INDUSTRY REPORT Machine Tool Industry 2019

Compiled for Knowledge partner

January, 2019

1 INDUSTRY REPORT Machine Tool Industry 2019

INDEX Overview of Machine Tool Industry in India 3

Why Telangana & Andhra Pradesh? 4

Demand Drivers

Strong Automobile & Auto component Presence 5 as New Defence & Aerospace Hub 7 Investment in Railways 10 Electrical & Electronics 11

Initiatives and Policy Support by Government 12

Why Hyderabad as a Destination for Organizing Expos on Machine Tool Industry 16 Estimated Market size of Indian Machine Tool Industry for FY 2018-19 is INR 11,500 – 12,000 Crore

Growing at a CAGR of 12-15% over next few years

The market is fragmented, major 25 large scale organizations - HMT, Bharat Fritz Werner, Kenmateta, Batliboi, Ace, Fanuac, Lakshmi, Yuken, ASB etc. - account for about 70% of the turnover and the rest are in the MSME sector of the industry

Industry Break Up Regional Break up

10% 6% 16% West 40% South Forming North Cutting East 90% 38%

End Users 42% 20% 18% 10% 10%

Automotive Consumer durables Defence and aerospace Railways Others

Machine Tool Industry in Telangana & Andhra Pradesh (refer as AP in report)

Estimated Market size of Indian Machine Tool Industry in Telangana & AP for FY 2018-19 is INR 500 – 600 Crore There are 25-30 players in the region Lokesh machine, ranks amongst the top five machine tool manufacturers in the country, and is based out of Hyderabad Operating from five locations (Hyderabad and Pune) Huge presence of user industries, which include - Automotive, Defence, Aerospace, Electronics & Railways Overview of Machine Tool Industry in India (2/2)

Existing Players

Why Telangana & Andhra Pradesh?

Hyderabad is gearing up to become the largest industrial hub in Telangana and South India, as it has existing conducive ecosystem

1) Presence of more than 200+ automotive and auto-component manufacturer within two states Bharat Forge, Steelbird, Mahindra, Benelli, Deccan Auto, Isuzu, Kia Motors etc. 2) Presence of about 1,000 aerospace and defence related small and medium enterprises adds to its strength in the domain DRDO, BDL, HAL, TASL, Adani, Kalyani Rafael, Pratt & Whitney etc.

3) Hyderabad, is marching towards establishing itself as one of the leading electronic hubs globally. Home for 250+ companies and growing at a CAGR of 9.3% Nvidia, , Qualcomm, AMD, CDAC, Cypress, BEL, HBL, ECIL, Apple, Micromax, Celkon etc.

4) Investment in railways segment has created a huge potential for Machine Tool Supply in the region

Sources: 1) IBEF report on Auto-components, 2018 2) ACMA and SIAM website; Make in India Demand Drivers (1/7) 1. Strong Automobile & Auto component Presence

Total estimated market of Automobile is 1,308, 325 to 1,400,000 units in

Telangana & Andhra Pradesh

Total estimated market size of Auto component for FY 2017-18 is INR

20,000 to 21,000 Crore in Telangana & Andhra Pradesh

The market is growing with a CAGR of 10-12% Y-o-Y

By 2020, Tamil Nadu, Andhra Pradesh, Karnataka and Kerala account for more than 75% of the total after-market potential Hyderabad stands on 2nd rank in registration of commercial vehicles in the country. If number of taxis registration are removed, Hyderabad is the city with highest commercial vehicle registration Around 50,000-60,000 dealers, distributors & retails of auto components are present in these two states Andhra Pradesh and Telangana are wooing investment in the automotive space to create automotive base. On the other hand, Chennai-Bangalore industrial corridor is a major region for automotive players in the country AP has managed to attract INR 25,000 Crore in the auto sector

Investments and Tie ups

M&M invested over INR 300 Crore towards the development of this new platform of tractors. These were manufactured at Mahindra’s newest plant located at Zaherabad in Telangana state

Deccan Auto has set up a INR 250 Crore facility with a capacity to produce more than 3,000 buses annually

Steelbird International to set up tyre plant in Hyderabad It will have a capacity to produce 5,000 units per day

Sources: 1) IBEF report on Auto-components, 2018 2) ACMA and SIAM website; Make in India 2 Demand Drivers (2/7) Benelli has signed an MoU with Telangana government to set up a manufacturing facility in two phases It also entered an agreement with AARI1, a subsidiary of Mahavir Group, to market its product range in India and also set up a CKD assembly plant for it in Hyderabad

Chinese electric bus maker BYD is setting up a plant with an investment of INR 200 Crore, partnering the Hyderabad-based Gold Stone Group The Department of Heavy Industry under FAME-I2 scheme has provided a subsidy of INR 1 Crore for each bus to Telangana.

UM Lohia Two Wheelers (JV company of UM International and Lohia Auto), is going to invest INR 250 Crore for manufacturing two-wheelers and engines

Hyundai Mobis, Is planning to set up a mega campus in Kollur/ Osman- nagar Cluster in about 20 acres The company plans to make the campus operational by 2020

Andhra Pradesh also, have a strong presence in - The Automobile and Auto Components Industry, has a potential for USD 2 billion investment and USD 3.50 billion output Over half the cylinder liners and clutch plates in India are being produced in Andhra Pradesh

Isuzu Motors inaugurating its new plant with an investment of INR 3000 Crore The plant has a capacity of 50,000 units that can be scaled upto Steelbird International to set up tyre manufacturing plant in Hyderabad 120,000 units in future It will have a capacity to produce 5,000 units per day

Note: “1” Adishwar Auto Ride India

“2” the Faster Adoption and Manufacturing of Hybrid and Electric vehicles in India

Source: The economics times*, The economics times**, Indian Express Demand Drivers (3/7) South Korean auto giant Kia Motors pumping in INR 13,000 Crore in setting up its first manufacturing unit in the country at Anantapur in Andhra Pradesh It’s vendors too are queuing up to invest and have lined up investments worth INR 4,790 Crore in the state

Hero MotoCorp will invest INR 1600 Crore in developing a Greenfield manufacturing facility in Andhra Pradesh Spread over 600 acres, with an annual installed capacity of 1.8 million units & will be achieved in three phases

Forging major Bharat Forge has created a component hub in Nellore district on 100 acres land

Brakes India is planning to invest about INR 100 Crore in expanding the capacity at Naidupeta The proposed capacity expansion will add 24,000 tonnes to the capacity

Ashok Leyland to invest INR 340 Crore on bus making plant in two phases

2. Hyderabad as New Defence & Aerospace Hub Hyderabad is considered as the missile center of India with several public sector defence labs and missile manufacturing facilities located here Telangana is targeting a share of 15-20% market share in the aero- space and defence sector in India Major strength of Hyderabad is the presence of 1,000+ (SMEs), some of which are making parts of missiles, launchers, satellites, aircraft, submarine and armaments Some crucial components of inter-planetary vehicle of ISRO’s Mangalyaan were sourced from the city

Source: 1) CII & Yes Bank report on Automotive Industry in Telangana 2) Government of Telangana – Annual report 2017-18 3) TSTPC, Government of Telangana. website Demand Drivers (4/7)

Aerospace & Defence Cluster of Telangana & AP

Proposed Aerotropolis at Bhogapuram Defence corridors being planned UAV Cluster at West Godavari Defence park in Eliminedu BEL facility at Machilipatna Aerospace cluster in Medak district Aerospace and Defence Park at Ananthapuram Radar Test Bed Facility at Ananthapuram

Existing Players

Investments and Tie ups

The State is also planning to set up a larger aerospace and defence park in Eliminedu and create another aerospace cluster within the National Investments and Manufacturing Zone in Medak district with an investment of INR 2,500 Crore in next 3-4 years

DRDO has proposed a Centre of Excellence for smart manufacturing in aerospace and defence sectors in and around the city. For this, they have planned invest INR 64,000 Crore by 2025 in Hyderabad

TATA Advanced Systems Limited (TASL) has four units in partnership with aerospace giants Sikorsky, Lockheed Martin, Pilatus and RUAG Aviation. They invested INR 4,000 Crore Demand Drivers (5/7)

French aerospace and defence equipment maker Safran Electrical & Power SAS is planning to set up shop in Hyderabad, and has signed a MoU with the government. The unit will be set up at a cost of INR 52 Crore and is expected to create employment opportunities for 250 people

Adani will start a new plant in Hyderabad to manufacture composite aero structure in tie-up with Elbit Systems of Israel, with an initial investment of $15 million, which will go up to $100 million depending on the order from the government

Andhra Pradesh

6 existing airports; 1 major and 3 no-frills airports planned Eastern Naval Command HQ in Visakhapatnam Presence of ISRO, Hindustan Shipyard, , and other defence PSUs Upcoming naval shipbuilding facility by Reliance Defence at Rambilli, Visakhapatnam Upcoming weapons integration facility in West Godavari district Dedicated A&D park near Palasamudram, Anantapur district Missile testing facility planned in Nagayalanka, Krishna district World-class MRO facility and air cargo complex planned at proposed Bhogapuram Mega Aerotropolis

Key Policy Targets 2020 – A & D Industry

INR 20,000 Crore 5,000 New Jobs

Existing Partners Upcoming Partners

Sources: 1) Telangana & Andhra Pradesh Government website 2) Online article: Telangana today, TSTPC publications Demand Drivers (6/7)

3. Investment in Railways

Medha Servo Drivers, a manufacturer of propulsion systems, will set up a railway coach factory near Hyderabad with an investment of INR 800 Crore

Pennar Industries received multiple orders aggregating INR 309 Crore, out of which INR 124 Crore is booked for railways from Integrated Coach Factory, Modern Coach Factory, etc.; for hydraulics and industrial components from customers such as Emerson, Endurance, Firestone, etc.

SCR*The South Central Railway, started MMTS, is planning to augment the ongoing phase-I services by expanding at a cost of INR 6 Crore In phase-II involved an investment of INR 12 Crore

L&T has invested about INR 13,000 Crore of the INR 14,132 Crore elevated metro rail project under the PPP model & Telangana Government has invested more than INR 2300 Crore in phase I In phase II, L&T is planning to invest INR 2500 Crore For the ease of the consumers, it is planning to open two Metro shopping malls connectivity at Erramanzil (0.35 million sq.ft) and at Musarambagh (0.24 million sq.ft) These will be in addition to the malls already functional at Punjagutta of 0.48 million sq.ft & at Hi-Tec City station of 0.21 million sq.ft. Demand Drivers (7/7)

4. Electrical & Electronics

Promoting Telangana as the ideal destination for Electronics Industry through creation of sustainable ecosystem, making this industry a major contributor to employment and economy in the State

Key Policy Targets 2020

USD 3 billion Attract 160,000 Enhance Investment Employment Production to USD 7.5 billion

By 2020, Telangana State targets to achieve more than INR 120,000 Crore worth of IT exports by growing at a CAGR of 16% and create more than 4 Lakh of direct employment and 20 Lakh of indirect employment

Growth in IT/ITES Exports % Note: The statistics were provided by All India (Projected by NASSCOM) 7 to 9 Director of Software Technology Parks of India (STPI) and Development Commissioner, SEZ) Telangana 9.32

T-Works, Government of Telangana’s initiative, acts as a prototyping centre for electronics, semiconductors and hardware start-ups At 250,000 sq. ft., T-Works will be one of the world’s largest hardware prototyping facilities Phase-1 consists of ~70,000 sq. ft. area and equipment worth INR 10 Crore

Launched IoT Policy 2017 to create an atmosphere conducive for IoT specific businesses and manufacturing units to thrive in the State

Attract investments worth 10,000 Crore & generate direct employment

Sources: 1) Telangana Government Electronics Policy 2017 2) Online article: TSTPC Website Initiatives and Policy Support by Government (1/4)

The state government has undertaken number of reforms to offer an enabling and investor- friendly business climate to the investors. Some of the key Ease of Doing Business initiatives in Telangana include:

Telangana State Industrial Project Approval and Self Certification System (TS-iPASS) established as a single point for clearances of industrial set up

Single Window system, combined application form (CAF) with provision to submit multiple applications in one form, Paperless application and incentive disbursement

Predefined timelines (max 30 days for processing applications) with provision for deemed approvals in case of no response Note: The statistics were provided by Director of Software Technology Parks of India (STPI) and Development Commissioner, SEZ) Minimum inspection, maximum facilitation with paperless application and incentive disbursement

Government Initiates for End User segment

1. Automotive

The State has planned industrial park along with anchor units, & suppliers/vendors park

Mega projects will have to compulsorily set up a suppliers/vendors park to encourage growth of local ancillaries. This model can greatly benefit the automobile sector which is dependent on the auto-ancillary units for their operational differences Initiatives and Policy Support by Government (2/4)

Established T-Works Automotive Prototyping center, recognized as India’s largest Prototyping Center It have a dedicated wing for prototyping & soft tooling of automotive components/ assembly Industry partnership in the same will be invited from Auto OEMs and large component manufacturers

A Mobility Engineering Cluster is at planning stage and is being built with Industry partnership to facilitate development and testing of future automotive technologies such as Electric Vehicles (EVs) and other emerging automotive technologies It will house a state of the art infrastructure and technology base is envisaged to establish a global benchmark in Automotive Design, Development, Testing and Validation facility

EV Cluster - A mega Automotive Park with global standard infrastructure is currently at planning stage and is expected to commence by mid 2018

It will be spread over 1500-2000 acres catering to EV & EV component manufacturing for two wheelers, cars, buses & trucks will be integrated with the Automotive Park plan

Source: 1) CII & Yes Bank report on Automotive Industry in Telangana 2) Government of Telangana – Annual report 2017-18 3) TSTPC, Government of Telangana. webiste Initiatives and Policy Support by Government (3/4) Fiscal Incentives provided

Capital Subsidy for Auto Clusters and ASMC developers – 50% CAPITAL SUBSIDY of fixed capital investment in building and common infrastructure (maximum of INR 20 Crore)

PATENT COST 75% reimbursement, subject to a maximum of INR 25 lakh

50% reimbursement, subject to a maximum of INR 5 lakh for QUALITY CERTIFICATION MSME units

50% reimbursement of cost of participation in international INTERNATIONAL FAIRS fairs upto INR 5 lakh.

100% CST reimbursement for 10 years Gross VAT/SGST reimbursement on sale of VAT/SGST/CST finished goods for 20 years Concessional VAT/SGST rates on input & capital goods @ 5% 75% reimbursement of Gross VAT/SGST for 10 years from the date of commercial production

No entry tax and octroi duties; reimbursement of stamp OTHER TAXES AND DUTIES duty, transfer duty

WATER SUPPLY 50% of the price of existing industrial supply tariff for the initial 5 years

2. Defence & Aerospace

Telangana government is preparing a policy for Defence and Aerospace sector

The Telangana government has taken a number of initiatives to develop a Defence & Aerospace segment by developing an exclusive Hub, Aero Skills Academy in collaboration with Aerocampus Aquitaine, France and Aerospace Incubation Centre in collaboration with IIT, Hyderabad

Source: Andhra Pradesh Automobile & Auto Components Policy 2015-20 Initiatives and Policy Support by Government (4/4)

Fiscal Incentives provided:

1. Tax Incentives

Net VAT/CST/SGST reimbursements for MSME and large A&D units shall be as per the new Industrial Development Policy 2015-20

100% exemption from Entry Tax on ‘Plant & Machinery and capital goods’ for an initial period of 3 years (or policy validity period, whichever is earlier) from the date of commencement

For aircrafts which are brought in specifically for MRO in Andhra Pradesh, 100% reimbursement of VAT/CST/SGST on all input material (excluding Aviation Turbine Fuel) 2. Capital Subsidy

Anchor unit subsidy of INR 10 Crore each shall be offered to first 10 aerospace and/or defence OEM enterprises established during the policy period 3. Patent Cost/ Quality Certification cost reimbursement

Government will provide financial assistance limited to 75% of the cost, subject to a maximum of INR 25 Lakh for obtaining patent registration and 50% of all charges, subject to a maximum of INR 5 Lakh paid for obtaining quality certification

4. Promotion of Defence Public Sector Units and R&D Centers

R&D investments in defence above INR 10 Crore would be eligible for a 10% subsidy on investments subject to a maximum of INR 10 Crore per investment Why Hyderabad as a Destination for Organizing Expos on Machine Tool

Why Hyderabad? 1. Tax Incentives Hyderabad is a MICE capital of India and an emerging center for automotive cluster.. Net VAT/CST/SGST reimbursements for MSME and large A&D units shall be as Currently there are 9 Exhibitions held in automotive space in India, and out of which per the new Industrial Development Policy 2015-20 4 are held in South, as automotive business thrives there 100% exemption from Entry Tax on ‘Plant & Machinery and capital goods’ for an As per SIAM, by2020 Indian vehicle production will touch 46 million units and auto initial period of 3 years (or policy validity period, whichever is earlier) from the date of commencement component revenues will increase several fold. South India will contribute at least a third of this output For aircrafts which are brought in specifically for MRO in Andhra Pradesh, 100% reimbursement of VAT/CST/SGST on all input material (excluding Aviation Some of the major user industries present in the region are Yamaha, Allison Turbine Fuel) Transmission,Turbo Energy, Titan Automation, Simpson, Roots, Hyundai Motor India, 2. Capital Subsidy Ford India, TVS Group, Royal Enfield, Hero MotoCorp , BMW India, Daimler, Mitsubishi, Renault-Nissan plant, Ashok Leyland, TAFE, Caterpillar India, Wabco India, Wheels Anchor unit subsidy of INR 10 Crore each shall be offered to first India, Federal Mogul, Rane, Visteon, Takata, BorgWarner Thermal Systems, Ennore 10 aerospace and/or defence OEM enterprises established during the policy period Foundries, etc 3. Patent Cost/ Quality Certification cost reimbursement Hyderabad is the missile center of India with home to public sector defence labs and Government will provide financial assistance limited to 75% of the cost, missile manufacturing facilities subject to a maximum of INR 25 Lakh for obtaining patent registration and Hyderabad is a well connected location for Exhibitors as well as Visitors 50% of all charges, subject to a maximum of INR 5 Lakh paid for obtaining quality certification A. Road connectivity: The density of notified national highways in Telangana is 4. Promotion of Defence Public Sector Units and R&D Centers 2.90 km/100 sq.km against the national average of 2.84 km/100 sq.km B. Strong railway connectivity: The State also has an integrated railway network R&D investments in defence above INR 10 Crore would be eligible for with railway terminals such as - Nizamabad, Mahbubnagar, Kamma Reddy, a 10% subsidy on investments subject to a maximum of INR 10 Crore Bodhan, Jedcherala, Gadwal and, Balanagar per investment C. Access to world class airport facility: Rajiv Gandhi International Airport (RGIA), Shamshabad is one of the largest 7 modern airports in India

D. Government of Telangana has entered MoU with Ministry of Civil Aviation and Airports Authority of India for development of small airports at Kothagudem and Warangal

E. Government of Telangana is ranked no 1 in Ease of Doing Business given by Department of Industrial Policy & Promotion (DIPP) and World Bank Contact: Sambit Kumar Mund | +91 7337518888 HYDERABAD INTERNATIONAL TRADE EXPOSITONS LTD. Trade Fair Office Building, First Floor, HITEX Exhibition Centre, Izzat Nagar, Hyderabad- 500084 Phone: 91 40 23112121/22 | Fax: 91 40 23112124 | Email: [email protected]