Mumbai: Encouraged by the government’s focus on infrastructure development, Mahindra and Mahindra Ltd, the $7.1 billion tractor-to-technology company, has entered the construction equipment business with the launch of earth moving machines on Monday.
Nearly 54,000 machines used for construction of buildings, roads and ports, among other things, are sold in India every year.
Tata Motors Ltd, the country’s largest auto maker, has been building construction equipment for years through a collaboration with Japan’s Hitachi, while Ashok Leyland Ltd plans to launch products in this segment this year with the help of US-based John Deere.
Pawan Goenka, president of automotive and farm equipment sectors at Mahindra, said the company’s experience in these two sectors will help it in the construction equipment business.
On Monday, Mahindra launched the EarthMaster, saying it is the first so-called backhoe loader to be developed without overseas collaboration in India.
A backhoe loader is meant for applications such as excavation, loading, grading, dozing and cutting.
Mahindra, which started developing the machine three years ago, has invested Rs 300 crore in the construction equipment business to date and has plans to produce nearly 200 backhoe loaders every month at its factory in Chakan near Pune. It will go on sale next month; each unit will cost Rs 20.98 lakh.
The UK’s JC Bamford Excavators Ltd is the market leader in the segment, while Caterpillar Inc. and Terex Corp. are some of the other manufacturers.
Infrastructure investment in India is expected to touch $500 billion in the next few years, and the opportunity for construction equipment makers is significant, said Neeraj Bansal, director at KPMG Advisory Services Pvt. Ltd.
Most project contractors have healthy order books and are facing delays in execution. The drive to cut down execution time has boosted the demand for such machines, he said.
“If they (earth moving machines) are being used for shopping malls etc., they need to work longer as the depths are much larger—up to five levels below or so,” Bansal said.
He added that Mahindra’s expansive sales, service and distribution network will work in its favour.
India’s construction equipment industry was valued at Rs 9,000 crore in 2009-10 and is expected to double in the next five years, said Umesh Karne, analyst at the brokerage Bric Securities India Pvt. Ltd.
Mahindra also plans to export its earth moving machines in a couple of years, said Kairas Vakharia, the company’s business head for construction equipment.
Every second construction equipment sold in India is a backhoe loader, and the segment has been expanding at 15%, Vakharia said.
Vakharia said Mahindra will focus on earth-moving machines for now, and look at the material-handling segment after some years.
Mahindra’s shares gained 0.20% to close at Rs 668.15 apiece on the Bombay Stock Exchange, keeping pace with the bellwether index, Sensex, which gained 0.16% to close at 18,037 points.