you give a brief about Terex and how the company has been doing of late? And
what are your products which are popular in the Indian market today?
Terex is a US based company which operates
through five verticals and one of the verticals is Terex Construction and that
is where our company belongs. We are based out of Greater Noida and what we
manufacture here is backhoe loaders and skid steer loaders. The global
technology which was available with Terex was indigenised for the Indian market
and that’s when the plant was set up here and we manufacture these machines
here for the Indian market. So broadly speaking most of the designs are tailor
made for the Indian market. There is a stark difference between the backhoe
loaders which are operated in India and the ones which are operated in western
countries. These are used as utility machines there and they help you
accomplish your routine work. Here it is an earning machine, it has to earn for
its master. So the whole principle of design then changes. You have to make it
more reliable, you have to increase the service life, and you have to focus on
issues like lower operating cost as someone has to make a living out of this machine.
Lately we have also been seeing the revival of the mining market, the mining of
aggregates, coal, etc and as a result we have tied up with a Chinese
multinational corporation which will bring in wheel loaders. They manufacture
wheel loaders for the mining market and tomorrow we will announce our strategic
tie up with the world’s largest manufacturer of wheel loaders which is Lonking Holdings
Limited. We are focusing now on the mining market in the hope that the government
will sort out all the mess which happened and the mining market will see a very
bright sunrise. As the government is on the right path and the Supreme Court is
involved, a whole lot of water has already flown so we are hoping fresh water
will start coming in and this would be a right timing for us to bring these
products. On the general market side in the backhoe segment we are the number
three or number four player in the market after JCB, ACE and Caterpillar. So Terex
is number four with a 6pc share in the market. We do about 1000-1200 units a
year. That is very small compared to the size of the Indian market which is
about 27000-28000 units, we are about 5pc of that amount. We are inching up our
new backhoe model which will be launched tomorrow. So we hope to get an
additional 3-4pc market share out of this new launch. They are a completely new
generation of backhoe loaders. What Terex was making in India has been shifted
and the new generation is being brought in now. It is called the series 70 or
the 7th generation of backhoe which Terex has rolled out. I think
the market is ready for it, it is a work horse and again as I told you it is
designed to earn for the master. As for the backhoe loaders and skid steer
loaders which we make, both have a double digit CAGR growth. Last year was a
little down, but even in the downturn it had a double digit CAGR. So these are
the two exciting segments to be in and Terex is in both of them.
entered the Indian market in 1995 with fierce competition in the market. Most
of the players are on the expansion path. So what is your current strategy?
From a corporate perspective, Terex is open
to both inorganic as well as organic growth. The last five to six years Terex
really did not look at inorganic growth or even organic for that matter as we
were never sure about how the government rules and regulations would change or if
they would be in our favor or against us. Now we are very optimistic as the government
has acknowledged the fact that there should be policy stability which will make
investors feel confident. So now we are planning for acquisitions, inorganic
and organic growth. So the first step is to tie-up with Lonking Holdings
Limited. After another 5-6 months down the line, once the framework stabilises
and we are very clear about what the government plans to do in the next two to
three years we will get into the make in India scheme with Lonking. Then we
will follow the make in India policy as well. Right now we are just carefully
sitting and watching how the make in India plan rolls out and the moment it rolls
out we will be the first ones to jump in. In fact we have already jumped in –
we have announced a tie up with Lonking Holdings, we will keep evaluating the
situation every quarter and will immediately jump in the make in India scheme.
One is to expand our manufacturing base here and the second is to explore the
markets outside of India like the SAARC and ASEAN regions. ASEAN holds a lot of
potential. For the Indian market we are already present to a large extent and
have 53 dealers. The Indian strategy is to strengthen these dealerships. The real
challenge is to make these dealers responsive to the customers. In India as I
said the customer profile has gone very rural. It is the rural youth which is
now coming up with 5-6 Lakhs of rupees and wanting to invest, they pick up a machine
and put it on hire or do some contracting work themselves. So those are the people
who are mainly our customers. Until now our network was urban centric. It is a
massive shift and we need to train all dealers to become rural centric. So in
India we are focusing on that shift from urban to rural. Markets unfortunately
are two steps ahead of us. The markets have already shifted we were the ones
who did not realise it. So now we are running full steam to change the focus of
our distribution network to become more rural centric. At the same time we are
expanding outside India into other neighboring markets. So we have an
aggressive plan for ASEAN and SAARC regions. We have already established a very
decent market share in Nepal, Thailand, Indonesia and Malaysia. We plan to keep
aggressively moving on that path as we have a cost advantage unlike these
markets which are typically occupied by major Japanese, Chinese and Korean
players. All three of them are not as cost competitive as Indians are. For India
we will redesign the distribution network to be more rural focused as that is
where the growth is coming from and that is where the customers are coming
from. The immediate plan is to complete the tie up with Lonking Holdings and
just wait for another quarter to see how the make in India program rolls out.
So we will have the Lonking range of machines manufactured in India soon.
would you say is the current market condition for CE and what is your forecast
for the coming times?
The current condition is that in the last
five six months have picked up. There is a sense of optimism. Last year was
absolutely bad, there was no hope but things have changed. Currently the market
is picking up and compact equipment sector will probably continue to enjoy an
upwards of 15-18pc growth in 2015. That is the minimum expectation we have and
if the GDP grows by another 2-3pc this growth would easily go up to 20-22pc. This
growth of 15pc is pegged at a GDP of 6pc. If the GDP goes up to 8pc then we
will see an increase of 10pc in our business volumes.
company has a financing programme for its products. Could you briefly elaborate
on what it involves and what kind of an effect it has had on your products?
We have a vertical called Terex Financial Services,
this is not involved in direct funding. It acts as a syndicator between a
client and a financial institution. Our specialisation is to tailor make
programmes for these customers, based on their needs. Banks or other
institutions don’t necessarily understand every customer. They understand
customers in form of sets. Like a builder or a contractor or a mining operator.
Terex Financial Services understands customers on a last and first name basis.
We say that Mr. X has Y-business. So we are ten times more deeply penetrated
into the customer than a bank or a funder. With our financial expertise, we are
able to tailor make a program for this gentleman and then take it to the bank
or an institution, that this is how we want to structure a financial program
for him. We ask the bank or the funding institution to come on board and then get
the client onboard then we put them together. This is one unique service which
no one else offers in India except for Terex that is how deep our customer
interaction goes. Maybe in the short run we would probably have our own funding
arm as well which will directly fund customers with our own cash. Today we are
only providing it as a service. As far as demand is concerned this programme is
loved by people who have worked on it. As of now we don’t have much of market
penetration of this program so we will work on some selected deals but as you
rightly said demand for specialised products we have been able to increase.
Like the demand for Genie products has increase due to the financial services
we offer. This service has helped many cases to come on board and the demand for
the products have gone up. People are getting attracted towards it. For other
retail products like backhoe and skid steers it has not really helped much. So
demand for specialised equipment yes we have been able to make a dent. People
who work on specialised projects or high technology projects have been impacted
by Terex financial projects.
you tell me a little about your R&D center and what it has been doing of
late? What are the new products or technology we can expect in the coming
Terex has an R&D centre in India which
is a global centre for us. It is called the Terex India Research Centre based
out of Bangalore. They do design and engineering work for all Terex companies.
We have manufacturing bases in Germany, UK, US and China so we do all kinds of
R&D and engineering work for these guys. They are engineers on demand, so if
any Terex company needs engineering support they call on these guys. They are a
profit centre by themselves. So you pay them and get your work done. We have a
team of 45 highly qualified engineers working on all global projects that Terex
companies are doing. They are currently into helping our crane division to
develop some of the world’s largest boom cranes. Which are going to be made out
of Germany or UK, we have not decided that as of now. The core team is working
on lots of such projects for high mast cranes and they are also to cut cost for
group companies by having a global product sourcing program to help local
companies develop components for other companies of Terex. An example is that
they are working with us in Noida to develop some components for our German
plant. At the End of the day it will become a cost out exercise. The German
plant will be able to reduce cost and the Noida plant will be able to increase
business revenues. That is also one of their big mandates where they try to
cost out the cost of production between Terex companies.
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