Infrastructure experts discuss opportunities and roadblocks for rentals, equipment financing and technology Upgradation in infra equipments.

Economic revival position

Certain sectors within the construction equipments have increased quarter over quarter. As a result, segments such as vibratory compactors, hydraulic excavators, and concrete equipment, among others, have experienced strong development. Construction equipment purchase is a lag indicator of construction activity; first, construction activity itself, then construction equipments, and the thumb rule is that whatever the GDP growth is, infrastructure growth will be double that, and construction equipment growth will always be 1.5 times that.

Marginal increase in construction equipment costs

According to Jaikumar Kamath, Head-Road Machinery Business, L&T Construction & Mining Machinery , “It is surely not going to be marginal but a substantial increase. In fact, because of the CEV-IV, which ever machines are with CEV-IV, the increase in price is going to be at least about 18 to 20 percent levels, because of the steel price increase as well as the input cost increase of CEV-IV and this is already evident in the marketplace. All manufacturers are trying to pass on these cost increases to clients. 

There are certain segments where a CEV-IV has still not kickedin, like hydraulic excavators. So, as a drawback of steep increase in steel prices, all manufacturers are forced to consider minimum 6-7 percent price increases on an annual basis. If we are looking at the alternatives, then we might fight suitable ones, but for construction equipment, we can’t move away from steel.

Steel prices impacting the project cost 

According to Munish Taneja, President – Equipment Business, Indiabulls Store One, “Sky rocketing steel prices are one of our primary concerns post-Covid, especially towards the supply chain disruptions. It’s further impacting the input costs of the projects. But there are several ways to manage such situation, setting timeline for a project. If a project is being completed within 30 months but the infrastructure company deploy more assets in an attempt to complete it in 4-5 months ahead of its schedule. Here, we can save liquidity, and in some cases we can also achieve extra miles for moving ahead of the schedule.

We need to look at ways to work within the present available constrains, and innovate accordingly. It has to be innovative because even if the machines are technologically advanced, consumes less fuel or any other certain specific aspect that allow us to reduce manual labour component; then project cost is manageable. 

Interest rates impacting the formwork business 

“Cost is one of the key critical restrictions today,” says Vikas Mittal, CEO, NOVA Formworks. Because the rate of interest in India has decreased, it will be much more difficult for individuals to rent. Overall, for a contractor, it will be far more practical to pick up machinery, or anything else directly from the customer if he has tasks lined up. Because, that will always be cheaper than renting, so, it’s a bit of a contradiction, but yes, I believe it is one of the primary reasons why India will continue to undershoot.

Bottlenecks and barriers for rental business in Indian market 

Because there are so many companies in the rental market in India, this is an important question. “When compared to India, developed markets have far higher penetration, but the number of participants is substantially smaller. The rental business in India has a significant degree of fragmentation,” says Munish. Also, there’s a lack of proper process or standardisation of documentation, contracts, rental pricing, and terms. So, in terms of the penetration, we see that it can only improve if the rental yields are better, which makes investment viable in this segment. Also, the rental service provider should have security for their payments, which they should get on a timely basis from their customers.

Significance and bottlenecks for formwork business 

When it comes to the rental market, it’s worth noting that it is, in fact, quite modest in comparison to the rental markets of other developed countries. “One of the primary reasons, in my opinion, is the lack of a guaranteed return,” notes Vikas. Basically, there are organisations that will not even get into a contract with you based on your promises, and it becomes extremely difficult to accept only a few large corporations when it comes to long-term rental payback. The other firms won’t even give you a PDC, let alone agree to a contract or any other type of negotiable paper that secures the rental man.

So, I believe that, aside from anything else, one of the primary restraints is that, now that the rate of interest in India has decreased, it will be even more difficult for individuals to get into rentals because the rate of interest has decreased dramatically. Overall, for a contractor, it will be far more practical to pick up machinery, or anything else directly from the customer if he has tasks lined up, because that will always be cheaper than renting. So, it’s a contradiction, but yeah, it is what I believe is one of the primary reasons why India will continue to undershoot.

Modernisation of technologies 

Using System Formwork; it is a boon because you’re teaching people that they need more knowledge to use the system when it’s the other way around. “In comparison to the current method, the number of employees required when employing a system for formwork or, I would say, any kind of technology upgrade would be significantly reduced” says Vikas.

If you don’t have a good system in place, you’ll need a technical expert to fix it. You’ll need additional carpenters to work on the formwork if you’re using plywood because you won’t have a suitable finish or locking system. So, for him to truly go over the splice together so that the final comes out very well in a system for work, he’ll require a skill. Everything is laid up for you; all you have to do now is lock the panels. 

Modernisation in equipments 

Modernisation trends started with telematics, and are now expanding into equipment, allowing machines to be monitored remotely. “With the introduction of the CEV-IV standards, the engine is now being checked as well. As a result, the engine and the sensors attached to it can display failure codes and will not allow the engine to distract you. In the case of a malfunction, the engine will direct itself,” Jaikumar explains. To that extent, investing in equipment with all of these current devices would be preferable for a client, even though the initial expenditure would be a little greater.

Business prospects of used equipment 

In India and other areas where there is a large market for old equipment, used equipment is always an alternative. But, in general, the issue with old equipment is that there is no organised market for it, no organised market place for used equipment. “The majority of used equipment is offered in an unorganised market with no guarantee of adequate refurbishing, maintenance, or inspection reports. In that instance, if the company possesses the competence, it is an option. Then they will undoubtedly be able to purchase those devices”, Munish concludes.