Construction equipment rental

1. Introduction

The business in which I have decided to invest in the future is the “Construction equipment rental” in India. It is the business which is so far not been practiced and initiated at a commercial scale. So there is an opportunity for me to exploit the market and be a pioneer in this field.

The idea for this business comes to my mind because of the large demographic and infrastructure growth in India. In a report issued by Government Of India, it is mentioned that Construction Equipment sector is contributing 8.5 % to the GDP of India and which will be increasing its contribution from year to year basis (Business maps of India, 2009). With the increasing contribution of construction equipment sector it's been predicted by the “foundation of Indian brand equity” that the rental of construction equipments will be increasing its contribution from 2% in the year 2001 to the 25% by the end of the year 2010 (Vimarsh Bajpai, 2008).

2.0 Business description

My business will basically involve giving construction equipments on rent. The construction equipment business will be basically involving machines like forklifts, tower cranes and excavators. I will be buying these machines on the basis of their durability, efficiency and the after sales service. The choice for the brand for equipment will be entirely on the basis of a customer perspective, which will be decided through a survey via questionnaire.

Giving machines on a rent is not a new thing, it is been widely practiced from decades in the Northern America. But with the ongoing growth in the infrastructure sector in India, it has forced small contractors and agents to rent a machine on rent, as it's very expensive for them to buy and at the same time helps them to cut down the expenses.

2.1 Business operation

I will be going to operate my business from my native place Faridabad, Haryana, India. As there is no one indulge in this kind of a business so far. The location for my business is best suited to start up construction equipment rental services, as my town is on the periphery of the three metropolitan cities. This will help me in providing services better and faster. I will be employing four employees from the local area and will me positioning them in various ground floor duties. My business will be contributing at national as well as local level, as I will be employing local people and the revenues generated from the business will be within the local community. The office from where I will be operating my business will be on a lease to cut down the fixed expenses. The business services will be available 24 hours throughout the year, as the equipments are required for a longer duration for maintaince and for building purposes.

3.0 Industry analysis

The construction equipment rental industry is a competitive industry though it is at an embryonic stage. As per the survey conducted by the leading auto magazine, it predicts that there is a plenty of room for other investors to invest in this industry as various development program are been carried throughout the country for example highway projects in northern India, Common wealth games in the year 2010 and power plant constructions in southern India, which will require equipments to be hired on rent (Abhishiek Parekh, 2007). The industry is also a large source of employment, it employs nearly 2 million people and it is forecast that it will be employing another 3 million people by the end of year 2015 (Vimarsh Bajpai, 2008). The industry is so far not organized only one fourth of the sector is organized where as rest of the portion is still need to be organized. The industry till date has just two major contractors renting equipments on rent; they are “Quippo rental service” operating from Delhi and “Sanghvi Movers” operating from Pune. The industry also accommodates various small scale contractors renting equipment on rent but they are not employed on a commercial scale. The equipment rental sector has number of hurdles to be crossed as they do not have any support so far from the Government in terms of the tax structure, environmental policy and structural support. The industry is still growing without any support from Government (India Mart, 2003).

3.1 Trends in the industry

In the coming future the industry has a positive prospect as it is inducing major players like JCB India and Tata to enter this field, which so far are indulge in manufacturing these machines. But there is a dilemma for them to enter equipment rental industry as they do not want themselves to be competing with their own customers.

The industry follows a simple trend; they give equipments on rent for months to years depending upon the duration of the projects and its prerequisite. The duration of rent can vary from hours to a day as per the demand. The industry has a very unusual trend that the bigger equipments are taken on a rent for a long duration of a time as compared to the small equipments which are hired for a smaller duration of time. As in India there is an infrastructural development going on, which requires big equipments like tower crane in comparison to the small equipments which are just required for the purpose for the maintaince (Abhishiek Parekh, 2007).

3.2 Opportunities in the rental equipment industry

There is lot of opportunity in this sector to excel, as the present scenario is supporting the investors to invest in the equipment rental business because of the low interest rate, which will help to establish the business. Moreover with the current boom in the mining industry there is a liner growth in the equipment rental business. Furthermore with the formation of united “rental association of India” there is an organized structure which is governing for the rights and benefits of the industry from the government, this will bring an opportunity to do business (Rajiv Sethi, 2009). According to the survey there is a huge shortage of construction equipments to be rented, which has resulted in a high hiring price and which has hooted up the equipment rental market by 30% and this has generated lot of revenue for example L&T is hiring construction equipments and is paying 25 crores a year, so it is a good opportunity to indulge in this business (Shilpa Shree, 2007).

Reference

1. Business maps of India. (2009). Infrastructure growth rate. Available: http://business.mapsofindia.com/india-gdp/sectorwise/infrastructure-sector-growth-rate.html. Last accessed 4 April 2010.
2. Vimarsh Bajpai. (2008). An earth moving opportunity. Available: http://www.dare.co.in/opportunities/services/an-earthmoving-opportunity.htm. Last accessed 5 April 2010.
3. Abhishiek Parekh. (2007). Construction equipment industry cautious in adopting rental model. Available: http://www.automonitor.co.in/article/Construction-equipment-industry-cautious-in-adopting-rental-model/page1.html. Last accessed 7 April 2010.
4. India Mart. (2003). Higher value infrastructure projects boosting equipment rental industry. Available: http://news.indiamart.com/news-analysis/higher-value-infrast-603.html. Last accessed 4 April 2010.
5. Rajiv Sethi. (2009). Equipment rental is too big for competition to be threat. Available: http://www.projectsmonitor.com/detailnews.asp?newsid=17616. Last accessed 7 April 2010.
6. Shilpa Shree. (2007). Equipment rentals hit construction industry. Available: http://www.livemint.com/2007/09/20020703/Equipment-rentals-hit-construc.html. Last accessed 10 April 2010.