'New funding options reduce cost of equipment ownership'

Different funding options have emerged in the Indian construction equipment industry to reduce the cost of ownership of equipment to the customer.

An increase in the penetration of financing, renting and leasing of construction equipment up to the taluk level is an indication of this trend, said C P Rangachar, managing director Yuken India.

Speaking at Excon-05 seminar on financing of construction equipment here on Friday, he said while reducing overall cost of ownership, these activities have also helped original equipment manufacturers (OEMs) to increase their range of service offerings and increase revenues from services, he added.

Based on key features of India's construction equipment and equipment financing markets, certain factors important for financiers can be identified. These include good understanding of the equipment industry, an innovative product portfolio and partnership with appropriate stakeholders.

Several new venture capital funds have entered this industry. Another significant move has been the forming of the India Infrastructure Finance Company Limited (IIFCL) by the government of India exclusively for funding of infrastructure projects. About Rs 10,000 crore has been earmarked for the first year. This move will attract private sector investment into the Infrastructure sector.

Construction equipment customers expect more from equipment financiers than simple financing. "They expect financiers to understand equipment of different brands and advise on their utility, leading to an informed purchase. Financiers, in order to provide integrated solutions to customers, need to look for partnership with appropriate stakeholders," said Rangachar.

"With this, financiers could become a major service integrator offering financial services, insurance, selling new or leased equipment, leasing and renting of equipment along with after sales services," he added.

In his theme address, Hemant Kanoria, vice chairman and managing director, SREI Infrastructure Finance, said, "Investments worth billions are needed during the next few years and this would translate into huge demand for the construction equipment industry. Sales for this year are already envisaged at $2 billion."

In his address, Daniel Kaplan, former president of Hertz Equipment Rental and Member - Board of Directors, Quipo said, "financing of construction equipment is a global phenomenon. It has immense advantages and we in the west have benefited from it. It adds a completely new dimension and gives a lot more options to construction equipment manufacturers. It is heartening to note that India is now aware of the advantages and is in a position to benefit from it."

Other speakers pointed out that state governments are now aware of the benefits of good infrastructure and are thus adopting more efficient forms of resource mobilisation.