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Construction and mining exports ride global boom

The Economic Times:  October 13, 2005

Mumbai: Increased spending in the core sector across the globe has given an indirect push to infrastructure-driven sectors like electrical equipment, mining and construction. These sectors are also thriving on high export demand from overseas. Consider these facts. Exports of electrical equipment and components from India are set to grow more than 20 per cent with MNCs like Siemens, ABB, Alstom and GE planning to outsource these products from India in a major way.

The organised construction sector accounts for 50-55% of the total construction equipment industry which is growing at around 25% per annum. Currently, the market size of India’s organised construction equipment industry is around Rs 6,500 crore and the $10bn domestic electrical equipment industry exports electrical equipment, primarily in the transmission & distribution segment, to the tune of $1bn.

Ketan Shaah, head infrastructure, ICICI Securities, said: “There is an all-pervasive boom in Indian Infrastructure, and pure infrastructure projects take a much longer time to complete, and the immediate beneficiaries have been the infrastructure-driven sectors, which are providing inputs for this explosive growth.

Thus, power equipment players like Apar Industries, Kalpataru, KEC International and Crompton Greaves and construction majors like Patel Engineering and L&T have seen a significant turnaround in their fortunes and investors have backed these stories.” He said the growth in core sector-driven sectors is expected to be fairly robust over the medium-term, especially for companies with mature management and good corporate governance.

Officials with the Electrical Equipment Manufactures Association (IEEMA) said MNCs have identified three countries — India, Turkey and China — for global sourcing. As products from India conform to International Electrotechnical Commission (IEC) standards, they are in demand. Kushal N Desai, MD, Apar Industries, said: “We export transformers to more than 27 countries.

More and more Indian companies are slowly becoming global.” Industry sources said even mid-sized corporates like Shakti Pump has received a $3m order from Vervent, one of the largest US pump set traders. “Most MNCs are sourcing 30-50% of their components from their Indian operations. The recession experienced by India has given domestic companies a better understanding of export requirements and strategies,” senior L&T officials said.

India exported low-tension switchgear worth Rs 400 crore in April ’04-February ’05 against Rs 376 crore in April ‘03-March ’04, and Rs 283 crore in April ’02-March ’03. High-tension switchgear exports grew from Rs 177 crore in April ’02-March ’03 to Rs 250 crore in April ’03-March ’04. In April ’04-February ’05, it was Rs 212 crore. Transformer exports grew from Rs 493 crore in April ’02-March ’03 to Rs 602 crore in April ’03-March ’04.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.