Allen Antao, Executive Vice President and Business Head (Process Equipment), Godrej & Boyce Mfg Co Pvt Ltd
In an interview, Allen Antao with Chemical Today Magazine talks at length about the global dynamics of the process equipment market. He also delves into the opportunities offered by India to strengthen the country as a global powerhouse.
By Shivani Mody
Process equipment landscape in Indian chemical industry.
We manufacture equipment for the process industry. Oil & gas constitutes the pre-dominant part of our portfolio which covers refining, petrochemicals, fertilisers and chemicals. The power sector is a growing part of our portfolio.
In India, there has been substantial investment in the refining and petrochemicals space in the last few years driven by investments by the major oil companies and of course, Reliance. Investments in the fertiliser sector are now seeing some momentum. The overall growth in the Indian economy will necessitate growth in the core sectors which in turn will fuel increased demand in all these areas.
Factors supporting growth in the global process equipment market.
Since the global liquidity crisis in 2008, there has been a slowdown in demand for process equipment, primarily because of the squeeze on capital investment. When we thought that we were getting out of that phase, we saw a sharp drop in oil prices which affected all those industries which are oil dependent. Global economic slowdown has further served to dampen demand for process equipment.
Elevated oil prices boosted the viability of shale gas production in the US which had a positive impact on fertiliser and LNG investments there. The reverse happened when oil prices hit near historic lows. All in all, the industry has seen very challenging times since 2008. Both, the upstream and downstream sectors have been badly hit.
Changing dynamics in Indian market.
The India situation seems to be in a slightly brighter spot as compared to the rest of the world simply because it is a faster growing economy. In this kind of a growth environment, there will definitely be increased core sector demand for process equipment.
There are other factors driving growth in India. To list only a few:
- The increasing push for cleaner fuels is driving new investments in the oil & gas sector in India.
- Several environmental protection initiatives initiated by the Government of India are driving the adoption of cleaner processes.
- The focus on renewable energy will give rise to new investments in the power sector, boosting the demand further.
India is a power house in fabricated equipment for the chemical industry. This not only comes from the fact that there is substantial high end investment in manufacturing capability but also from the fact that Indian technical talent is a much sought after resource. All major global engineering companies have set up their engineering hubs in India to leverage this critical resource.
What could hold India back is the availability of pressure vessels grade materials, a significant quantum of which still has to be imported. Indian steel manufactures still do not make the critical grades of steel used in process equipment manufacturing. In a depreciating rupee environment, import substitution would have a beneficial influence on cost. In addition, logistics makes imports disadvantageous from a cost and time perspective. Locally available materials required for chemical equipment manufacturing in this country will allow Indian manufacturers to take pole position on fabricated equipments, worldwide.
Impact of mergers & acquisitions on the process equipment business.
Scale is essential for survival and growth. Mergers and acquisitions and consolidation put more power in the hands of the merged entity, both financial and technological. It widens the customer base and generally makes for better competitiveness and healthier bottom lines. The capabilities of these companies to make investments become stronger which become a strong driver of growth both up and down the value chain.
Consolidation, as against fragmentation, improves the gene pool of companies.
Company’s growth plans, strategy for India and global markets.
We see India and the Asia-Pacific region, in general growing. We expect a growing Indian economy to generate increased demand. Simultaneously, the new tiger economies in the far East like Vietnam, Myanmar, Indonesia are seeing large scale new investments both in fertilizers and also in upgradation and modernisation of refineries. The Middle East has always been, and will continue to be, one of our primary markets. Several new investments in the US are also very attractive.
Although the global market, in volume terms, does not present a very optimistic outlook right now, we believe that it will turn for the better going forward. The identified pockets of opportunities offer bright opportunities.