CAGR: 16.

8%

125.4

Increasing industrialisation and economic development to drive capital goods & engineering market

57.6

Capital goods & engineering turnover is expected to reach USD125.4 billion by 2017 from USD57.6 billion in 2012

2012 2017 CG & Engineering turnover

CAGR: 14.2%

Expansion in the electrical equipment industry

105

24.2 2011 2022 Electrical equipment market size

Electrical equipment market size expected to reach to USD105 billion by 2022 from USD24.2 billion in 2011

CAGR: 19.0%

45

Engineering research & design segment revenues to increase fourfold by 2020

11.2

ER&D revenues projected to reach to USD45 billion in 2020 from USD11.2 billion in 2012
2020 ER&D revenue Source: Dept of Heavy Industries, India Electrical and Electronics Manufacturer Association, NASSCOM, Aranca Research Notes: CG - Capital Goods, ER&D - Engineering Research & Design

2012

CAGR: 28.8%

22.7

Indian construction equipment market to grow sevenfold from 2012 to 2020

3 2012 2020 Construction equipment market revenue

Construction equipment market projected to reach USD22.7 billion by 2020 from USD3 billion in 2012

CAGR: 9.7% 16

37

Indian telecom equipment market to more than double by 2020

2011 2020 Telecom equipment market size

Telecom equipment market to reach USD37 billion by 2020 from USD16 billion in 2011

CAGR: 5.4% 9.2 10.7

Increased production of Central Public Sector Enterprise (CPSE)

2011 2014 Production of CPSE's

Production of CPSE under DHI to aggregate USD10.7 billion by 2014 from USD9.2 billion in 2011

Source: Booz & Company, Volvo India Ltd, Estimates, Ministry of Heavy Industries and Public Enterprise, Aranca Research Note: DHI - Dept. Of Heavy Industries, CPSE - Central Public Sector Enterprise

FY13

Growingdemand demand Growing

Capacity creation in sectors such as infrastructure, power, mining, oil & gas, refinery, steel, automotives, and consumer durables driving demand in the engineering sector Rising demand for electrical and construction equipment

Attractive opportunities
Nuclear capacity expansion to provide significant business opportunities to the electrical machinery industry Rapid increase in infrastructure investment and industrial production to fuel further growth

FY14E
Engineering exports target from India: USD125.0 billion

Engineering exports from India: USD56.7 billion

Advantage India
Higher investments

Comparative advantage vis--vis peers in terms of manufacturing costs, market knowledge, technology and creativity Highly organised sector and dominated by large players employing over four million skilled and semi-skilled labour

The engineering sector is delicensed; De-licensed engineering 100 per cent FDI is allowedsector; in the 100 per cent FDI permitted sector Due to policy support, there was Cumulative FDI totalled USD19.9 cumulative FDI of USD14.0 billion into billion over April 2000April 2013 the sector over April 2000 February due to policy support 2012, making up 8.6 per cent of total FDI into the country in that period

Policy support

Source: Government of India, Ministry of Heavy Industries, Department of Industrial Policy & Promotion, India Electrical and Electronics Manufacturer Association, Aranca Research Notes: FDI - Foreign Direct Investment, FY - Indian Financial Year (April March), USD - US dollar

Heavy Electrical

Heavy Engineering

Heavy Engineering and Machine Tools

Automotive Engineering

Low Technology Products Light Engineering High Technology Products

Boilers

The Indian boiler industry has the capability to manufacture boilers with super critical parameters up to 1000 MW unit size The industrys market size was USD5.1 billion in FY12 and is expected to reach USD11.7 billion in FY22 The industry manufactures various turbines in the range of 8007000 MW per annum, and generators ranging from 0.5 KVA to (ones even higher than) 250,00 KVA Total production of turbines and generators stood at US2.2 billion in FY12 and is estimated to reachUSD6.7 billion by FY22

Turbines and generator sets

Transformers

A whole range of power and distribution transformers, including special type of transformers required for furnaces, electric tracts and rectifiers, are manufactured in the country The transformers market in India was valued at USD2.7 billion in FY11 and is expected to reach USD11.1 billion in FY22

Switchgear and control gear

About 32.6 million switchgears and control gears were produced during FY12 The switchgear market size touched USD2.0 billion in FY12 and is projected to reach USD8.2 billion in FY22

Source: Ministry of Heavy Industries and Public Enterprise Annual Report 2012-13, Aranca Research Notes: MW - Mega Watt, KVA - KiloVolt - Ampere

Machine tools

This segment churns out basic machinery for all major industries and determines competitiveness in other sectors such as automobiles, heavy electrical and defence Nearly 200 machine tool manufacturers are operational in the organised sector along with 400 small-scale units Production of machine tools totalled USD900 million, while exports stood at USD288.7 million in FY12

Textile machinery

It comprises over 1,446 units involved in churning out machinery and components; another 600 units manufacture complete machinery The industry is de-licensed with FDI permitted up to 100 per cent The industry has an installed capacity of USD1.7 billion and produced goods worth USD1.1 billion in FY12 In FY12, total exports from textile industries stood at USD368.8 million

Cement machinery

Cement plants based on raw mill grinding, pre-processing and cement grinding process technology (for capacities up to 10000 TPD) are being manufactured in India Currently,100 per cent FDI is allowed under the automatic route With an installed capacity of around USD125 million, the industry is capable of catering to the domestic demand

Material handling equipment

With around 50 units in the organised sector, the material handling equipment industry is engaged in the setting up of coal/ore/ash handling plants and manufacturing associated equipment The sectors total imports stood at USD331 million in FY12, while exports aggregated USD31.9 million

Source: Ministry of Heavy Industries and Public Enterprise Annual Report 2012-13, Cabinet Committee on Infrastructure report, Aranca Research Notes: TPD - Tonnes Per Day

Plastic processing machinery

There are 11 major and nearly 200 small & medium manufacturers Domestic manufacturers cater to 95 per cent of the processing industrys needs Total production stood at USD0.6 billion in FY12 Exports increased 17.1 per cent to USD124.1 million in FY12 It includes over 500 commercial tool manufacturers Nearly18 governments tool rooms as well as training centres are operating in the country Total production of dies, moulds & tools stood at USD2.8 billion Exports aggregated USD604.7 million in FY12 Over 200 manufacturers are engaged in the production of process plant machinery Nearly 65 per cent of the total manufacturers are small and medium enterprises Production and exports totalled USD4.1 billion and USD788.1 million, respectively, in FY12

Dies, moulds & tools industry

Process plant equipment

Earth moving and mining equipment

Currently, 20 large and global manufacturers, and 200 small & medium manufacturers operate in the industry Production and exports totalled USD3.8 billion and USD274.9 million, respectively, in FY12
Source: Ministry of Heavy Industries and Public Enterprise Annual report 2012-13, Aranca Research

Passenger and utility vehicles

Currently, there are 16 manufacturers of passenger cars and multi-utility vehicles, 13 manufacturers of commercial vehicles and 16 manufacturers of two-wheelers and threewheelers Total production in the automobiles sector stood at approximately 20.4 million units in FY12 and 13.7 million units over FY13* Total exports stood at 2.9 million units during FY12 and 1.9 million units over FY13*

Auto components

The auto components industry has more than 500 companies in the organised sector and about 10,000 entities in the unorganised sector The industrys turnover expanded at a CAGR of 19 per cent between FY08 and FY12 to USD43.9 billion from USD22.2 billion During FY08-12, exports increased at a CAGR** of 22 per cent to reach at USD7.0 billion

Agriculture machinery

The agriculture machinery sector is primarily dominated by agricultural tractors The Indian tractor industry is the worlds largest and accounts for one-third of the global production More than 250,000 tractors are manufactured every year by 13 manufacturers Indian tractors are exported to the US, Malaysia, Turkey and Africa
Source: Ministry of Heavy Industries and Public Enterprise Annual Report 2012-13, Cabinet Committee on Infrastructure report, Aranca Research Note: * From April 2012 to November 2012, ** CAGR calculated on Indian rupee

Casting and forging

The Indian casting industry produces 6 MMT of various grades of casting and ranks sixth in the world The forging industry comprises around 10 organised players, with nearly 100 players in the small and medium sector The industry exports a substantial part of its production apart from catering to the local demand

Medical and surgical equipment

The medical and surgical equipment industry manufactures a wide range of medical equipment such as ECG and X-ray scanners The industry is highly fragmented and dominated by small players The indigenous industry caters to 40 per cent of the demand and the remaining is met through imports

Industrial fasteners

The fastener industry in India can be classified into high tensile and mild steel fasteners Mild steel fasteners are primarily manufactured by the unorganised sector, while the high tensile steel segment is dominated by the organised sector Total Industrial fasteners exports stood at USD621.9 million in FY13, a growth of 13.8 per cent from FY12
Source: Ministry of Heavy Industries and Public Enterprise Annual Report 2012-13, IVG Research, Aranca Research Notes: MMT - Million Metric Tonnes

Indian engineering exports stood at USD56.7 billion in FY13 Over FY0813, exports registered a CAGR of 12.6 per cent

Indias engineering exports (USD billion)

CAGR: 12.6%

67.1 58.1 56.7

Engineering exports include transport equipment, capital goods, other machinery/equipment and light engineering products such as castings, forgings and fasteners Exports target for FY14 is estimated at USD125 billion To boost engineering trade, India Engineering Sourcing Show 2013 was held by the Engineering Export Promotion Council (EEPC) in March
FY08 31.3

45.3 38.3

FY09

FY10

FY11R

FY12P

FY13

64 countries participated in the show and there were 320 exhibitors including 60 overseas companies 418 business enquiries worth USD38.0 million received by the respondents

Source: Reserve Bank of India, Engineering Export Promotion Council, Ministry of Commerce & Industry Estimates, Aranca Research Note: P - Data for FY12 is provisional, R - Data for FY11 is revised

Transport equipment is the leading contributor to engineering exports. The segment accounted for 32.5 per cent of the total engineering exports during FY13 Machinery and instruments is the other major contributor with a share of 26.8 per cent The engineering sector retained its 18 per cent share in overall exports from the country which is the maximum in terms of sectoral contribution

Exports performance of principle commodities (FY13)

Transport equipment
14.1% 32.5% 9.0% Machinery and instrument Manufactures of metals 17.7% Primary and semi furnished iron & steel 26.8% Others

Source: Engineering Export Promotion Council, Aranca Research

Company

Revenues (FY13)

Products

Larsen & Toubro

USD28.3 billion

Engineering & Construction, Cement, Electrical & Electronics

Bharat Heavy Electricals Ltd

USD9.3 billion

Power Generation, Transmission, Transportation Power Generation and Distribution Equipment, Transportation Systems, Communication and Healthcare Products Transformers, Switch Gears, Control Gears Power Generation and Transmission Equipment

Siemens India Ltd

USD2.6 billion*

ABB Ltd

USD1.4 billion**

Crompton Greaves Ltd

USD2.1 billion

Source: Company Reports, News Article, Bloomberg, Aranca Research Note: Financial Year Ending * 30 September 2012, ** 31 December 2012

Company

Revenues (FY13)

Products
Highways & Bridges, Mass Rapid Transport Systems Construction, Specialist Materials Manufacturing Engines, Engine Bearings & Valves, Grey Iron Casting Power Generation, Construction and Mining Equipment, Fire Pumps & Cranes, Compressors Boilers and Heaters, Air Pollution and Purification, Absorption Cooling

Engineers India

USD0.5 billion

Kirloskar Oil Engines Ltd

USD0.4 billion

Cummins India Ltd

USD0.8 billion

Thermax

USD1.0 billion

BGR Energy

USD0.6 billion

Boilers, Turbines, Generators

Source: Company Reports, News Article, Aranca Research

Diversification

Several companies in the engineering sector have diversified, either geographically (mainly to Middle Eastern countries) or sector-wise BHEL plans to foray into Ukraine Simplex Infra has moved to the Middle East Larsen & Toubro (L&T) has diversified into power equipment manufacturing Thermax entered the power utility segment

Shift to value-added products

Rising competition is driving domestic players to focus on improving their capabilities, become more quality conscious, and upgrade their technology base in line with global requirements More than 2,500 firms in the engineering sector have ISO 9000 accreditation Companies are now increasingly focusing on R&D and product development

Entry of international companies

With 100 per cent FDI allowed through the automatic route, major international players such as Cummins, ABB and Alfa Laval have entered the Indian engineering sector due to growth opportunities Entry of new players has raised the industrys competitiveness
Source: Aranca Research Note: BHEL - Bharat Heavy Electricals Ltd

Demand-side drivers

Capacity addition for power generation Increase in infrastructure spending Rise in exports

Growth drivers

De-licensing Reduction in tariff and customs Supportive government policies leading to higher investments

Policy

Investment

Increasing FDI inflows Higher M&A Easy credit facilities for manufacturing companies

Indias energy requirement increased at a CAGR of 6.7 per cent over FY0613 to 995.5 billion units Demand for energy grew 6.2 per cent during FY13 vis--vis the previous year Higher demand for energy has led to increasing capacity additions for power generation that, in turn, boosted demand for power generation and transmission equipment
632

Energy requirement (000 MU)

CAGR: 6.7%
739 691 777

937

996

831

862

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

Source: Ministry of Power, Annual report 2012-13, Load Generation Balance Report 2012-13, Aranca Research Note: MU - Million Unit

Investments to increase capacity have led to rising demand for power generation and transmission equipment Capacity increased to 20600 MW during FY13 compared to 20500 MW in FY12

Addition in generating capacity (000 MW)

32.9 22.3 17.1 12.1 8.1 20.5 20.6

FY90

FY97

FY02

FY07

FY11

FY12

FY13

Source: Ministry of Power, Annual report 2012-13, Aranca Research Note : MW - Mega watt

The Infrastructure Index (part of the wider Index of Industrial Production) comprises eight core industries: coal, crude oil, natural gas, petroleum refinery products, fertilisers, steel, cement and electricity The index rose to 144.4 in FY12, implying a CAGR of 5.1 per cent since FY07 The infrastructure index rose to 145.1 over AprilDecember 2012

Infrastructure index and growth rate

160.0 129.9

140.0
120.0 100.0 80.0 60.0 40.0 20.0 0.0 FY07 FY08

138.4 144.4

145.1

9 8 7 6 5 4

112.6

118.5

121.8

3
2 1 0 FY09 FY10 FY11 FY12 FY13*

Source: Reserve Bank of India, Aranca Research Notes: The base year for Infrastructure index has been changed from 1993-94 to 2004-05 * - April 2012-December 2012

India has one of the largest road networks (4.7 million km), consisting of national highways, expressways, state highways, districts and village roads The length of the highways added during the 11th Five-Year Plan was 9,044 km (as of 2011) During the 11th Five-Year Plan, of the total USD 456.9 billion investments in infrastructure, development of roads and bridges accounted for 15.3 per cent Owing to large-scale public and private investments in roads, demand for related machinery has increased significantly

Share in roads network (FY13)

3.3 1.7

Total highway length added during Five-Year Plans (KM)

23,814 State highway National highway 7,091 Districts and rural roads

9,044

95

9th Plan

10th Plan

11th Plan*

Source: National Highway Authority of India, Ministry of Road Transport and Highways, Aranca Research Notes: * - Physical Achievements under National Highways Development Project during 11 th Five Year Plan upto Sept, 2011

De-licensing

The engineering industry has been de-licensed and 100 per cent FDI has been permitted in the sector Foreign technology agreements are allowed permitted under the automatic route

Tariffs and custom duties

The government has eliminated tariff protection on capital goods It has reduced custom duties on a range of engineering equipment

Initiatives focussed on power generation and infrastructure development

The government has an ambitious mission of Power for all by 2012 and has planned capacity additions of 120 GW in the 12th Five-Year Plan Governmental infrastructure projects such as Golden Quadrilateral and the North-South and East-West corridors fuelled growth in the engineering sector

Special Economic Zones (SEZs)

The government approved a significant number of SEZs across the country for the engineering sector Delhi Mumbai Industrial Corridor (DMIC) is being developed across seven states that is expected to bolster the sector

National Manufacturing Policy (2011)

Government of India launched the National Manufacturing Policy with the aim of enhancing the sectors share in GDP to 25 per cent within a decade and creating 100 million jobs by 2022
Source: DHI Annual report 2010-11, Ministry of Power Annual Report, Aranca Research Notes: GW - Giga Watt

15 per cent investment allowance to boost capex

The government would provide 15 per cent exemption on tax to manufacturing companies that invest more than USD18.4 million in plant and machinery over FY1415

Cut in excise duty to aid the auto industry

A cut in excise duty on truck chassis from 14 per cent to 13 per cent would increase profit margins for major automobile companies such as Ashok Leyland and Eicher Motors

Increase in allocation to JNNURM to aid infrastructure and capital goods

The government has increased the allocation to JNNURM from USD1.3 billion in FY13 to USD2.6 billion in FY14; this is expected to benefit companies in capital goods, infrastructure and automobile sectors

Higher allocation to the defence sector

Allocation to the defence sector was raised to USD37.5 billion, which includes USD16 billion for modernisation-related expenditure. This could further increase investments in the defence equipment industry
Source: Union Budget FY14 Note: Capex - Capital Expenditure JNNURM - Jawaharlal Nehru National Urban Renewal Mission

Developer
Andhra Pradesh Industrial Infrastructure Corporation Limited (APIIC) Deccan Infrastructure and Land Holdings Ltd M/s Essar Hazira SEZ Gujarat Industrial Development Corporation Ltd (GIDC) N.G. Realty Pvt Ltd M/s Synefra Engineering and Construction Ltd E. Complex Pvt Ltd Dishman Infrastructure Ltd Ansal Properties and Infrastructure Ltd Raheja Haryana SEZ Developers Pvt Ltd Ansal Kamdhenu Engineering SEZ Ltd Karnataka Industrial Areas Development Board Suzlon Infrastructure Ltd

Location
Ranga Reddy, Andhra Pradesh Nalgonda, Andhra Pradesh Hazira, Gujarat Gandhinagar, Gujarat Ahmedabad, Gujarat Vadodara, Gujarat Amreli, Gujarat Ahmedabad, Gujarat Sonepat, Haryana Gurgaon, Haryana Sonepat, Haryana Shimoga, Karnataka Mangalore, Karnataka

Product
Aerospace and precision engineering Light engineering Engineering Electronic products Engineering

High-tech engineering and related products

Engineering Engineering Engineering Engineering Engineering Engineering Port-based for high-tech engineering products
Source: SEZ India, Aranca Research

Developer
Quest Machining and Manufacturing Pvt Ltd Viraj Profiles Ltd Navi Mumbai SEZ Pvt Ltd Maharashtra Industrial Development Corporation (MIDC) Township Developers India Pvt Ltd Maharashtra Industrial Development Corporation (MIDC) Orissa Industrial Infrastructure Development Corporation (IDCO) Vividha Infrastructure Pvt Ltd

Location
Belgaum, Karnataka Thane, Maharashtra Navi Mumbai, Maharashtra Satara, Maharashtra Pune, Maharashtra Aurangabad, Maharashtra Jajpur, Orissa Patiala, Punjab

Product
Auto, aerospace and industrial engineering Stainless steel engineering products Light engineering Engineering Engineering Engineering & Electronics Metallurgical engineering Engineering

Mahindra Worldcity (Jaipur) Ltd

New Chennai Township Pvt Ltd Perundurai Engineering SEZ by SIPCOT Uttar Pradesh State Industrial Development Corporation (UPSIDC)

Jaipur, Rajasthan
Kanchipuram, Tamil Nadu Erode, Tamil Nadu Kanpur, Uttar Pradesh

Light engineering
Engineering Engineering Engineering

Source: SEZ India, Aranca Research

Cumulative FDI inflows increased to USD17.3 billion in FY13 from USD8.9 billion in FY10 With the increasing focus by government to attract foreign investors in manufacturing and infrastructure, FDI in the sector is set to rise

Cumulative FDI inflows in Engineering sector (USD billion)

17.3 14.7 11.1 8.9

FY10

FY11

FY12

FY13

Source: Department of Industrial Policy & Promotion, Aranca Research Note: FY10 - Cumulative from April 2000 to March 2010 and so on FDI inflows includes Automobile industry, Electrical equipment, Miscellaneous mechanical and engineering industry, Industrial machinery, Machine tools, Agriculture machinery, Earth-moving machinery and Industrial instrument

M&A deals
Acquirer Geometric * Simplex Infrastructures Ltd Target 3Cap Technologies GmbH Joy Mining Services India Pvt Ltd Type Acquisition Acquisition Acquisition date January, 2013 May, 2012

Larsen & Toubro Ltd

Titagarh Wagons Ltd JBM Cadmium Pvt Ltd Diamond Power Infrastructure Ltd Yash Birla Group Gaji Mercantile HBL Power Systems

Thalest Ltd
Titagarh Marine Ltd Tesco GO Utkal Galvanizers Ltd Aircon Engineering Services Bharat Wire Ropes Ltd Igarashi Group-Agile Electric Drives Technologies and Holdings

Acquisition
Acquisition Acquisition Acquisition Majority stake Acquisition Majority stake

April, 2012
March, 2013 January, 2012 April, 2011 May, 2011 July, 2010 December, 2010

Source: Grant Thornton, Aranca Research Note - * - Acquired by its German subsidiary- Geometric Europe GmbH

Net sales (USD billion) Salient features

One of the largest engineering and manufacturing companies with Navratna status One of the major integrated power plant equipment (IPPE) manufacturers in the world Profit-making company since 197172 Installed base of more than 120,000 MW Fifteen manufacturing units, two subsidiaries and seven joint ventures Accounted for over 59 per cent of the total generating capacity in FY12
10.4 9.0 7.1 5.8 3.0 3.9 4.5 9.2

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

Source: Company Reports, Indian Express, Aranca Research Note: Navratna is the title given to nine Public Sector Enterprises (by the Government of India) having distinct comparative advantages

Recent Awards and Recognitions

Golden Peacock Award 2011 for Occupational Health and Safety(2011) SCOPE Meritorious Award 2010-11 for Best Practices in Human Resource Management Intellectual Property Award from the Government of India(2011) Essar Steel Infrastructure Excellence Award (2011) DSIJ Gentle Giant Award from the Government of India (2011) CII-Thompson Reuters Innovation Award (2010) Boiler efficiency

Lower auxiliary power consumption

Lower design heat rate Key success factors

Lower lifecycle cost

Better PLF

Acquisitions in various countries Transmission Parts Entry into new markets such as US and Greece Organic growth & integration Joint ventures and technical partnerships

FY13 USD1050 million turnover

Hubs

Front Axle Beams

Crank Shaft

Closed Die Forging

ISO accreditations FY05 USD245 million turnover

Open Die Forging 1960 1970 1980 1986 1990 1996 2000 2004 2005 2006 2007 2008 2011 2012

Source: Company Reports, Aranca Research

Net sales (USD billion) Salient features

One of Asias largest aerospace companies with Navratna status Produced over 3,700 aircraft including 15 types of indigenous designs and over 4,300 engines Nineteen production units and 10 research & design centres across eight locations in India Promoted and established 11 joint venture companies in collaboration with leading international and Indian aviation organisations Offers services for the aircraft accessories, foundry and forge, engine, helicopter, industrial & marine gas turbine division and transport aircraft division
2.9 2.3 2.1 2.4 3.0

2.6

FY08

FY09

FY10

FY11

FY12

FY13

Source: Company Reports, Aranca Research Note: Navratna is the title given to nine Public Sector Enterprises (by the Government of India) having distinct comparative advantages, HAL- Hindustan Aeronautics Limited

Defence

Budget for the defence sector is expected to grow 8 per cent until 2014; of this, 54 per cent would be earmarked for procuring manufactured items which is likely to translate into a market opportunity of USD91 billion over 20102014 Government initiatives, such as allowing private sector participation, have been reinforced by opening up the sector to 26 per cent FDI, and its offset policy is expected to enhance private sector (including SME) participation

Civil nuclear sector

Indias nuclear capacity is expected to be strengthened by 3.8 GW by 2012; an additional 12,000 MW has been planned under the 12th Five-Year Plan (201217) It represents a total business opportunity worth USD312 million for the manufacturing industry, which is likely to garner 61 per cent

Auto components

Global auto majors are rapidly ramping up the value of components they source from India, steered by the countrys advanced engineering skills, established production lines, a thriving domestic automobile industry and competitive costs Industry sales are expected to increase to USD40 billion by 2016, with about USD20 billion generated from exports
Source: Aranca Research Notes: GW - Giga Watt, SME - Small and Medium Enterprises

Power transmission and distribution (T&D)

T&D expenditure is set to increase as a result of growth in power generation and privatisation of distribution By the end of 2012, the transmission network was expected to be about 60,000 circuit km, with a potential demand for 630,000 transformers

Material handling equipment

The material handling equipment sector is expected to gain from robust demand from steel, power, mineral and other infrastructure industries Market demand for material handling equipment is estimated at USD30 billion over 2007 14

Machine tools

Demand for machine tools from the capital goods sector (especially automobile and textile industries) is projected to remain high Considering the industry's demand for higher productivity, superior precision and accuracy, as well as low-cost manufacturing solutions, computer numerically controlled (CNC) machine tools are set to be in greater demand
Source: Aranca Research

2009
By 2020, the ESO market in India is expected to reach USD4050 billion, propelled by increasing onshore to offshore movement of services 2009
The

2020

global engineering services spending estimated to be around USD850 billion

is

Total Spend ~ USD850 billion

Projected Spend USD1100 billion

About USD40 billion is expected to flow through the

outsourcing channel into vendor countries

India

~4.5%
Offshore Expenditure Onshore Expenditure

15-20%

accounts for about 20 per cent of the outsourced market 2020

~ 20% 25-30%

The

global engineering services projected to reach USD1100 billion

spending

is

About USD180 billion is estimated to flow through the

outsourcing channel into vendor countries

India can account for about 2530 per cent of this
India Competing countries India Competing countries

outsourced revenue

Source: Booz Allen Hamilton, Nasscom, Aranca Research Notes: ESO is Engineering Services Outsourcing

Indias electrical equipment industry significant growth in the last few years

has

witnessed

Growth in industry size of major electrical equipment (USD billion)

25.0

Major electrical equipment registered a CAGR of 21.8 per cent from a small base of USD11.4 billion to USD25 billion between FY08 and FY12 Major electrical equipment manufactured include capacitors, energy meters rotating machines, transformers, cables, switchgears, transmission line towers and conductors Based on the expected capacity and investments, domestic demand for electrical equipment is targeted to be USD100 billion by FY22 Demand for T&D equipment is expected to reach USD13.9 billion in FY22 from USD3.4 billion in FY11
11.4 10.2

CAGR: 21.8%
13.2 11.0

FY08

FY09

FY10

FY11

FY12

T & D equipment-wise demand projection (USD billion)

13.9

7.4 3.4

FY11

FY17

FY22

Source: Indian Electrical and Electronics Manufacturers Association, Department of Heavy Industries Note: T&D - Transmission and Distribution, BTG - Boilers, Turbine, Generator

The generation equipment (BTG) segment is projected to increase to USD25 billion Production of generation equipment (boilers, turbines and generators) in India is estimated at around USD5.7 billion by 2022 Demand for generation equipment is projected to rise to USD25.1 billion in FY22 from USD6 billion in FY11 Cables contribute 27.3 per cent to the electrical equipment market followed by transmission lines (23.4 per cent), transformers (19.3 per cent) and switchgear (15.2 per cent)

Generation equipment-wise demand projection (USD billion)

Market share of electrical equipment (FY13)

10.0% 23.4% 6.7 15.2%

Rotating Machines Switchgear Cables Transformers Capacitors

6.7

3.3
0.6 1.6 3.8 FY11 3.3 11.7

3.9% 0.9%

5.8
FY17 FY22

19.3%

27.3%

Energy Meters Transmission Lines

Boiler

Turbine

Generator
Source: Indian Electrical and Electronics Manufacturers Association Notes: BTG - Boiler, Transmission and Generation

Indias earthmoving and construction equipment (ECE) industry has enjoyed strong growth over the last seven years due to rapid economic development The organised construction sector in India (for example, roads, urban infrastructure) accounts for approximately 55 per cent of the ECE industry. Mining, irrigation and other infrastructure segments (power, railways) account for the remaining During FY1014, sales of construction equipment is expected to increase at a CAGR of 10.6 per cent and reach USD6.5 billion Earthmoving sector is continuing to make headways and could command a share of 56.2 per cent followed by concrete equipment and material handling equipment

Product segment-wise CE market by 2014

Expected unit sales by 2014 Equipment
Excavators Backhoes Loaders Asphalt pavers Mobile cranes Tower cranes Transit mixers
3.0% Earth moving 13.2% Road constrution equipment

Sold in 2010
10500 23000 2500 1150 8000 200 3800

Forecast 2014
14000 32000 4500 1650 11750 700 9000
8.5%
19.0% 56.2%

Concrete equipment
Material handling Material processing

Source: Indian Construction Equipment Manufacturers Association, NBM media Notes: CE - Construction Equipment, ECE - Electrical and Construction Equipment

National Automotive Testing and R&D Infrastructure Project (NATRiP)

NBCC Place, South Tower, 3rd Floor,Bhishma Pitamah Marg, Pragati Vihar,Lodhi Road, New Delhi - 110003 Tel : + 91-11-49215555 Fax : +91-11-24369333 E-mail : team@natrip.in

The Automotive Research Association of India

Survey No 102, Vetal Hill, Off Paud Road, Kothrud, Pune - 411 038 P.B. No 832, Pune - 411 004 Tel. No : +91-020-30231111 Fax No : +91-020-25434190 Email Id: info@araiindia.com

Fluid Control Research Institute

Kanjikode West, Palakkad - 678623. Phone : 91-491-2566120/2566206 Fax : 0491-2566326 E-mail : fcri@fcriindia.com

Engineering Export Promotion Council (EEPC)

Vanijya Bhawan, 1st Floor International Trade Facilitation Centre 1/1, Wood Street Kolkata, West Bengal700016 Phone: 91-33-22890651, 22890652 Fax: 91-33-22890654 E-mail: eepc@eepcindia.org

BTG : Boilers, Turbines, Generators BHEL: Bharat Heavy Electricals Limited MHI: Mitsubishi heavy industries DHI : Department of Heavy industries BHEL: Bharat Heavy Electricals Ltd ICEMA: Indian Construction Equipment Manufacturers Association HAL: Hindustan Aeronautics Limited IEEMA: Indian Electrical and Electronics Manufacturers Association EEPC: Engineering Export Promotion Council TPD: Tonnes Per Day NHAI: National Highway Authority of India

MORTH: Ministry of Road Transport and Highways CEA: Central Electrical Authority HVDC: High Voltage Direct Current USD: US Dollar FY: Indian Financial Year (April to March) Wherever applicable, numbers have been rounded off to one decimal

Exchange Rates (Fiscal Year) Year

2004-05 2005-06 2006-07

Exchange Rates (Calendar Year) Year

2005 2006 2007 2008

INR equivalent of one US$

44.95 44.28 45.28

INR equivalent of one US$

45.55 44.34 39.45 49.21

2007-08
2008-09 2009-10 2010-11 2011-12 2012-13

40.24
45.91 47.41 45.57 47.94 54.31

2009
2010 2011 2012 2013

46.76
45.32 45.64 54.69 54.45
Average for the year

India Brand Equity Foundation (IBEF) engaged Aranca to prepare this presentation and the same has been prepared by Aranca in consultation with IBEF.
All rights reserved. All copyright in this presentation and related works is solely and exclusively owned by IBEF. The same may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this presentation), modified or in

any manner communicated to any third party except with the written approval of IBEF.
This presentation is for information purposes only. While due care has been taken during the compilation of this presentation to ensure that the information is accurate to the best of Aranca and IBEFs knowledge and belief, the content is not to be construed in any manner whatsoever as a substitute for professional advice. Aranca and IBEF neither recommend nor endorse any specific products or services that may have been mentioned in this presentation and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this presentation. Neither Aranca nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of this presentation.