1. Summer Internship Project Jayesh Halgekar FLAME School of Business
Identifying and analyzing the market potential of forgings in the Non- Automotive sectors
Summer Internship Project
Jayesh Halgekar
FLAME School of Business
11th May 2009 – 11th July 2009

2. Scope of the Study
The study aims at analyzing the potential on the Non – automotive markets for forged products
The sectors considered for the study include
Off- road equipment manufacturing
Diesel Genset Manufacturing
Valve Manufacturing

3. Indian Forging Industry
Total installed forging capacity in India as of FY 2009: – 1.5 million MT
Total estimated forging production in India as of FY 2008: 1.1 – 1.2 million MT
Large
Medium
Small
9 – 11 units
100 – 120 units
230 – 250 units
Source: Association of Indian Forging Industries (AIFI)

4. Indian Forging Industry
In ‘000 MT
CUF:
65%
CUF:
59%
CUF:
70%
CUF:
57%
CUF:
30%
Year
*CUF: Capacity Utilization Factor
Source: Association of Indian Forging Industries (AIFI)

5. Non Automotive sectors identified as potential market for forged products
Railways
Off – road equipment
Oil & Gas refineries
Diesel Engines/ Generators
Aviation
Space Exploration Equipment
Defense Equipment
Agricultural equipment
Valves
Shipping/ Ship Building
Power Generation
Industrial/ Heavy Engineering

6. Open – die/ Hammer Forging/ Ring Rolling
Forged products demanded by the Non Automotive industry commonly include following products
Closed – die Forgings
Open – die/ Hammer Forging/ Ring Rolling
Under-carriage components for excavators
Ground engaging tips
Valve bodies and components
Engine components
Chassis components
Axle components
Flanges (Weld neck/ Girth)
Rings
Gears
Nozzles
Tube Sheets
Blanks
Blinds
Wheel sets for locomotives
Bearing races
Shafts
Fly wheels

7. Off – Road Equipment Manufacturing Sector

8. Product range observed in the Off- road Equipment Industry
Earth Moving Equipment
Concrete Equipment
Material Handling
Material Preparation
Road Construction Equipment
Construction Vehicles
Tunnelling & Drilling
Backhoe Loaders
Excavators
Loaders
Bulldozers
Skid-Steer Loaders
Wheeled Loading
Shovels
Wheel Loaders
Motor Graders
Motor Scrappers
Dump Trucks
Wheel Dozers
Draglines
Concrete Breaker
Paver Finisher
Concrete Batching Plants
Concrete Pumps
Concrete Mixers
Hot mix plants
Telescopic
Handlers
Crawler Cranes
Mobile Cranes
Truck Cranes
Forklifts
Pick & Carry
Cranes
Slew Cranes
Tower Cranes
Conveyors
Crushing Plants
Jaw Crushers
Compaction
Equipment
Vibratory
Rollers
Pavers
Dumpers
Articulated
Haulers
Rotary/ DTH Drilling
Hammer Track Drill
Boring Equipment
Demolition Equipment

9. Product – wise contribution in the industry
Contribution in the industry which is estimated to be
Rs Crores as in 2008
Excavator industry is thus valued at Rs Crores as in 2008
Source: KPMG Analysis, CII – KPMG Report on Indian Infrastructure

10. Excavator Manufacturing companies in India include
Other potential entrants in the sector include:
Liugong India Private Limited
Guangxi Liugong Machinery Company Ltd. (China), In association with Salgaocar Engineers Pvt. Ltd
XCMG Machinery India Pvt. Ltd.
Terex Vectra
Kobelco Construction Equipment Pvt. Ltd.
Source: Primary survey and published news articles

11. Share of individual companies in total excavator production in India for FY 2007 - 2008
Off-road equipment manufacturers
Estimated annual production of excavators
JCB
Telcon Hitachi (Dharwad)
Telcon Hitachi (Jamshedpur)
L&T Komatsu
BEML
Others
Total
Source: Primary survey and published news articles

12. Components in an excavator which are generally forged
Sprockets
Spindles
Rollers
Track links
Idlers
Guide base
Wheel hubs
Counter pins
Yokes
Levers
Axle beams
Gears
Shafts
Teeth

13. Average no. of components per machine
Number of individual forged components in an excavator
Forged Component
Average no. of components per machine
Track links/ shoes
Rollers
Idlers 2
Teeth
5 - 10
Sprocket wheel
Shafts
15 – 30
Counter Pin 4
Forged ring gear 1
Forged components contribute to not more than 5% of the total components in an excavator of which 90% is contributed by undercarriage components

14. Components in an excavator which are generally forged
Slewing bearing

15. Estimated annual demand (in numbers)
Total estimated demand for forged products in the excavator manufacturing industry in India for the FY
Forged component
Estimated annual demand (in numbers)
Links
Rollers
Sprockets
Teeth
Idlers
Ring gear
Excel spreadsheet analysis

16. Company-wise estimated demand for forged products in the excavator manufacturing industry in India for the FY
Company
Upper rollers
Bottom Rollers
Idlers
Bucket Teeth
Track shoes
Sprocket wheel
Ring gear
TATA Hitachi
22000
80667
11000
27042
523600
5500
JCB India
7000
24500
3500
11083
145833
1750
BEML
1167
3833
500
1375
23917
250
L&T Komatsu
10800
43200
5400
13500
253800
2700
Others
9000
40500
4500
11250
220500
2250

17. Projected growth for the excavator manufacturing industry in India
Projected production
42%
40%
36%
30%
30%
24%
30%
23%
10%
Year

18. Greenfield projects in the sector
BEML Ltd. has plans to set up a new manufacturing unit for defense products and parts for the Railways at the Kinfra Integrated Industrial Park.
The company intends to invest Rs 260 crore in this venture. The first phase of the factory will come up on 400 acre at Sathyanathapalam in Kanjikode, Palakkad, provided on a long-term lease by Kinfra.
Heavy equipment like bulldozers and earthmovers as well as heavy vehicles meant for defense use will be manufactured at the plant

19. Greenfield projects in the sector
Caterpillar India Ltd and the Tamil Nadu government have signed a Memorandum of Understanding (MoU) for a heavy engineering equipment manufacturing plant near Chennai with a capital investment of Rs 800 crore.
The plant will manufacture equipment used in the construction and mining industry. Caterpillar India Ltd., will also be expanding its manufacturing capacity at its plants in Thiruvallur and Hosur in Chennai.

20. Greenfield projects in the sector
Terex Pegson & Powerscreen are opening a manufacturing plant in Hosur, India.
The Indian plant is expected to start assembly operations in mid-2009 with additional manufacturing processes to be added over the long-term.

21. Greenfield projects in the sector
Escorts Construction Equipment will invest Rs 60 crore to set up plants in Vallabhgad in Haryana and Rudrapur in Uttaranchal.
Another Rs 130 crore is likely to be invested in five years. The company, which exports some 100 units a year now, plans to increase exports to 500 units within a year.

22. Greenfield projects in the sector
JCB Chairman Sir Anthony Bamford officially opened the company’s newly extended $ 60 million backhoe loader factory in India, the largest plant of its kind anywhere in the world.
The factory in Ballabgarh, Faridabad, has undergone huge expansion, doubled its capacity and enables JCB to produce 100 backhoes a day.
The existing backhoe plant area was 24,000m2 but now totals 33,574m2 including assembly line, paint shop, fabrication, transmission, logistics, utility, pre-delivery inspection and hot test area.

23. Greenfield projects in the sector
Ashok Leyland Ltd has entered into a JV with John Deere, for manufacturing and marketing of construction equipment.

24. Greenfield projects in the sector
Telco Construction Equipment Company Ltd is setting up earth moving equipment factory in Kharagpur spread over 250 acre.

25. Greenfield projects in the sector
Liu Gong Group is planning to open a manufacturing facility at Indore in India, at an investment of Rs 150 crore which will be operational by May 2009.
They plan to start with wheel loaders and hydraulic excavators, and increase their product profile later.
The facility at Indore will have the capacity to produce 500 units of machines per annum, and will be increased as per the demand.
The Liu Gong wheel loader was named China's top brand and sold about 32,000 such loaders in ‘08 globally to emerge as the second largest loader manufacturer in the world after Caterpillar

26. List of excavator manufacturing facilities across the globe
Prominent multinational companies in excavator manufacturing
List of excavator manufacturing facilities across the globe

27. Prominent undercarriage component suppliers in the world
Berco SpA
ITR America
Yantai Huhui Machinery Co. Ltd., China
Parco Track Company, South Korea
ITM Italy
Daechang Forging Co. Ltd., South Korea
IVA Johann GmbH, Baumaschinentechnik, Germany
Taiheiyo Seiki KK., Tokyo Japan

28. Prominent undercarriage component suppliers in India
Ramkrishna Forgings
India Forgings
Vishnu Forgings
Local (unorganized) forging companies in Kolhapur and Faridabad

29. Marketing recommendations for MFL
Forged components being priced higher than substitutive castings for similar application, Indian manufacturing facilities prioritize cost reduction over material physical properties thus giving a preference for usage of cast and fabricated components in excavators
A similar scenario is not observed in manufacturing facilities in other parts of the globe where only forged components are used. This gives MFL a reason to focus on overseas excavator manufacturing facilities as potential markets
However, for an impressive and successful marketing plan for overseas excavator manufacturing facilities, MFL should be able to boast of serving the Indian operation divisions of MNCs like JCB, Hyundai, Komatsu, etc.
If MFL foresees a potential in the industry sector, they may consider entertaining small quantity orders from PSUs like BEML and Ordnance factories who integrate undercarriage systems in their products

30. Marketing recommendations for MFL
Forged products demanded by the earthmoving equipment industry do not require high finishing, accurate machining or close tolerance considering their application. This enables the unorganized sector in the forging industry to easily cater to the demand thus making the competition severe in terms of price
Efforts for developing customer relationships moving from supplier to development partner and full service provider (design to development) of finished products would prove fruitful especially for overseas markets
Companies like Caterpillar India Ltd. and BEML have in-house engine manufacturing facilities which can be targeted by MFL for supplying engine components if has not done so already. As a registered supplier to the engine division MFL may seize opportunities to market their capability for under carriage components to the excavator manufacturing facility under the same business house
With an increase in rental services for earth-moving equipment, spares market too is on the rise. MFL may consider the opportunity of supplying to dealers and trading companies for excavator spares

31. Allied recommendations for MFL
Employing a dedicated marketing team for the non-auto sector which would not be independent of Mahindra Systech may be considered by MFL
The projected rates of growth for the sectors considered in the study provides a promising demand for forged products in the future
With automation on the forefront at MFL, they should also consider branding themselves with Clean Development Mechanism (CDM) to provide an impressive carbon footprint on their portfolio
Energy conservation and efficiency mechanics can be considered for implementation for the high power consuming hydraulic presses
Investment in renewable sources of energy like wind and solar power may be considered which would also provide tax benefits and portray MFL as an organization with green initiatives. CNG buses for employee transport too could be promoted. The green identity may prove to be a novel idea while marketing the MFL profile to global OEMs

32. Thank You