Lease financing is still at a nascent stage
Lease financing is still at a nascent stage

Lease financing is still at a nascent stage

Partha Mookherjee, Head - Mining Equipment Business, Larsen & Toubro Limited
How do you view the immediate and long term growth prospects for the Indian cement industry? How important is the cement/limestone market for your organisation? What is the share of contracts from new projects vis-a-vis replacement requirements?
We have a very positive outlook of the Indian cement industry. The per capita cement consumption in India is much lower than world average (200 kg vis-a-vis world average of 500 kg). With major spend taking place in affordable housing, road construction and civil infrastructure, we anticipate a fillip in the demand with expected compounded annual growth of 7 to 8 per cent in next few years. Limestone segment comes next only to coal segment in machinery consumption. We supply mining machines like hydraulic excavators, dump trucks, crawler dozers, wheel loaders, motor graders of Komatsu brand, who are world leaders in construction and mining equipment. We also offer Scania Tipper Truck, which is ideal for the mid-mining segment. We offer complete mining solutions for limestone segment right from application engineering, optimum fleet requirement, cost per tonne analysis, lifecycle costing and crushing solutions. Currently, the capacity utilisation in the cement industry ranges from 65 to 75 per cent depending upon geographical locations; but we see a continuous appetite by our customers in both brownfield and greenfield expansions. Our share is about 50:50 for expansion and replacement requirements.
Given that the cost of energy and fuel are escalating, have you seen a shift to Life-cycle cost as against initial capital cost as the major procurement decision criterion? How do your machinery/ equipment designed for the cement sector, fare in this respect? What competitive advantages do your customers gain when they choose your products over your competitors?
The industry has shifted to lifecycle costing as a major procurement decision criterion unlike past scenarios where only the capital cost was the key factor. The industry now appreciates that initial capital cost contributes only 15 to 20 per cent of the lifecycle cost whereas fuel and spare parts form over 60 per cent of the lifecycle costing. Komatsu machinery operates in the premium market and we still enjoy a very high market share because of much lower lifecycle costs. While choosing our products, our customers gain in terms of higher productivity in tonne/litre basis thus making us cheaper on cost per tonne basis. Over the years, our customers have gained confidence in Komatsu products due to their high reliability and unmatched support extended by L&T from its nationwide workshops and service infrastructure which results in highest availability and utilisation.

We have today a heightened sensitivity towards environmental issues, and mining activities in particular have attracted some amount of negative attention. How do your designs build in environment-friendly features into your machines? Kindly share some details with our readers.

With increased sensitivity towards the environment and negative impact of global warming, it is but imperative that we need to have a clear focus on environment conservation. Mining, being a contributor to global pollution, it is but natural that all of us should move towards sustainable mining. L&T, being an environmentally-conscious company, have always been in the forefront of nature conservation. Komatsu equipment incorporates all the latest features that are environment friendly like lead free radiators, emission compliant engines, low noise cabins etc, which meet the most stringent pollution norms applicable anywhere in the world.

There has been a trend of lease-financing of the mining assets, by some customers, instead of outright purchases, which one may even call "hire-purchases". Have you encountered such choices being made by some owners, and if so, how have you been able to service such financing needs?
Presently, most of our customers are going for outright purchases only. However, there is shifting trend towards lease financing though still at a nascent stage in the mining asset purchase.

We have tied up with leading banks and NBFCs who have partnered with us and ready to offer tailor made financing options which suit our customers' requirements.

Our country has been witness to sharp changes in the mining regulatory framework in the last few years, around prospecting schemes, award of leases, auction of concessions, as well as compliances. What has been the impact of all these changes on the mining sector overall, and per se, on the limestone mining sub-sector? How have these shifts influenced your business?
Yes, there has been a disruption in mining activities starting with Supreme Court judgement in the coal and mining sector coupled with adoption of stringent norms in LA and R&R which had slowed down the overall process of new projects coming up. We are, however, hopeful that with the overall positive business scenario and growth prospects, the industry shall revive sooner than later. The slowing down of the industry has impacted the offtake of mining machinery but things have started looking up of late with enquiries and overall buoyancy. In the limestone industry, the impact was minimal for two reasons: the industry was operating at 70 to 75 per cent of their capacity and the brownfield expansion kept the clock ticking along with debottlenecking. However, the greenfield projects took a backseat for a while.
What are the latest introductions by you into the mining machinery market? Are these superior product offerings from technology, environment, energy or productivity perspectives? How has the market accepted such new products? Are there newer products on the drawing board?
As authorised distributors of Komatsu, Scania and our own range of equipment in the Indian market, we offer world-class products in terms of latest technology and meet environment standards. Our equipment are highly productive and fuel efficient and provide better availability to the customers. Customers across user segments have shown wide acceptance of equipment in the Indian market.
Quite a few of your machines cater both to mining sector as well as the construction. So, with your wide-angle view of both these industries, how do you assess their current growth performance, relative to each other?
The mining sector is currently sluggish due to judicial intervention, which has impacted the mining equipment business. However, construction sector in India is doing good due to increased demand from real estate, roads and infrastructure projects. Due to high priority of he Government of India, infrastructure segment has created big market for these equipment.
How does L&T stand out in terms of offerings in the mining market?
L&T's strengths lie in its ability to remotely manage large assets in various projects across India with full maintenance contracts and site support agreements. Our service engineers are well equipped and trained to rapidly assemble large machines at project sites in shorter lead times. Besides, L&T provides training and expertise to the operators to handle Komatsu, Scania and L&T machines.

B.S. Srinivasalu Reddy

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