“If OEMs, NBFCs, and rental businesses work together on this, they can create a product that is a leasing option for infrastructure corporations,” says Munish Taneja, President – Equipment Business, Indiabulls Store One.

Present scenario for equipment rental and leasing

In terms of the infrastructure project requirements, we see an increase in the government spending towards infrastructure projects. As a country, we need huge investments in construction of roads, metro, railways, flyovers, waterways and other critical infra projects. So there’s a lot of opportunity in this segment. As a rental and leasing company, IndiaBulls store one sees a lot of opportunities.

Evaluating CAPEX and investments for leasing arrangement

In terms of equipment and expenditure, we require  about 50 percent investment for equipment procurement,for an infrastructure project. All of the major corporations are now seeking for ways to finish these projects in the shortest amount of time with the least amount of CAPEX, as well as ways to acquire access to high-quality machines through rental or leasing arrangements.

We have had infrastructure equipment rentals in India for many years. However, we are still lagging behind developed countries in terms of penetration. In India, rental penetration is between 10 and 12 percent, compared to 50 to 60 percent in developed countries. As a result, professional rental companies in India still have a lot of room to grow.

Advantages and challenges in execution

We already have a large market where many small and midsize equipment rental companies having-smaller fleet of 5, 10, 20, and 30 machines are operating and offering rental solutions to customer. This is resulting in a fragmented rental industry. We see a lot of consolidation taking place,  and new players will also enter into this space offering innovative rental solutions.

We’re seeing a many clients who were buying lot of construction equipment’s before Covid period are now going for rental solution. They don’twant to invest in capital equipment purchase.There are numerous advantages to renting. Any company working on an infrastructure project can save money for execution, raw material procurement, or expanding into new projects with the same funds. They can perform numerous projects with the same capital rather than investing it into CAPEX. They don’t need large work force to manager construction equipment’s maintenance and operations.

The CAPEX payback cycle is often substantially longer, ranging from seven to eight years on average. It may take longer for some companies, depending on the type of machine they are purchasing and how that asset will be used.

Equipment leasing

Leasing is also a viable option. There are numerous banks and non-bank financial institutions (NBFCs) that can provide this service; however, it has not taken off as quickly as it has in industrialised countries. However, after the advent of GST, we feel that leasing, rather than outright purchase should be a realistic choice for infrastructure corporations.

This also allows them to avoid leveraging their balance sheet by keeping these asset acquisitions off of it, as well as expense out their leasing payments. However, we find that certain obstacles exist in leasing, and that the flexibility of restructuring or the creative product solutions supplied by NBFCs are relatively limited. As a result, several sectors, including OEMs, must work on it.

We believe that this will help us feed demand and usher in a new age in which we can expedite the use or deployment of construction equipment in India.

So, in terms of productivity, fuel consumption, or technology, we need newer machines with higher technology, as well as better fuel and pollution standards. This will aid us in improving overall project productivity as well as project cost control. As a result, I believe there is a significant possibility for this older equipment to be retired or utilised for specific types of tasks.