Machine tool industry sees revival in fortunes

May post 35-40% growth this year, based on large orders from the automobile, defence, aerospace and engineering sectors

After flat growth for two years, the Indian machine tool industry is seeing boom times again. Inclusive of imports, it grew by 47 per cent to Rs 1,923 crore in the first quarter of 2010-11 (April-June), over the corresponding quarter of last year, on the back of a big rise in demand from the automobile and auto components sector.

Domestic machine tool output grew by 143 per cent over the corresponding quarter of last year, to Rs 502.7 crore. Encouraged by the recovery, Indian manufacturers also tapped new opportunities in overseas markets, leading to a 9 per cent increase in exports in the first quarter.

 

Shrinivas Shirgurkar, managing director of the Ace Group, said the machine tool industry is set to grow by 35-40 per cent in 2010-11. Last year (2009-10), it had recorded a decline of 15.7 per cent to Rs 6,413 crore. Many machine tool companies are getting orders for 250-300 machines per month, he said, compared to about 20 machines per month during the last two years.

“Demand is so huge this year that most companies are unable to cope with it. Many are facing shortage of materials like castings, forgings and bearings,” he said. “The problem is not just with Indian companies. Even companies in Japan and Taiwan are facing a similar situation. The Indian industry needs to expand capacities hugely to meet the demand from the domestic manufacturing sector.”

Shirgurkar expects the industry to invest at least Rs 100 crore this year in capacity expansion.

The Indian machine tool industry manufactures almost the complete range of metal cutting and metal forming machine tools. Customised in nature, the products comprise conventional machine tools as well as computer numerically controlled (CNC) machines. There are other variants, including special purpose machines, robotics, handling systems and TPM-friendly machines.

Machine tool companies, which had diversified into other segments two years ago due to the downturn in the automobile sector, are now facing multiple problems with the revival in demand from the automobile sector. They are finding it difficult to make sufficient allocations to the automobile and other sectors, Shirgurkar added.

The industry had diversified into aerospace, consumer durables and defence in pursuit of growth opportunities. Demand from other segments like the railways, the power and general engineering sectors has also now revived. The industry typically generates over 60 per cent of its orders from the automobile and auto components sectors.

“Opportunities are visible in every sector. After facing a downturn for two years everybody is buying machines this year. The orders are so huge that we may have to stop taking any more orders for the rest of the year,” said M Lokeshwara Rao, president of the Indian Machine Tool Manufacturers’ Association (IMTMA).

He said there was a big rise in orders from the automobile industry and the power sector, especially nuclear power. Companies like BHEL and L&T are manufacturing a large amount of power equipment, so there is big scope for ancillary units to come up. The industry expects to get multiple orders from these companies, Rao added.

The machine tool industry in India comprises about 450 manufacturers, with 150 units in the organised sector and 10 major companies contributing almost 80 per cent of the industry’s production.

Manufacturing activity is concentrated in Mumbai and Pune in Maharashtra; Batala and Ludhiana in Punjab; Ahmedabad, Baroda, Jamnagar, Rajkot and Surendranagar in Gujarat; Coimbatore and Chennai in Tamil Nadu; and Bangalore in Karnataka.

Bangalore is a key hub of the machine tool industry. The city houses HMT Machine Tools Ltd, BFW, Kennametal India Limited and Ace Group, which together produce nearly 50 per cent of the industry’s total output.