It’s Like Boom Years Of 2003-07, Says Action Construction

For Action Construction Equipment Ltd., it feels like the boom of 2003-2007 as India's infrastructure push has increased demand for everything from cranes and crawlers to forklifts.

The company grew at an annualised rate of 70% prior to the 2008-09 global financial crisis on a smaller base, Sorab Agarwal, chief financial officer at Action Construction, said in an interview with BloombergQuint's Niraj Shah. This fiscal, the company recorded its highest-ever quarterly numbers in October-December, led by a strong revival in roads to metros, and housing construction activities, coupled with spillover from the second quarter, he said.

India plans to spend $1.4 trillion under the National Infrastructure Pipeline in FY19-25. The budget set aside a record Rs 1.18 lakh crore (more than $16 billion) for roads and highways for FY22, as the nation spends on building and widening highways, laying new metro lines.

Agarwal said this push would power a 50-60% growth in construction equipment and 25-30% growth in crane, agri-equipment and material handling segments.

The company has also increased focus on exports in the last couple of days. Contribution from overseas markets has increased to 6-7% and the management aims to more than double it 15-20% in the next three years as exports earn higher margins.

While American and European rivals dominate overseas markets, Agarwal said Action Construction's price arbitrage will help the company gain a foothold. The company's next-gen pick-and-carry cranes, he said citing an example, are priced at one-fourth the price of other equipment used for the same job.

Key Highlights

• Construction and agri equipment segments are contributing to growth, with nearly 61% of the revenue coming from cranes.
• In nine months ended December, construction equipment revenue rose 32% over a year earlier to Rs 88 crore.
• The company expects construction equipment to grow at an anuualised rate of 50-60% in the next three to five years.
• Agri equipment top line rose 29% year-on-year to Rs 143 crore in April-December.
• The company introduced track combines five years ago in the agri segment; Action Construction is the No. 2 player in this category and aims to become the market leader in the next two to three years.
• Overall, the company targets a Rs 400-500 crore revenue from construction and Rs 500 crore agri-equipment in the next two to three years.
• Citing all factors, Agarwal said the company expects to see revenue growth of at least 25-30% in FY22.
• It has set a target to double the top line to Rs 2,500 crore in the next three years, coupled with higher margins.

Watch the full interview here:

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