Equipment mfgs. have to work hard on value engineering

Equipment mfgs. have to work hard on value engineering

Pakona Engineers (I) Pvt. Ltd are manufacturers of vertical cast pipe machines. Rohit J. Shah, Executive Director, Industrial Operations, Pakona Engineers (I) Pvt. Ltd in an interaction to Sandeep Menezes says that due to Rupee depreciation imported equipment have become more expensive.

Excerpts from the interview:

The construction equipment market has not witnessed growth this year due to projects not taking-off as planned earlier. What is the evolving future scenario?

Most of the projects which are in pipeline will be released after the general election 2014. That will boost the infrastructure and equipment industry. We are looking at anything up to 50 per cent growth because the last couple of years have been really slow. To recover to that earlier scenario and further growth, at least 50 per cent growth is anticipated.

Don’t you feel 50 per cent growth is a rather aggressive outlook?

It is only a start up for Pakona. Since last three years, we are producing pipe manufacturing machine. To make the customers aware of such equipment being available in India, it will take time. But, once the awareness is spread, I am sure that everyone is going to look at finding such automatic machines.

Since the equipment market is not growing, tell us about the increasing pricing pressures felt from customers?

We have kept our pricing very reasonable when compared to imported equipment since we are in the import substitute line. We keep on doing value engineering and maintain pricing. Costs can be controlled by manufacturers and offered to customers. Therefore OEMs have to work really hard on value engineering.

How has the Rupee depreciation impacted the industry?

We are very comfortable with the Rupee depreciation since imported equipment have become more expensive. Therefore we have become more competitive compared to imported equipment.

What is the quantum of localization achieved in your products?

I would say that we have achieved around 95 per cent localisation. We stared with a technology from Italy wherein first machine had almost 60 per cent imported components. Today we manufacture and source more than 95 per cent of our equipment components from India.

The Rupee depreciation has an added opportunity of making exports more lucrative. Comment.
This would not apply to us. We have a license agreement with the technology providers. We only manufacture and market our products within the country.

Around 90 per cent of equipment sales are routed through funding from financial institutions. How has the recent hardening of interest rates affected the equipment market?

Our equipment are not very expensive. They cost only around Rs two to Rs three crore. Most of our customers finance the equipments themselves. But there are few financing companies which have approved our product and keen to finance it.

Currently, there are huge shortage technicians and operators across the industry. Comment.

When you purchase an automatic machine from us to manufacture RCC pipes, then basically you are reducing your manpower requirement drastically. We use only 5 per cent manpower compared to the conventional spin technology line. We have our own training programs for operators on handling the equipment.

How has Pakona performed vis-à-vis the industry in last two years?

Last year (2012-13) was horrible but now in 2013-14 things is slowly coming back to normal. Going forward, we expect a minimum growth of 50 per cent for Pakona.

Do you intend to launch any new products?

We have started offering this manhole. The machines are basically the same but we are offering a newer product that can be manufactured around our machine. The digging that happens for laying drainage lines bothers everyone. With the help of this machine the drainage line can be dug faster, by saving nearly 75 per cent time. This is the new requirement of the day.

Do you have any capex plans to support to Pakona’s future growth?

We have a good set up in Vadodara and we are expanding capacity by around 50 per cent. It’s a Rs 5 crore brown-field expansion at the same site in Vadodara and will be completed before the end of the current financial year. We have already started construction at the site.