Monday, September 21, 2020

Table of Contents for Cover Story

Interaction- Jitender Aggarwal, Director, Aggcon Equipments International

Our services are appreciated for, timely delivery, cost effectiveness, reliability

This company has emerged a major player in the hugely lucrative equipment rentals segment, a market which is still latent in India and characterised by low rental penetration. In an exclusive interview to CONSTRUCTION OPPORTUNITIES, JITENDER AGGARWAL, DIRECTOR, AGGCON EQUIPMENTS INTERNATIONAL PVT LTD, underlines their USPs, and discusses the reasons for low rentals penetration in India.


Major reasons for low penetration of rentals in India’s construction equipment market. What are the main challenges faced in India?

In India, people like to own the equipment instead of hiring it. Further, the pride of ownership drives direct purchasing versus rental of equipment. The other aspect which prevents us from focusing on growing this segment is the slow legal process in India. Should a customer default on our payment/fail to return the rental equipment, quick redressal via the legal system is slow and painful, and therefore prohibits large companies from investing in this segment.


Equipment sales are majorly routed through NBFCs. How has the recent hardening of interest rates affected the equipment market?

Yes, that is true. But it has a direct correlation with available projects in the market. Once we have more projects cleared on the table, it will automatically help in easing out the financial crunch as well.


What are the major demands of your customers?

Most of the clients demand newer equipments on rent basis and the situation has not improved vis-à-vis older equipments. Thus, there is pressure on rental companies. Older equipments and machines, even if they comply with all safety standards, are preferred by only a few for deployment, that too at a lower price.

Larger players definitely have an edge over medium and small equipment owners since the higher capacity equipments owned by mostly large players earn 10-15 per cent more rental charges from the end-users.


Is the rental segment plagued by shortage of skilled manpower, how do equipment rental companies handle the situation?

A large number of equipment has been imported; both, new machines and used secondhand machines, whereas operators, technicians, and engineers for maintenance of these equipments, are in short supply in India. Small and medium equipment rental companies in the construction sector outsource the services of operators, technicians, and engineers, at a higher cost. Those equipment rental companies which have their own in-house maintenance facility are able to sustain maintenance cost and train skilled manpower.


Despite being nascent, what is the size of India’s equipment rental market?

Nobody knows it exactly. No definite statistics is available and it is difficult to arrive at the exact size. Besides, the views are hugely diverse. It could be about Rs.3000 crore rentals per annum. This is a very rough estimate and includes fleet owned by project owners, EPC companies, and mechanical contractors.


What is your USP, which segments are major demand drivers.

Our products are purchased from renowned manufacturers and our services are appreciated for timely delivery, cost effectiveness, and reliability.

We expect robust demand in this segment over the next few years, considering the latent untapped potential of lease-rentals in the Indian market. The new GST regime will have a liberating effect on this segment and will unleash this latent rentals’ demand in India. We see great opportunities with lot of projects in power, refinery, petrochemicals, fertilizers, metals, minerals, railways, airports, and roads, getting kick started coming year. Our focus would be to ensure participation in each of these sectors. Though our immediate focus is to deploy our existing fleet on long term basis wherever we get opportunities, we are not averse for need based or project based expansion.

The main demand drivers will be new projects pertaining to widening of roads, construction of new flyovers and underpasses,  and of course, metro rail,  Airports, Power Projects, construction and mining equipment.

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