26
WORLD RENTAL REPORT
IRN SEPTEMBER-OCTOBER 2013
in the last three years than it did in the previous 35.
The aerial platform fleet will continue to be
established as a national business, while the
scaffolding and power generation operations will
be focused in the north east of Brazil, close to its
base. Power will eventually be expanded nationally,
but Estaf want to consolidate its knowledge of this
product before expanding, having only entered the
power market in 2010. Its fleet of 350 generators are
sourced from Caterpillar, Atlas Copco and Stemac, a
Brazilian manufacturer.
The investment from Rio Bravo has also allowed
the company to expand its footprint, with eight
current locations spread around Brazil and plans for
another four within the next 12 months.
The aerials business – with a fleet of 1000 machines
by the end of the year - is now a major focus, and
takes up the lion’s share of fleet investment.
Despite the heavy investment in aerials by
Brazilian companies - including Mills and Solaris - Mr
Lima does not see yet see evidence of oversupply;
“Even with the growing fleet in Brazil, the rental
price is still about the same.”
Estaf’s strategy is to develop a professional
approach to rental, with one aspect of this the
decision to buy only new equipment – primarily JLG
and Genie. It operates large branches, typically with
200-300 machines, and Mr Lima says the aim is to
differentiate themselves from the competition by
focusing on good after sales service.
He agrees with Mills’ predictions of a doubling of
the access rental fleet by 2020 – which would take
the fleet to close to 50-60000 units. “Yes. When you
compare Brazil to Europe, it is doable”, says Mr Lima.
The Estaf strategy is to focus on its three
specialist products, with no current plans to add
cranes or move into the general equipment market.
And, of course, it is aware of the interest that rental
companies outside Brazil have in its market. The
message from Mr Lima is clear; “We are open to
discuss joint ventures or partnerships with other
companies.”
IRN
INDIA
By some estimates the Indian equipment
rental market is growing at a compound annual
growth rate of 40%, but to suggest it is simply
a fast-growing version of the European or North
American markets would be a mistake, says Vivek
Soni, the co-CEO and CFO of Mumbai-based Gemini
Equipment And Rentals (GEAR), one of India’s
largest pure rental companies.
Mr Soni, a chartered accounted with a
background in finance, has been at the helm of
GEAR for almost four years – a period in which
the business has tripled in size – and he tells
IRN
that the Indian rental market is huge, but remains
dominated by small, poorly organised players;
“The barriers to entry are very low – anyone with
20-30 million Rupees can buy a machine and live
off the rentals. 60 to 70% of all equipment in
India is sold to people with net worth of less than
$150000. There is very little organised rental.”
In this environment, GEAR’s strategy has been
to focus on specialist areas, largely avoiding the
overcrowded earthmoving sector, typified by the
omnipresent JCB backhoe loader. That means
concreting equipment (mobile placing booms,
transit mixers and concrete pumps), road building
machines, tower cranes, construction hoists and
mast climbing work platforms. The company also
created in 2011 a division that imports, sells and
rents forklifts, including the Still brand.
“Now, earthmoving equipment represents the
low single digits on percentage of the fleet”, he
says, “There’s not much money in earthmoving.”
In contrast, concreting equipment and vertical
equipment such as hoists and cranes now
represent 55-60% of the business.
Operating in India brings with it challenges,
such as a federal structure that imposes a dense
bureaucracy and a wide variety of tax regimes. To cope, GEAR operates seven regional offices and a
further 150 customer sites where machines, operators, mechanics and spare parts are placed. Its fleet
comprises around 600 units and it has 1800 employees. Reducing the logistical burden for contractors is
seen as a major selling point for rental, says Mr Soni.
Logistics may be difficult, but GEAR – which is backed by two private equity investment firms, Cycladic
Capital and its majority owner Berggruen Holdings - manages to track the location and status of its fleet
daily, not by telematics – cell phone networks are not widespread enough – but by having a network of
contacts (operators, site supervisors, clients) who are called daily by its call centre. All machines are
rented with an operator.
Mr Soni says there are several market dynamics that favour the development of rental. India’s
bigger contractors, who traditionally preferred owning their equipment, have faced a slowdown in the
construction market and seen their equipment lie idle; “Now they see the attractions of rental. And now
capital is short, so they would rather use it on their business than in a depreciating asset.”
In addition, there is a trend for India’s larger contractors to outsource more site work to small and mid-
sized contractors who are unable to access capital to buy equipment, so look instead to rental.
In the current slowdown, however, GEAR has targeted business with the 50 largest contractors in India,
because Mr Soni says these companies are weathering the downturn better than the smaller players.
“Construction is currently going through a slight rough patch, largely because of government policy”,
he says, “The sector will pick up slowly – in one or two years construction will be back on track. The real
kick start will come after elections next year. From a rental point of view it’s a great time to be in the
business, with everybody wanting to rent rather than buy.”
GEAR has so far resisted the allure of the aerial platform market, where European players including
Riwal and Lavendon have now established Indian footholds. Mr Soni says returns in the sector remain
“sub-optimal, with lots of used assets. You can’t break even with new equipment. Legislation to deal with
health and safety and working at height has still not been rolled out in the construction sector. It will
happen, and then access equipment will be an easy bolt-on.” More interesting to Mr Soni are different
sectors, such as the rental of healthcare equipment, a market that GEAR is poised to enter.
So GEAR is ready for the upturn, and resisting the urge to import the western approach to rental, instead
creating an Indian variant that suits the market.
Vivek Soni, co-CEO and CFO of Gemini Equipment and
Rentals (GEAR).
“The real kick start will
come after elections
next year. From a rental
point of view it’s a
great time to be in the
business, with everybody
wanting to rent rather
than buy.”
The Arena da Baixada stadium, Curitiba, has been
expanded for next year’s World Cup.
