Tata Hitachi company on road to breaking even

Barely one-and-a-half years ago, the three plants of Tata Hitachi Construction Machinery Company, a 60:40 JV between Japanese construction-equipment giant Hitachi and Tata Motors, was running at barely 20 per cent capacity, with the company deep in the red.

Though still not profitable, the company is expecting to break even this year, riding on the construction boom, primarily in the road and irrigation sectors.

“We sold 3,000 machines in the first half (April-September) at 40 per cent year-on-year growth at 55 per cent capacity utilisation. If we can sell 6,000 machines this fiscal, we will break even,” Sandeep Singh, Managing Director, Tata Hitachi, told BusinessLine on Wednesday.

He was here in connection with the International Mining and Machinery Exhibition (IMME) and Global Mining Summit 2016.

Construction-equipment makers and equipment-finance companies have been reporting the arrival of good days from the beginning of this fiscal. But it has an added value to companies such as Tata Hitachi that had invested heavily in manufacturing in India in the last boom.

By the time the company’s ₹550-crore brand-new facility at Kharagpur in West Bengal (over and above its facilities at Jamshedpur in Jharkhand and Dharwad in Karnataka) started operating, the mining sector was hit by controversies.

While mining as a whole is yet to pick up, rapid capacity expansion by Coal India over the past two years has added some stability in the market.

Though the current sluggish demand for fuel and the resulting slow-down in CIL production has impacted growth, Singh said it’s still in the positive. He is hopeful that the proposed auction of iron-ore mines will add to the sector’s growth potential.

The captive coal mine auction may not have the desired impact, but the government is keen to bring the sector back on the growth path. “I am positive that mining will grow.”

But for the moment, he is expecting his order books to grow faster, riding on the Centre’s focus on road building — starting from rural roads under Pradhan Mantri Gram Sadak Yojna and National Highways to border roads in the North-East – and railways, and irrigation activities by some State governments.

“The Railways has started implementing many old projects for capacity expansion on priority basis. They are keen to transfer a part of the road cargo to rail, and it has started yielding fruits. I am expecting this activity to pick up in the near future,” Singh said.

On irrigation, he said drought-prone Maharashtra, Andhra Pradesh, Telangana and Karnataka are leading the race.

“If sales grow at the current rate, we will book some profit in the next fiscal with 70 per cent capacity utilisation,” he said. “But we need to grow at this rate for the next decade to return to the pink of health.”

COMMENT NOW