slowdown in demand for new CE, this year. This reflects the fact that many infrastructure development companies have cut down on new capital expenditure plans.
However, there is a lot of demand for used CE as it helps them not only to reduce cash flows but also decrease interest costs.
What are the consolidated services that you offer to owners and buyers of construction equipment?
For a wide gamut of pre-owned construction equipment, SAMIL offers various platforms, namely physical bidding, online bidding, private treaty and one stop intranet kiosk to facilitate its trade in the most transparent and credible manner. In the premises of a huge Automall, physical bidding platform gives buyers an opportunity to inspect the equipment before bidding. Through online bidding, we serve the most instant and easy platform that offers an extensive market reach. In Private Treaty, the company acts as a negotiator to serve the deals between an owner and a buyer, personally. With our One Stop Kiosks, we present a plethora of listing or classified options in the CE segment.
We also offer various services including refurbishment, parking, valuation and easy finance.
The demand for CE is expected to rise to US$4.1 billion by 2014. Which are the sectors you see driving this growth and which equipment in your view will be most in demand?
The demand for CE is aligned with infrastructural growth. So the CE market has also been deeply affected by this. The infrastructure and real estate sectors will account for 70 per cent of equipment sales. This will translate into a compound annual growth rate of about 20 per cent until next year. However, not everybody predicts robust growth for mining and construction equipment industry. For instance, demand for equipment has remained 'sluggish' owing to slow pace of infrastructure investment, weak business confidence and continued regulatory issues surrounding mining activities. The construction, mining and earthmoving equipment sector remains occupied with certain ongoing projects in infrastructure sector, particularly road construction (NHAI), metro rail in various cities, and power and airports. There will be a demand for equipment such as excavators, backhoe loaders and road equipment.
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