Sorab Agarwal, Executive Director - Action Construction Equipment

Action Construction Equipment Ltd. (ACE) was incorporated in 1995 with a very small capital and has since grown to become India’s largest mobile crane and tower crane Company with a consoli¬dated presence in all major infrastructure, construction, heavy engineering and industrial projects. 

The journey along the years has been very tough but a fruitful one and the policy of the company to provide the right products, at the right price and supported by good after sales support has paid off. Today, ACE is poised to capitalize, on the industrial and infrastructure boom which is gain¬ing pace. Over the years, apart from mobile cranes and tower cranes, ACE has also ventured into Forklifts, Loaders, Crawler Cranes, Tractors and Road Making machinery. These product lines are 2-4 years old and have now started gaining momentum and would start to contribute in a bigger way to the revenue of the company in the years to come. 

Company’s performance in the FY-11 has been quite robust and we are expecting around 55 per cent top line growth and around 80 per cent bottom line growth. Post October 2008, the demand for construction equipment was suppressed, but throughout FY-11, the scenario was totally reversed and ACE witnessed business growth in line with company’s earlier performances. In FY-11, ACE also introduced indigenously built Fixed Tower Cranes and Crawler Cranes in the Indian market. The volumes for these products are expected to grow significantly in our country in times to come. 

ACE had been growing at CAGR growth rate of 68 per cent from 2002 to 2008, but unfortunately this growth tapered off post October 2008. FY-11 has turned out to be much better year with more than 55 per cent top line growth. 

ACE has targeted a top line in excess of 40 per cent for FY-12 and bottom line growth of around 65- 70 per cent in the same period. The above growth target set by the company looks easily achiev¬able and our target over the next 3-5 years would be to maintain CAGR growth in excess 35-40 per cent levels. In the next Financial Year, the company also intends to launch new models within its existing product categories. 

The sale of construction equipment can be compared to HCV sales and the customers don’t wait for longer delivery periods. Ideally, the customer wants ex-stock delivery, hence, there is hardly any order book concept in our industry, but our current order book would stand at 2 ½ to 3 months of planned production. 

Tell us about your sales and service network. 

ACE equipment is used throughout the country and to cater to this wide spread and to provide effective pre-sales and after sales service, the company has developed a network of Dealers operating out of 78 locations and supported by 18 Area/ Regional Offices based at Delhi, Mumbai, Chennai, Kolkata, Ahmedabad, Pune, Jaipur, Ranchi, Patna, Raipur, Bhubneshwar, Kanpur, Lucknow, Indore, Hyderabad, Banga¬lore, Vizag and Cochin. These outlets are fully equipped to provide genuine spare parts and services by company trained engineers. 

Besides above, we have also set up dealerships in UAE, Qatar, Iran, Bangladesh, Egypt and South Africa to provide support to our equip¬ment working in Middle East Asia, South East Asia and African Coun¬tries. 

Our EDBITA margins are currently at 9.5 per cent approximately and PBT margins are at around 8.5 per cent. In the year FY-12, we expect our margins to stabilize at around 10.5 per cent to 11 per cent EDBITA levels and around 10 per cent plus on PBT level. We can also expect a further margin growth on account of the new products like Crawler Cranes and Tower Cranes, which ACE has started producing in FY-11. The main factor affecting the margin is the raw-material cost, but within a time period of 2-3 months we are easily able to pass on the price increase to our customers. 

ACE has manufacturing facilities in Uttranchal and recently the R&D Department of ACE has also been recognized for income-tax benefits hence the overall tax rate for FY-12 is expected to be below by 25 per cent. 

As mentioned above, in the last 2-4 years ACE has started producing Forklifts, Loaders, Crawler Cranes, Tractors and Road Making ma¬chinery and the main focus of the company is to increase penetration into the market and expand these product lines as soon as possible so that in times to come these products gain a larger revenue share and propel out top line even faster. The company has been focusing on value engineering and up-gradation of the current product lines in vogue with market expectations. 

ACE is a fast growing company and along with its growth we are generating cash-flows part of which is being deployed for future investments in the business to generate higher revenues and profits in near future. Apart from generating free cash-flows, ACE has set up plants in Tax Free Zone, where we will continue to have 100 per cent tax exemption for next five years. In addition to above, we continue to operate on low fixed costs as a part of our operating structure, which will provide us immunity against any adverse economy condition, which we don’t foresee in near future specially for our sector.