Two years ago, engineer Kislay Bhatnagar joined a Germany-based cement, coal and mineral exploration equipment maker here in the Capital, in a role that focused on improving products designed at the research and development centre overseas.

Today, he is doing the designing. “Our Cologne office handled almost all the critical work earlier. Today, 95% of the research and development work is done here," says Bhatnagar, 30, who works for KHD Humboldt Wedag India Pvt. Ltd, and handles a half-dozen critical assignments in Saudi Arabia and Oman.

Business hub: Kislay Bhatnagar, a mechanical engineer with Humboldt Wedag India Pvt. Ltd, says 95% of the company’s research and development work is now done in the India office.

Foreign equipment manufacturers have long viewed India as an engineering outsourcing hub. Now, capital equipment makers are steadily enhancing engineering facilities and vendor network to access markets in West Asia, Africa and the Asia-Pacific region. And so the Indian arms of many multinational manufacturers and engineering services firms are turning into research and development centres in their own right.

The shift is occurring across industries, although automotive and electronics got much of a headstart due to domestic demand. Now analysts foresee huge investments in the engineering, cement, power and steel sectors. Engineering exports touched $26 billion (about Rs1 trillion) in 2006-07, up from $19 billion the previous year, as per the Engineering Export Promotion Council.

“While we have seen a trend of auto components and electrical equipment makers setting up manufacturing bases to cater to both local markets and exports, the trend is new for cement and steel equipment companies," said Y.S. Sashidhar, vice-president for global growth consultancy Frost and Sullivan for South Asia and Middle East.

Bhatnagar’s expertise lies in understanding the heat exchange flow in cement plants. When glitches crop up, he troubleshoots from his office in the Capital’s Mohan Cooperative Estate.

He mostly works with 3D modelling, but whereas he earlier used to refine others’ work, now he innovates much of its engineering.

“India will be a technology and order execution hub for the company," said Jim Busche, the Hong Kong-based president of KHD Humboldt. “The India operation is expected to generate 50% growth by December 2008."

KHD Humboldt’s Indian arm contributes one-fifth of the company’s total global sales, and has secured 30% market share in the cement equipment category in the domestic market. Order intakes of critical machinery are multipliying rapidly and business from West Asia and India will hit Rs6.5 crore this year. It is expected to climb to Rs7.2 crore in 2008.

Although hiring costs are rising, India’s benefits—namely, its democratic government, a large engineering labour pool and English language proficiency—are attracting the companies. The same cannot be said of China and West Asia, the markets that many of these companies are trying to tap. Coupled with a global talent crunch, India makes more sense, the firms say.

“If you were (to) look for 500 mechanical engineers in Germany, you won’t find them today," says Busch. “And the customers, too, are no longer in Europe." The company has a staff of 500; by early next year, it will hire 400 more to service its expanding business.

Pune-based Aquatech System (Asia) Pvt. Ltd—the Indian arm of the $100 million US-based Aquatech International—exploring markets in China and South-East Asia to provide its technology expertise for water treatment in infrastructure, power and petrochemical plants. It also opened a subsidiary in the United Arab Emirates.

“Earlier our India operations were mainly supporting our global operations. The company is now transforming from an outsourcing hub to a business hub," says its managing director Devesh Nath Sharma.

For this year, the firm has already booked business worth $40 million from India and West Asia. The growth is expected to sustain at 25% in the coming year, says Sharma.

After setting up workshops in Thailand and China, Danieli Engineering India Ltd, the Indian subsidiary of the Italian steel equipment maker, plans to expand its base as well. It recently purchased an 18,000 sq. ft workshop to make machinery in South Kolkata and plans on hiring more staff. The Indian company exports mostly to West Asia and African nations such as Ghana and Zambia. Said Bikramjit Ghosh, the company’s executive finance director: “We plan to manufacture critical engineering equipment in India and expand our production."