1. Machine Tools September 2006 www.imacs.in

2. MACHINE TOOLS www.imacs.in Market Overview Government regulations & policy Advantage India and business opportunities Contents

3. MACHINE TOOLS www.imacs.in Market Overview Government regulations & policy Advantage India and business opportunities

4. MACHINE TOOLS www.imacs.in Indian Machine Tools sector is very small in comparison to the global market size Global Machine Tools Market Total world market size; USD 65.3 bn World leader Japan has USD 10.5 bn has 16% market share China leads consumption with US $ 9.3 bn in 2004 ( 20% of world wide production). It imported US $ 5.8bn ( 62%) Market Overview Indian Machine Tools Industry Domestic Market Size : USD 620 mn ( consumption) Ranks 19th in overall world machine tools production Contributes 0.5% to overall world production Exports : USD 11 mn Exports mainly to developed countries

5. MACHINE TOOLS www.imacs.in Manufacturers are geographically dispersed Top 10 producers account for 70% of the output in India Around 70% of the players are in the small & medium scale sector Hubs of manufacturing centres located near the raw material industry or user industries Market Overview Machine Tool hubs in India Mumbai and Pune in Maharashtra; Batala, Jalandhar and Ludhiana in Punjab; Ahmedabad, Baroda, Rajkot Jamnagar, and Surendranagar in Gujarat; Coimbatore and Chennai in Tamil Nadu; Bangalore in Karnataka.

6. MACHINE TOOLS www.imacs.in Production has grown at a high rate during the period 2002 to 2005 Market Overview CNC Conventional Metal Forming Metal Cutting Production Rs 528 m n CAGR 47% Production Rs 860 mn CAGR 30% Production Rs 7387 mn CAGR 43% Production Rs 2113 mn CAGR 37% 70% of production 87% of production bending machines, presses, cold-heading machines,, shears, coil slitters, and stamping machines Turning centres, Machining centres, grinding centres (70% of total metal cutting output)

7. MACHINE TOOLS www.imacs.in Metal Cutting constitutes bulk of the exports Metal FormingMetal Cutting Export of Machine Tools (By Operation) Machine centres, Lathes, Electro discharge machines and HSC drilling tools together account for ~75% of exports ( in FY 2005 ) Market Overview

8. MACHINE TOOLS www.imacs.in Shortage in production capacity has resulted in rising imports 4507 5093 9655 7420 18208 10360 0% 20% 40% 60% 80% 100% 2002-032003-042004-05 ImportsDomestic Production The surge in domestic demand, capacity constraints and lowering of import duties have led to a doubling of imports The percentage share of imports in total consumption has also risen from 47% in 2002-03 to 64% in 2004-05 Market Overview Consumption Breakup - Machine Tools India

9. MACHINE TOOLS www.imacs.in Domestic demand fuelled by growing end user industries Auto Components Automotive Capital Goods Consumer Durables Domestic market grown at a CAGR of over 11% ( FY 2000 - FY 2005). Exports have grown even higher at about 25% CAGR Domestic market size at USD 8.7 bn and growing at a rate of 15% per annum. Industry estimated to grow at 25% till 2010. Grown at about 20% in FY 2006. Government’s thrust on infrastructure development, and growth in core sectors like textile and agriculture are expected to sustain high growth in this sector The sector has grown at rate of about 13% in FY 2005. The growing middle class, rising affordably, changing lifestyles have all contributed and continue to contribute to this sectors growth pace. Market Overview

10. MACHINE TOOLS www.imacs.in Government regulations & policy Market Overview Government regulations & policy Advantage India and business opportunities

11. MACHINE TOOLS www.imacs.in Indian machine tool industry is most amenable to investments by foreign players 100% FDI is allowed Machine tools manufacturers are exempt from obtaining an industrial licence to manufacture Manufacturers are free to select the location of the project Only specific items under machine tools are reserved for production by the small scale industry Import duties have been constantly reduced to promote increased import and usage of machine tools Government regulations & policy

12. MACHINE TOOLS www.imacs.in Advantage India & business opportunities Market Overview Government regulations & policy Advantage India and business opportunities

13. MACHINE TOOLS www.imacs.in India enjoys several advantages for the growth of machine tool industry Design Skills Lower cost of manufacture Availability of raw materials Availability of skilled manpower Presence of support industries (like foundry) Growth in end user industries Advantage India & business opportunities

14. MACHINE TOOLS www.imacs.in Rising demand and cost competitiveness drives investment and growth Advantage India & business opportunities There is a substantial demand-supply gap for machine tools currently being met through exports Availability of skilled manpower and design skills coupled with cost competitiveness make Indian machine tool industry amenable to outsourcing opportunities by foreign manufacturers and consumers Limited production capacities of specialised products like high speed, high precision machines and heavy duty machines provide scope for investment in production facilities

15. MACHINE TOOLS www.imacs.in Leading players have built substantial capabilities Pioneer in Machine tools business in India Leading manufacturer of conventional and CNC machines Revenues of INR 2902 mn Largest machine tool manufacturer in the Private sector Collaboration with German Machine Tool manufacturing Company Manufacturer of CNC horizontal and vertical machining centers, Special Purpose Machines, ACE Designers Ltd., is a leading manufacturer of CNC turning centers and Auto Lathes Part of the ACE Group of companies that manufactures and exports CNC machine tools, grinding machines, turrets etc., to Europe and USAGroup Revenues close to INR 2500 mn Jyoti is a leading CNC machine tool manufacturer from Gujarat Has recently tied up with French CNC manufacturer Hurron Graffenstaden SAS to produce Special Purpose CNC machines to be sold in Europe and other western countries Batliboi Limited is among the leading engineering and machine tool manufacturers in India Machine tool business revenues of INR 400 mn Advantage India & business opportunities

16. MACHINE TOOLS www.imacs.in Leading players have built substantial capabilities Kennametal India Lakshmi Machine Works is a leading engineering and machine tool manufacturing Company Produces CNC machine tools Also has supporting foundry division to manufacture castings Machine tool revenues close to Rs.1000 mn Kennametal India Limited is the largest cutting tools manufacturer in India and is a Subsidiary of Kennametal, Germany Sales revenues of INR 3631 mn Other Leading Players are: Heavy Engineering Corporation; Motor Industries Company Limited; Lokesh Machines Limited Premier Limited; TAL Manufacturing Solutions Limited; Godrej & Boyce Manufacturing Company Limited; Mysore Kirloskar Limited; Many of the global players like Makino, DMG, Yamazaki, Haas, Trumpf, Daewoo, Agia Charmilles, Schuler, Cummins, Siemens, ABB Ltd etc. are present in India either through their marketing agents, technical centers, service centers or assembly centers. Advantage India & business opportunities

17. MACHINE TOOLS www.imacs.in The India Brand Equity Foundation is a public-private partnership between the Ministry of Commerce & Industry, Government of India and the Confederation of Indian Industry. The Foundation’s primary objective is to build positive economic perceptions of India globally India Brand Equity Foundation c/o Confederation of Indian Industry 249-F Sector 18, Udyog Vihar Phase IV Gurgaon 122015, Haryana, INDIA Tel +91 124 401 4087, 4060 - 67 Fax +91 124 401 3873 Email j.bhuyan@ciionline.org Web www.ibef.org

18. MACHINE TOOLS www.imacs.in Disclaimer This publication has been prepared by ICRA Management Consulting Services (IMaCS) for the India Brand Equity Foundation (“IBEF”). All rights reserved. All copyright in this publication and related works are jointly owned by IBEF and IMaCS. The same may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this publication), modified or in any manner communicated to any third party except with the written approval of IBEF. This publication is for information purposes only. While due care has been taken during the compilation of this publication to ensure that the information is accurate to the best of knowledge and belief of IBEF and IMaCS, the content is not to be construed in any manner whatsoever as a substitute for professional advice. IBEF and IMaCS neither recommend nor endorse any specific products or services that may have been mentioned in this publication and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this publication. IBEF or IMaCS shall in no way, be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of this publication. ICRA Management Consulting Services Limited