US’s Manitowoc buys Shirke Construction

US’s Manitowoc buys Shirke Construction
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First Published: Fri, Jul 20 2007. 12 53 AM IST
Updated: Fri, Jul 20 2007. 12 53 AM IST
Mumbai: US-based Manitowoc Co. Inc., one of the largest manufacturer of cranes in the world, is buying Shirke Construction Equipments Pvt. Ltd, India’s No. 1 manufacturer and marketer of tower cranes used to build skyscrapers, from the BG Shirke group.
Shirke sold 120, or 60%, of the 200 crane towers sold in India in 2006-07.
The buyout, which has already been approved by the Foreign Investment Promotion Board, is expected to be announced as early as Monday, according to T.R. Badrinarayan, chief executive of Shirke Construction.
The acquisition by the Wisconsin-based Manitowoc is being done through its Singapore-based Manitowoc Crane Group Asia Pte. Ltd. Founded in 1902, Manitowoc has operations in 20 nations and has annual revenues of $2.93 billion.
Shirke sells its tower cranes under the Shirke Potain brand and has had a technical collaboration with France-based Potain SA since 1982. Potain, which is a world leader in the construction crane business, was acquired by Manitowoc in 2001.
Shirke has also been exporting structures for the cranes to Potain even though much of the focus is on catering to domestic demand for 5-10 tonne tower cranes.
The terms of the deal couldn’t be ascertained, but it comes at a time when demand for cranes is soaring and shortages are starting to impact projects worldwide as countries such as China and India step up infrastructure projects and the Gulf continues to see a boom in construction.
Demand for these cranes is rising fast in India as a construction boom in commercial and residential realty fuels demand for cranes that can help move construction materials from the ground to upper floors speedily.
Manitowoc, for instance, has added 500 employees in the US to take its total staffing to 6,000 and has also added a third shift at this Wisconsin facility. Its shares have soared over 60% in the 52 weeks through mid-June. Mint first wrote about the growing shortage of cranes globally and in India on 19 June in a Page 1 article.
In India, “mechanization has come in in a big way in the construction industry as there is a rush to finish projects on time. The heights at which the buildings are being built requires quick movement of materials. Tower cranes help in such movement,” says Sunit Sachar, chief operating officer of real estate firm Parsvnath Developers Ltd.
Shirke’s Badrinarayan says the average price of a tower crane sold by his company is between Rs80 lakh and Rs90 lakh, with bigger cranes, which are custom-built, costing as much as Rs4 crore.
“We have been a profit-making company from Day 1,” he said, but declined to say how much Manitowoc was paying to take control.
“We aim to manufacture 200 cranes this year and 300 a year from now,” says Badrinarayan, adding that the standard tower cranes sold in India can typically be supplied in four-six weeks but internationally, the lead-time is much longer.
“There are only a few specialized manufacturers of the critical mechanisms that go into tower cranes and they are unable to boost their capacities sufficiently (resulting in a global shortage),” said Badrinarayan. “Tower cranes are manufactured using jigs and fixtures and designing these takes time.”
After the acquisition, Manitowoc plans to make Shirke a regional hub and supply products to West Asia as well, says Badrinarayan. Almost 40% of the world’s cranes are said to be deployed in Dubai, where massive reclamation from the sea has been undertaken to create islands and where the world’s tallest building, Burj Dubai, is being built.
“Good construction companies usually own them (cranes) and, in the recent past, companies have begun owning such cranes more because of its higher usage,” says Dharmesh Jain, managing director of property developer Nirmal Lifestyle Ltd. “So there is a shortage of the cranes in the market.”
Manitowoc also has a technical collaboration with Kolkata-based TIL Ltd, which makes mobile hydraulic cranes that can lift weights of up to 75 tonnes, using expertise from Grove, also a part of Manitowoc. It is unclear what impact the Shirke acquisition will have on Manitowoc’s TIL relationship.
yassir.p@livemint.com
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First Published: Fri, Jul 20 2007. 12 53 AM IST