Summer Internship Project Jayesh Halgekar FLAME School of Business Identifying and analyzing the...
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Transcript of Summer Internship Project Jayesh Halgekar FLAME School of Business Identifying and analyzing the...
Summer Internship Project
Jayesh Halgekar
FLAME School of Business
Identifying and analyzing the market potential of forgings in the Non- Automotive sectors
11th May 2009 – 11th July 2009
Scope of the Study
The study aims at analyzing the potential on the Non – automotive markets for forged products
The sectors considered for the study include
Off- road equipment manufacturing
Diesel Genset Manufacturing
Valve Manufacturing
Indian Forging Industry
Large
Medium
Small 230 – 250 units
100 – 120 units
9 – 11 units
Total installed forging capacity in India as of FY 2009: 1.4 – 1.5 million MT
Total estimated forging production in India as of FY 2008: 1.1 – 1.2 million MT
16%61%
23%
Open Die Forging Closed Die Forging Others
Source: Association of Indian Forging Industries (AIFI)
Indian Forging Industry
2004 - 2005 2005 - 2006 2006 - 2007 2007 - 2008 2008 - 2009
0
200
400
600
800
1000
1200
1400
1600Actual Production Installed Capacity
In ‘000 MT
Year
CUF: 70%
CUF: 30%
CUF: 65%
CUF: 59%CUF:
57%
*CUF: Capacity Utilization Factor
Source: Association of Indian Forging Industries (AIFI)
Non Automotive sectors identified as potential market for forged products
Railways
Oil & Gas refineries Diesel Engines/ Generators
Defense Equipment
Industrial/ Heavy Engineering
Space Exploration Equipment
Off – road equipment
Power Generation
Aviation
Agricultural equipment
Shipping/ Ship BuildingValves
Forged products demanded by the Non Automotive industry commonly include following products
Closed – die Forgings Open – die/ Hammer Forging/ Ring Rolling
Under-carriage components for excavators Ground engaging tipsValve bodies and componentsEngine componentsChassis componentsAxle components
Flanges (Weld neck/ Girth)RingsGearsNozzlesTube SheetsBlanksBlindsWheel sets for locomotivesBearing racesShaftsFly wheels
Off – Road Equipment Manufacturing Sector
Product range observed in the Off- road Equipment Industry
Earth Moving Equipment
Concrete Equipment
Material Handling
Material Preparation
Road Construction Equipment
Construction Vehicles
Tunnelling & Drilling
Backhoe LoadersExcavatorsLoadersBulldozersSkid-Steer LoadersWheeled LoadingShovelsWheel LoadersMotor GradersMotor ScrappersDump TrucksWheel DozersDraglines
Concrete BreakerPaver FinisherConcrete Batching PlantsConcrete PumpsConcrete MixersHot mix plants
TelescopicHandlersCrawler CranesMobile CranesTruck CranesForkliftsPick & CarryCranesSlew CranesTower CranesConveyors
Crushing PlantsJaw Crushers
CompactionEquipmentVibratoryRollersPavers
DumpersArticulatedHaulers
Rotary/ DTH DrillingHammer Track DrillBoring EquipmentDemolition Equipment
Product – wise contribution in the industry
57%
5%
12%
7%
6%
13%Earth Moving Equipment
Material Preperation
Tunneling & Drilling
Road Construction Equipment
Concrete Equipment
Material Handling
70%
6%
15%
9%
Earthmoving equipment segment
ExcavatorsBackhoesLoadersOthers
Excavator industry is thus valued at Rs. 5800 Crores as in 2008
Source: KPMG Analysis, CII – KPMG Report on Indian Infrastructure
Contribution in the industry which is estimated to be Rs. 14500 Crores as in 2008
Excavator Manufacturing companies in India include
Source: Primary survey and published news articles
Liugong India Private Limited
Guangxi Liugong Machinery Company Ltd. (China), In association with Salgaocar Engineers Pvt. Ltd
XCMG Machinery India Pvt. Ltd.
Terex Vectra
Kobelco Construction Equipment Pvt. Ltd.
Other potential entrants in the sector include:
Share of individual companies in total excavator production in India for FY 2007 - 2008
Off-road equipment manufacturers Estimated annual production of excavators
JCB 1700 - 1800
Telcon Hitachi (Dharwad) 3500 - 3800
Telcon Hitachi (Jamshedpur) 1750 - 1950
L&T Komatsu 2600 - 2800
BEML 200 - 300
Others 2000 - 2500
Total 11750 - 13150
Source: Primary survey and published news articles
JCB15%
Telcon Hitachi (Dharwad)
32%
Telcon Hitachi (Jamshedpur)
16%
L&T Komatsu24%
BEML2%
Others11%
Components in an excavator which are generally forged
Sprockets
Rollers
Idlers
Wheel hubs
Yokes
Axle beams
Spindles
Track links
Guide base
Counter pins
Levers
Gears
Shafts Teeth
Number of individual forged components in an excavator
Forged Component Average no. of components per machine
Track links/ shoes 90 - 100Rollers 12 - 20
Idlers 2
Teeth 5 - 10Sprocket wheel 2 Shafts 15 – 30Counter Pin 4Forged ring gear 1
Forged components contribute to not more than 5% of the total components in an excavator of which 90% is contributed by undercarriage components
Components in an excavator which are generally forged
Slewing bearing
Total estimated demand for forged products in the excavator manufacturing industry in India for the FY- 2007 - 2008
Forged component Estimated annual demand (in numbers)
Links 1167000 - 1168000
Rollers 242000 - 243000
Sprockets 24500 - 25000
Teeth 64000 - 64500
Idlers 24500 - 25000
Ring gear 12400 - 12500
Excel spreadsheet analysis
Company-wise estimated demand for forged products in the excavator manufacturing industry in India for the FY- 2007 - 2008
CompanyUpper rollers
Bottom Rollers
IdlersBucket Teeth
Track shoes
Sprocket wheel
Ring gear
TATA Hitachi 22000 80667 11000 27042 523600 11000 5500
JCB India 7000 24500 3500 11083 145833 3500 1750
BEML 1167 3833 500 1375 23917 500 250
L&T Komatsu 10800 43200 5400 13500 253800 5400 2700
Others 9000 40500 4500 11250 220500 4500 2250
Projected growth for the excavator manufacturing industry in India
2007 2008 2009 2010 2011 20120
5000
10000
15000
20000
25000
30000
35000
40000
45000
Realistic Assertive
30%
24%30%
40%
42%
10%23%
30%
36%
Projected production
Year
Greenfield projects in the sector
BEML Ltd. has plans to set up a new manufacturing unit for defense products and parts for the Railways at the Kinfra Integrated Industrial Park. The company intends to invest Rs 260 crore in this venture. The first phase of the factory will come up on 400 acre at Sathyanathapalam in Kanjikode, Palakkad, provided on a long-term lease by Kinfra.
Heavy equipment like bulldozers and earthmovers as well as heavy vehicles meant for defense use will be manufactured at the plant
Greenfield projects in the sector
Caterpillar India Ltd and the Tamil Nadu government have signed a Memorandum of Understanding (MoU) for a heavy engineering equipment manufacturing plant near Chennai with a capital investment of Rs 800 crore.
The plant will manufacture equipment used in the construction and mining industry. Caterpillar India Ltd., will also be expanding its manufacturing capacity at its plants in Thiruvallur and Hosur in Chennai.
Greenfield projects in the sector
Terex Pegson & Powerscreen are opening a manufacturing plant in Hosur, India.
The Indian plant is expected to start assembly operations in mid-2009 with additional manufacturing processes to be added over the long-term.
Greenfield projects in the sector
Escorts Construction Equipment will invest Rs 60 crore to set up plants in Vallabhgad in Haryana and Rudrapur in Uttaranchal.
Another Rs 130 crore is likely to be invested in five years. The company, which exports some 100 units a year now, plans to increase exports to 500 units within a year.
Greenfield projects in the sector
JCB Chairman Sir Anthony Bamford officially opened the company’s newly extended $ 60 million backhoe loader factory in India, the largest plant of its kind anywhere in the world.
The factory in Ballabgarh, Faridabad, has undergone huge expansion, doubled its capacity and enables JCB to produce 100 backhoes a day.
The existing backhoe plant area was 24,000m2 but now totals 33,574m2 including assembly line, paint shop, fabrication, transmission, logistics, utility, pre-delivery inspection and hot test area.
Greenfield projects in the sector
Ashok Leyland Ltd has entered into a JV with John Deere, for manufacturing and marketing of construction equipment.
Greenfield projects in the sector
Telco Construction Equipment Company Ltd is setting up earth moving equipment factory in Kharagpur spread over 250 acre.
Greenfield projects in the sector
Liu Gong Group is planning to open a manufacturing facility at Indore in India, at an investment of Rs 150 crore which will be operational by May 2009.
They plan to start with wheel loaders and hydraulic excavators, and increase their product profile later.
The facility at Indore will have the capacity to produce 500 units of machines per annum, and will be increased as per the demand.
The Liu Gong wheel loader was named China's top brand and sold about 32,000 such loaders in 2007 - ‘08 globally to emerge as the second largest loader manufacturer in the world after Caterpillar
Prominent multinational companies in excavator manufacturing
List of excavator manufacturing facilities across the globe
Prominent undercarriage component suppliers in the world
Berco SpA
ITR America
Yantai Huhui Machinery Co. Ltd., China
Parco Track Company, South Korea
ITM Italy
Daechang Forging Co. Ltd., South Korea
IVA Johann GmbH, Baumaschinentechnik, Germany
Taiheiyo Seiki KK., Tokyo Japan
Prominent undercarriage component suppliers in India
Ramkrishna Forgings
India Forgings
Vishnu Forgings
Local (unorganized) forging companies in Kolhapur and Faridabad
Marketing recommendations for MFL
Forged components being priced higher than substitutive castings for similar application, Indian manufacturing facilities prioritize cost reduction over material physical properties thus giving a preference for usage of cast and fabricated components in excavators
A similar scenario is not observed in manufacturing facilities in other parts of the globe where only forged components are used. This gives MFL a reason to focus on overseas excavator manufacturing facilities as potential markets
However, for an impressive and successful marketing plan for overseas excavator manufacturing facilities, MFL should be able to boast of serving the Indian operation divisions of MNCs like JCB, Hyundai, Komatsu, etc.
If MFL foresees a potential in the industry sector, they may consider entertaining small quantity orders from PSUs like BEML and Ordnance factories who integrate undercarriage systems in their products
Marketing recommendations for MFL
Forged products demanded by the earthmoving equipment industry do not require high finishing, accurate machining or close tolerance considering their application. This enables the unorganized sector in the forging industry to easily cater to the demand thus making the competition severe in terms of price
Efforts for developing customer relationships moving from supplier to development partner and full service provider (design to development) of finished products would prove fruitful especially for overseas markets
Companies like Caterpillar India Ltd. and BEML have in-house engine manufacturing facilities which can be targeted by MFL for supplying engine components if has not done so already. As a registered supplier to the engine division MFL may seize opportunities to market their capability for under carriage components to the excavator manufacturing facility under the same business house
With an increase in rental services for earth-moving equipment, spares market too is on the rise. MFL may consider the opportunity of supplying to dealers and trading companies for excavator spares
Allied recommendations for MFL
Employing a dedicated marketing team for the non-auto sector which would not be independent of Mahindra Systech may be considered by MFL
The projected rates of growth for the sectors considered in the study provides a promising demand for forged products in the future
With automation on the forefront at MFL, they should also consider branding themselves with Clean Development Mechanism (CDM) to provide an impressive carbon footprint on their portfolio
Energy conservation and efficiency mechanics can be considered for implementation for the high power consuming hydraulic presses
Investment in renewable sources of energy like wind and solar power may be considered which would also provide tax benefits and portray MFL as an organization with green initiatives. CNG buses for employee transport too could be promoted. The green identity may prove to be a novel idea while marketing the MFL profile to global OEMs
Thank You