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Engineering & Capital Goods Industry

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Introduction
Engineering Industry primarily deals with the design, manufacture and operation of structures, machines or devices. Engineering industry primarily comprise of sectors like
Civil Engineering
Infra structure projects Earthmoving & Mining Metallurgical Machinery

Industrial machinery
Heavy engineering Power & Electrical Goods

Mechanical applications
Capital goods & Machine tools Dies, mould & Press tools

Chemical & Textile industry

Plastic Machinery Process Plant Equipment Textile Machinery
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Classification of Engineering Industry

Engineering Industry is a diverse industry with a number of segments, and can be broadly categorized into two segments, Heavy Engineering Big Players are engaged in the production Produces high-value products using high-end technology. Requirement of high level of capital investment poses as a major entry barrier. The small and unorganized firms have a small market presence. Light Engineering Various Small Payer are there uses medium to low-end technology. Entry barrier is low on account of the comparatively lower requirement of capital and technology. This segment is characterized by the dominance of small and unorganized players which manufacture low-value added products. This segment is also characterized by small capacities and high level of competition among the players
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Intecs Exposure on the Segment

ICL has good exposure in Engineering sector mostly in Light Engineering Segment. Light Engineering Segment consist of Tools & Dies Manufacturer, Industrial Equipment Manufacturer and other company which supplies product to these manufacturer. As per book size as on 31st March 2012, Engineering Segment consist only 8 % of total book size but exposure on this segment has been increased drastically.

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Intecs Exposure on the Segment (Contd)

Out of total portfolio made during 1st Quarter, Engineering segment comprising 21% of total disbursement amount in terms of volume i.e. second highest funded segment. The figure shows our improving concentration on the segment.

Other 17% Education 4% IT / ITES 4% Steel & Product 4% Retail Industry 5% Plastic & Products 9% Printing & Packaging 13% Engineering 21%

Automobiles Ancillary 23%

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Current Scenario of Engineering Industry in India

Capital goods & engineering sector is largest in India with demand at Rs 311,550 Cr, growing at a CAGR of over 14.12%. Heavy electrical and power equipment sector is the largest sector with a size of Rs 121,418 Cr, closely followed by Engineering Goods with size of Rs 116,449 Cr as of year 2010-11. Capital Goods and Engineering Market from 2005-2006 to 2010-11 (Rs Cr)
Sub-sector / Year Plastic Machinery Metallurgical Machinery Earthmoving & Mining Machine Tool Heavy Electrical Engineering Goods Dies, mould & Press tools Process Plant Equipment Textile Machinery Total 2005-06 925 1,386 6,700 4,877 58,941 62,013 7,000 9,329 9,090 1,60,261 2006-07 1,148 2,181 9,199 7,162 68,106 79,752 8,000 10,480 12,212 1,98,240 2007-08 1,466 2,423 13,800 8,698 82,309 89,744 9,190 13,142 10,770 2,31,542 2008-09 2,233 4,172 10,400 8,319 89,041 95,029 10,385 13,365 7,867 2,40,811 2009-10 2,332 3,800 13,850 7,245 1,04,185 1,00,990 11,735 14,628 8,020 2,66,785 2010-11 3,850 4,992 14,500 10,236 1,21,418 1,16,449 13,225 16,345 10,500 3,11,515 CAGR 30.60% 29.30% 16.70% 16.00% 15.50% 14.90% 13.40% 11.90% 2.90% 14.12%

Sources capital goods & Engineering sector for the 12th Five Year Plan Department of Heavy Industry Ministry Industries & Public Enterprise

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Segment Wise Assessment

Plastic Processing Machinery
There are 11 major manufacturers of machinery in the organized Sector and nearly 200 small & medium manufacturers. Major plastic machineries include Injection Molding Machine, Blow Molding Machine and Extrusion Molding Machine. Total demand and production of the Plastics Machinery is Rs 3850 Crores and Rs. 2403 Crores in 2010-11 and it has been growing @ 30.6% and 28.8% CAGR respectively. The demand is targeted to grow at a CAGR of 18.5% to Rs. 13096 Crores in 2016-17. Growth Factor Growing consumer goods industry Application in Auto Industry Wood components being replaced by plastic goods Credit Perspective Standard machinery and standard application Low default ratio Expected high Growth rate

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Segment Wise Assessment (Contd)

Metallurgical machinery
Metallurgical machinery includes all types of steel plant equipment such as blast furnace, steel melting furnace and equipment, rolling mills, continuous casting machines, etc., magnetic separators and metallurgical foundry, etc. Very few large manufacturers like HEC, L&T and about 200 mid size companies and SMEs making such machines and its accessories. Out of 200 units 85% are SMEs. Domestic consumption has risen from Rs. 1068 Crores in 2004-05 to Rs. 4992 Crores in 2010-11 at a CAGR of 29.3%. However, the domestic production has grown from Rs. 568 Crores in 2004-05 to Rs. 1129 Crores in 2010-11 at a CAGR of 12.1%. Growth Factor Related to Infrastructure Industry i.e. fast growing industry in govt. budgets. Various application in auto and power industry Vast application of steel product Credit Perspective Unorganized Sector & Various SME players Sub Standard Machine i.e. not versatile use of machinery The domestic market is expected to grow at a CAGR of 29% and production is targeted to grow at CAGR of 35%. Individual business model and financial analysis is inevitable.
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Segment Wise Assessment (Contd)

Machine Tools

Machine tool industry is considered as mother industry for capital goods sector as it supplies machinery for the entire manufacturing sector. Out of 800 manufacturers of machine tools and its parts mostly SMEs, about 25 units are midsize manufacturers which have annual turnover varying between Rs.200 - 300 Crores each. Type of machine tools currently manufactured in India are General/Special Purpose Machines, Standard CNC machines, Gear cutting, Grinding, Medium sized machines, EDM, Presses, Press Brakes, Pipe Bending, Rolling, Bending, Measuring, metrology and gauging, etc. The Indian machine tool industry is Rs.3624 Crores in production output (2010-11) and has recorded a growth rate of around 12% (CAGR) over the last 6 years against the demand of Rs.10236 cr. (2010-11) which has grown at nearly 16% (CAGR) over the last 6 years. Growth Factor Strengthening of domestic capital goods manufacturing industry associated with growth in Indian industrial growth rate Credit Perspective High involvement of SME players Standard Machinery and standard application Hugh gap in production and demand, so scope is high Demand is projected to grow at an average CAGR of 15% over the 12th Plan period (2012 ctive to BHAROSA APNO KA SAPNE AAPKE2017). Production is projected to grow at 25% CAGR over the same period.

Segment Wise Assessment (Contd)

Heavy Electrical and power plant equipment
There are about 675 manufacturers of electrical machinery in India including Heavy electrical power generation Equipment like Boiler, Turbine & Generator sets. Nearly 90% of them are small & medium manufacturers. BHEL is the major manufacturer of electrical and power equipment. The Product range includes Transmission Line Towers, HT Switchgear, Transformers, Motors (FHP, LT, HT & DC), AC Generators, Conductors, Capacitors, Cables, Energy Meters, etc. It is estimated that currently the total domestic electrical equipment market size is Rs. 121,418 Crores (2010-11). The market has grown at a CAGR of 15.5% since 2005. Production in the sector is estimated at Rs 110,000 Crores (2010-11) and has grown at a CAGR of 14.1% since 2005. Growth Factor Related to Infrastructure Industry i.e. fast growing industry. Government support Huge Market size Credit Perspective PSU & big private player e.g. BHEL and L & T. Supported by banker The domestic market is expected to grow at a CAGR of 16.4% to Rs 301,662 Crores in 201617. Production is expected to grow at a CAGR 15.2% to Rs 257,050 Crores by 2016-17. Involvement of SME players is very low. Generally, rated customer. SAPNE AAPKE BHAROSA APNO KA

Segment Wise Assessment (Contd)

Engineering Goods
Engineering goods considered for the report are Bearings, Steel pipes and tubes, Seamless pipes and tubes, Nuts, Bolts, Rivets etc., Castings, Forgings, Metal Containers including cylinders, Steel wires and ropes, Engines, Pumps, Compressors, valves & actuators, gears, etc. The market size of the sector stands at Rs. 116449 Crores (2010-11) and growing at a CAGR of 15%. The production of Engineering Goods sector is Rs 106,820 Cr during the year 2010-11 and has shown a healthy growth of 13.4% CAGR in the last 6 years. Growth Factor Depend on various growing ancillary industries Requirement of engineering goods in almost all the industry. Credit Perspective Involvement of SME is high Standard Machine e.g. Nut forming machine, wire drawing machine Regular and repeated business. Continuous and growing demand.

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Segment Wise Assessment (Contd)

Dies, Molds & Tools industry
Indian tool room industry is very fragmented and consists of more than 500 commercial tool makers engaged in design, development and manufacturing of tooling in the country. In addition to commercial tool makers, 18 Government tool rooms cum training centers are also operating in the country. The key commercial tool room locations are Mumbai, Bangalore, Chennai, Pune, Hyderabad and NCR. The estimated market size of Indian Tool Room Industry is Rs. 13,225 Crores (2010-11) growing at a CAGR of 13.4%. Growth Factor Good investment in Research & Development by the company and government Continuous technology change Credit Perspective Universal application (Required for giving any shape) Standard Machinery requirement i.e. VMC Involvement of SMI players are high It is estimated that the tooling demand in India will reach Rs 31,783 Crores by the end of year 2016-17 at a CAGR of 16%.
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