Monday, July 24, 2017

Table of Contents for Equipment Sphere





Interview - Sameer Malhotra (Shriram Automall)

As a company, we are looking at 100 percent y-o-y growth

 

Shriram Automall India Limited (SAMIL) has been a pioneer in organising physical platform for the trade of used vehicles and equipment across India. It serves an exhaustive range of pre-owned commercial vehicles, construction equipment, tractors, cars and SUVs, 3 wheelers, and 2 wheelers  to create a unique bidding experience for its customers. SAMEER MALHOTRA, DIRECTOR & CEO,  SHRIRAM AUTOMALL INDIA LIMITED offered CONSTRUCTION OPPORTUNITIES a peek of the growing Automall business.

 

Shriram’s Automall business started in 2011 and three years later it has grown to 37 outlets across the country. Briefly take us through the evolution of the business?

As you know Shriram Group is almost 40 years old and was primarily into funding small operators, who were drivers, but who wanted to become owners, through our parent company Shriram Transport Finance Company Limited (STFC). Post our initial experience of financing them, we soon graduated to the idea of a used Truck Bazaar close to four or five years ago. So, we went to different places and hired a big ground which served as a market place for trucks. We soon had a lot of transactions taking place among the people who met at the Truck Bazaar and even STFC has a counter set at Automalls to provide finance to the customers. That’s how the concept of an Automall was born. In 2011, we set up Shriram Automall as a company and I came on board with my experience in the auction industry from Ritchie Bros.

Along with my knowledge on infra-structure, construction and transport industry, I also have an exhaustive experience in the construction industry. With support from STFC, placing emphasis on the relationship and its pan-India presence, we thought it was the right time to create a concept pan-India, which could bring all the customers on one platform where the acquisition and disposal needs could be taken care of. We started with our first Automall in Chennai. Presently, we have 37 Automalls. Our plan is to have more than 60 by the end of this year. We started with trucks and soon moved to tractors and agri-equipment. And close to two and half years back we forayed into the construction equipment segment. Six months ago, we launched the passenger car segment.

We also launched two-wheelers on the online platform. So, today anything on wheels has become part and parcel of our business.

 

What is the feedback you have received on your services?

Earlier, we thought only our customers would need these services. Then, we realised that the need went way beyond them. Now, apart from finance companies, we even have manufacturers, dealers andend users as our customers, who own these trucks or construction equipment. A lot of dealers have their trade-in stock, which include agri-equipment or passenger cars, and we are catering to them. Even STFC has a counter set in our Automalls to provide financing to our customers.

 

What is the size of the market for you?

When we forayed into the truck market, we realised that it was quite huge. Nearly Rs.30,000 crore of yearly trading takes place, Pan India, which paves way for a huge opportunity. When we entered the agri-equipment segment, we found it was at Rs.15,000 crore market and the construction equipment market was worth another Rs.15,000 crore. And then, we entered cars and it was a completely different ball game – it constitutes Rs.60,000 crore market for us. Putting them all together means Rs.100,000 crore worth of market! We are the only player who caters to all the segments. We are expanding through our both physical bidding platforms, which is our main marketing platform, and online bidding platform which we started one and half years ago. The latter constitutes 5-10 percent of our business and is in demand by finance companies. Since two wheeler volumes are huge and one cannot handle them physically, we market them online.

 

Tell us about the performance of the construction equipment segment in terms of requirements, growth and prospects?

Though market sentiments in the last couple of years have been down, we have still done some good transactions. We have found many players hesitant to spend money on new equipment because of the uncertain job and project climate, or low recovery prospects of money invested in projects. Most customers approach us for used equipment. There are also a lot of customers who have extra equipment that are not being used because the projects are completed or are running slow. With the existing overcapacity in equipment, we play matchmaker or mediator between the buyer and seller.

We bring them through our bidding platforms or our private treaty platform. All major finance companies have associated with us for construction equipment disposal. We facilitate the equipment disposal of various construction equipment manufacturers and mining companies. We have also done some export of equipment recently. We had an international company working in India, which wanted to dispose off six 100 tonne dump trucks after their project got over. So we had to arrange for a buyer from the Middle East since there was a very limited requirement for them locally. The export transaction value was around $3.5 million.

 

So which are the types of equipment which you are helping dispose off?

Right now, we are mainly dealing with excavators. Backhoe loaders, small hydra cranes and tippers are routine for us at every bidding event. Then you have specialised larger equipment like excavator of 30 tonne and above and
motor graders and crawler tractors, compaction equipment, pavers and bigger cranes. We’ve done a lot of work with piling rigs. Currently, we are the largest disposer of used piling rigs in India.

 

Do people have a preference for any specific brand?

Everybody has their own choice. There are no specific brands which could be categorised as more demanded than the other, but definitely there are brands which move very fast in India. In the case of backhoe loaders, definitely JCB would have a much better demand and resale value.

But it is not like Case or Terex or Sany are not in demand. There will be some buyers for those as well. Similarly, in excavators, definitely L&T Komatsu, Tata Hitachi will have a much better demand, but that doesn’t mean I’m not selling Volvo, Caterpillar, Hyundai and Sany and all that. Same is the case with crawler tractors or loaders. We sell everything. People are looking at value for money and are mainly concerned with the condition of the equipment instead of being worried about the manufacturer or the model.

 

So what kind of volumes are we talking about? How did your business perform through 2013-14?

I think we sold close to 9,000 plus equipment last year. And we are looking into 100 per cent growth this year. We don’t need much investment because the main investment is on the facility which is all rented so the expenses basically go into marketing activities.

 

With the new government in place, the momentum is expected on the project implementation front and is planning new cities. How prepared are you for the surge in demand?

These Automalls are basically on the highways and they are spread over 4 acres to 17 acres depending on the topography and the kind of clients we have. We don’t own the properties, but have long term leasing arrangements with people who own the land and develop it for us. We started in February 2011 from Chennai, and then we entered places like Baroda, Manesar, Panvel, Aurangabad, Cuttack, Gulbarga, Hyderabad, Jammu, Hubli, Amritsar, Bengaluru, Raipur, Delhi, Shimla, Kanpur and Karnal. We are planning to open up in Ahmedabad,  Bellary, Calicut, Durgapur, Guwahati, Saharanpur, Vijayawada,  Lucknow and Madurai. Currently, we are at 37 places and we are looking to have a total of 60 Automalls by the end of the year. As far as new cities are concerned, we would most certainly like to expand to those clusters which don’t have any of our Automalls.

 

After the recession of the last few years what kind of scenario do you expect?

Whether it is a boom time or recession, the used equipment market will never go down. In my views, the boom time is coming so there is definitely more business coming our way. The day after the election results, we had to close one deal involving some high value equipment. Everything was agreed upon and we were to close the deal and take the advance from the buyer. But the seller calls up in the morning and demands 5 per cent extra because good times had come or else he was not selling. When we pointed out that everything was settled a few days back and the agreement was ready to be signed, he said, “Yes that was three days back. I waited for three years for this time and I will not like to sell unless you give me extra. I don’t mind waiting for another six months.” So we ended up paying him Rs.5 lakh over the Rs. 1 crore previously agreed. The prospects of the Automall concept picking up is quite bright – there is a huge untapped market in used equipment – and we will be growing year-on-year despite of whatever happens in the market. We grew 50 per cent last year and we are going to see growth even this year. As a company, we are looking at 100 per cent y-o-y growth. It’s a win-win situation.

 




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