“Besides the domestic market, we are also looking at exports to the Middle East, Asia, Africa, Europe and the U.S. These exports contributed to 14% of our revenues in FY24 from 4% a year earlier,” Sany’s managing director Deepak Garg said.
The company has also set a target to grow the contribution of exports to about 50% by 2030.
“In the longer term, we look at India as a global sourcing base for the group and an export hub for the country,” he said, while adding that the company is working towards higher levels of localization to achieve this goal.
A research report from ratings agency ICRA in January also noted that Sany’s scale of operations in the country had improved significantly in FY23 from a year earlier. This was aided by improved sales in hoisting equipment and mining segments, and increasing exports of telehandlers, a product launched in FY23 that is gaining traction in the US market, the report stated.
For context, Sany India’s consolidated revenue from operations grew to ₹4,631.9 crores in FY23, from ₹3,015.1 crores a year earlier. With India being the Group’s second-largest market outside of China, the Indian arm contributes about 12% to its overseas revenue and 4% to the group’s overall income.
Going after demand
According to its plan, Sany India has begun the initial phase of its investment of about ₹750 crore in capital expenditures to upgrade its facility in Pune over a period of 18 months.
Garg explained that the company is working towards doubling the manufacturing areas in its existing factories and also looking to invest significantly in new robotic equipment and technologies to increase its localization level and improve its overall capacity in the country.
Garg outlined plans to double the production capacity by the end of next year and launch new product lines for mining and material handling to cater to the vast demand in India.
It currently makes about 8,000 machines every year and expects to increase its capacity to about 15,000 machines by June 2025.
Sany had invested more than ₹1,000 crore to develop infrastructure for R&D, manufacturing, quality inspection, testing and service at their manufacturing facility in Chakan, Pune, in 2012.
Further, the company operates in multiple business verticals including earth moving, lifting, concrete, roads and renewable energy solutions through this facility.
Moreover, the company opened a new office in Delhi earlier in July to move closer to its customer base and improve its operational efficiency. Spread across 3,000 sq. ft, the New Delhi office is equipped with modern infrastructure and advanced technology to support Sany’s domestic operations.
Garg noted that the funds earmarked for investment will also be used to develop capacity for the production of electric heavy machinery wherever possible. While electric-powered vehicles (EVs) are likely to become the way forward, Garg also believes that it comes with some limitations as things stand today.
A sign of things to come
“The EV ecosystem in the construction equipment industry cannot cater to every requirement… It will be strategically prioritized towards confined areas such as mines, ports, steel and cement plants in the initial stages,” he said.
Garg also highlighted the possibility of migration towards hydrogen fuel technologies as the ecosystem matures, following the government’s focus on green hydrogen.
However, these are still early days for the industry as adopting such newer technologies may prove expensive and unfeasible for original equipment manufacturers as well as customers. Garg explained that the cost of a corresponding EV product to that of a standard fossil fuel or a diesel equipment is almost three times.
“This does not fit into the economics of every customer. So as of now, it does not blend into the overall costs for many customers, but it might make sense for some select sectors,” he said.
As battery prices come down, Garg sees EVs to eventually become an attractive option over the next five years.
Public Plan
Sany India had also floated plans to tap the public markets in 2021. At the time, the construction equipment maker was looking to list in India in the next two to three years, according to an Economic Times report.
However, the pandemic-related slowdown led the company to shelve its plans.
Now, before restarting the process to go for an initial public offering (IPO), Garg said Sany needs to increase its localization levels to five times of what it is currently.
Besides manufacturing, it is also focussed on delivering more sustained profits. This has been particularly challenging for the company due to higher imports, foreign exchange exposure that include logistics and shipping costs, as well as geopolitical turmoil that has further exacerbated input costs.
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The ICRA report also stressed that the company’s profitability remains vulnerable to these fluctuations amid intense competition in the category.
While Sany India’s operating margins improved to 2.7% in the first eight months of FY24, from -0.7% in FY2022, it is expected to remain muted at around 4-5% in FY25 due to the competitive pricing strategy adopted by the company, the report noted.
Further, being a net importer, Sany India has sizeable unhedged foreign currency exposure as seen in the past, ICRA stated.
Backed by numbers
In FY23, Sany India had posted a consolidated net profit of ₹112.2 crores, from a loss of ₹125.9 crores a year earlier, according to data from Tofler.
Over the last 10 years, the company has undergone a significant transformation aided by the government’s push for infrastructure spending and local manufacturing, which has driven demand for construction equipment.
In the interim budget presented earlier this year, the government had also increased allocation towards the infrastructure sector to ₹11.11 lakh crores in FY25, which will be 3.4% of the GDP.
Other than its manufacturing facilities and business centres in Bengaluru, Chennai, Pune and Delhi-NCR, Garg emphasized that states such as Madhya Pradesh, Orissa, Rajasthan and Telangana are also coming up strongly with incentive schemes to attract more localization, which will help the company expand its footprint.