The Indian mining and construction equipment (MCE) industry maintained its strong growth momentum during the first half of this fiscal.

The industry posted an impressive growth of 26 per cent in FY23 with total volumes crossing the one lakh unit mark.

While final numbers for the first half of this fiscal are awaited, the industry volumes (domestic plus exports) recorded a healthy year-on-year growth of 25 per cent during the first 5-month period of this fiscal.

“The growth was driven by improvement in the overall macroeconomic environment, a strong revival in construction activities and thrust on completion of infrastructure projects in the run-up to the General Elections in 2024,” says rating agency ICRA.

All product segments reported strong growth during the April-August 2023 period. Backhoe loaders, which account for the bulk of the volumes in the industry, recorded an increase of 25 per cent over the same period a year ago. Material handling (increase by 62% YoY) and road construction equipment (increase by 49% YoY) nearly doubled their volumes in these 5 months, albeit on a low base.

The healthy allocation for capital spending in the Union Budget 2023-24, coupled with ambitious targets set under the National Infrastructure Pipeline (NIP), are expected to boost infrastructure development in segments like roads, metros, railways, etc., and thus, drive volumes for the MCE industry.

Industry analysts point out that better availability of financing for the purchase of mining and construction equipment has also been a positive factor as 85-90 per cent of the equipment is financed. Bank credit towards the sector witnessed a higher increase vis-a-vis NBFCs in recent quarters. The NBFC delinquency levels also remained under control amid conservative LTV standards.

In its Q1 investor presentation, Cholamandalam Investment & Finance Co Ltd, said the construction equipment witnessed a growth during the quarter supported by improvement in construction, mining activities and a positive macro-economic environment.

“Higher demand drive with the run-up to elections will have a positive impact on this segment during the year,” it added.

The industry volumes are expected to grow by 10-12 per cent and revenues by 12-14 per cent in FY24. The profitability of MCE OEMs is also likely to improve by 100-150 bps in FY24, aided by softening commodity inflation and operating leverage benefits, said ICRA.

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