1

Construction and Mining Equipment

Business in India

September 16, 2015

Hisashi Shinozuka
Director and Senior Executive Officer
President of Construction and Mining
Equipment Marketing Division
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Contents

Outline of Komatsu India

1. India at a Glance
2. Production, Sales and Product Support Networks
3. Komatsus Footprints in India
4. India for Komatsu
5. Long-range Market Trends
6. Construction Equipment Business
7. Mining Equipment Business
8. Future Operations in India (Exports from India)
9. CSR Efforts
 1. India at a Glance 3

Area: 3,287,469km2 (7th largest in the world)

Population: 1,236 million (2nd largest in the world)
Nominal GDP: USD2,066.9 billion (7.3% growth rate in FY2014)
Urbanization rate: 32%
Roads and railways: 4,690,000km(roads) and 65,436km (railways)
Power supply and demand (peak): Demand for 156,862MW and supply of 152,754MW
Major minerals: Coal, iron ores, limestone, manganese, and bauxite
Major items of Japan-India trades
Exports to India: Machinery, steels, home electric appliances, automobiles and parts, and precision
machinery
Imports from India: Petroleum products, organic compounds, precious metals, fish and other marine
products, and iron ores

Sources: Japans Ministry of Foreign Affairs, JETRO website and public media
 2. Production, Sales and Product Support Networks 4

Sales and Product Support Sales of parts

Sales and support Customers

KOMATSU
operations
Distributor Sales of equipment
Komatsu India Pvt. Ltd. (KIPL) Larsen & Toubro Ltd. (L&T)
Sales and service distributor in India
A subsidiary engaging in development , production and
Established in 1938
sales of construction and mining equipment as well as Consolidated sales: INR927.6 billion (About JPY1.8 trillion) for
sales and service of industrial machinery FY2014
1 x Chennai Head Office (Mfg. plant for dump trucks and excavators) No. of employees (consolidated): 54,579 (as of March 31, 2014)
1 x Bangalore: Marketing and product support office Sales of industrial machinery represents about 4% of total
2 x Parts depots sales for FY2014
2 x Service support center Komatsu designated L&T as distributor in India in 1998, when
6 x Frontline office Komatsu established a joint-venture manufacturer of
2 x Komatsu/Nippei Toyama office for industrial hydraulic excavators with L&Ts Machinery Division.
machinery
KOMATSU No. of bases: 14 No. of bases: 152
INDIA No. of employees: 435 No. of employees: 931
Note: including sub-dealers

KIPL Chennai Plant

1 x Bangalore Head Office
26 x Sales office
5 x Service center
120 x Sub-dealer
 3. Komatsus Footprints in India 5

Komatsu has conducted business in India for over 50 years. (Opened Komatsus first overseas office in India in 1964.)
After liberalization of the market, Komatsu began collaboration with Larsen & Toubro (L&T), a leading conglomerate of
engineering and construction, and established a joint-venture manufacturer of hydraulic excavators in 1998.
Komatsu began production of dump trucks for use in mines at KIPL, a wholly owned subsidiary, in 2006.
Two partners dissolved the joint-venture manufacturer in April 2013 and entered a new business arrangement in which
Komatsu is responsible for development and production of hydraulic excavators while L&T for sales and service.
1. Closed market (government-owned companies) 2. Liberalization of market, shift to private-sector companies 3. Dissolution of the joint
Collaboration with BEML Collaboration with L&T (development of premium (high-end)market for venture and promotion of
hydraulic excavators) new arrangement
18,000

16,000 1. 2. 3.
Demand for excavators 1991: Shifted to market liberalization measures 2013: Dissolved
14,000
joint venture
Demand for 7 major products (excl. excavators) 1995: Joined WTO
12,000
1998: Est. LTK (J/V mfg. of hydraulic 2006: Est. KIPL
10,000 excavators
1960 2007: Annual demand for hydraulic excavators topped
8,000 10,000 units.
6,000

4,000

2,000
Units
0
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Expanding private-
Market environmen Centered on business with the government sector markets
2006: Added marketing 09: Assigned regional representative of India.
efforts
Komatsus

Management 1964: Opened office in Calcutta.

1967: Relocated to Bangalore. to KIPL Industrial Machinery Division created at KIPL
Sales 1958 98: Sold by BEML (gov. owned company) 98: Sold by L&T, a private-sector company, 08 -- Dump trucked exported by KIPL
Construction
eqpt.
1958 98: Produced by BEML (gov. owned company) 98 13: Produced by LTK, a joint venture 13 -- : Produced by KIPL, a wholly owned subsidiary
Mfg

Mining eqpt. 06 --: Produced by KIPL, a wholly owned subsidiary

 4. India for Komatsu 6

Sales of construction and mining equipment in India accounted for about 2% of total sales thereof for
FY2014. Although Indian demand is still low at about 4% of global demand, India has big growth potential
in the future, which will surpass other regions.

INR
Breakdown of sales by product category Units
Demand for major 5 products
300 20000
Medium-sized excavators made in India Construction Mining equipment
equipment
Dump trucks made in India 17500
Equipment made in Japan
Parts and Reman 15000
200
12500

10000

7500
100
5000

2500

0 0
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15BP
Notes: Figures for FY2012 and earlier include sales of equipment by LTK, a joint venture with L&T.

Construction and mining equipment: Major 7 products: Breakdown of sales by region

Breakdown of sales by region CIS
Africa 3%
Middle East 6%
Sales to outside 3% FY2014 demand: Japan
Japan
customers: China About 275,000 units Other 14%
6% 19% 24%
JPY1,761.3 billion for FY14
Oceania N. America
8% Asia:12%
Asia: 12% N. America Asi 23%
Asi 19% (4% represented by a
(2% represented by India) a India) China Europe
L. America Europe
11% 15%
15% 8%
 5. Long-range Market Trends 7

Indias population is projected to surpass that of China around 2030 and continue to increase until around 2050.
Indias GDP today is comparable to that of China 10 years ago. Because of democracy, the speed of GDP growth is slower
but growth should last longer.
Rate of urbanization is projected to increase and infrastructure investment should expand in the future.
India is a leading producer of coal, limestone, iron ores and other minerals.
Total population and productive age group (15 to 65 yrs old) Urbanization rates
Million
persons %
Chinas population Indias population Japans population 100
Chinas productive age group Indias productive age group Japans productive age group India China Japan
1,800
80
1,500
60
1,200

900 40

600
20
300

0 0

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050
1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050
(Sources: World Population Prospects, The World Bank, 2014 revision) Source: UN, World Urbanization Prospects 2014 revision)

Nominal GDP (USD-denominated) Production volume of major minerals

Billions of USD
18,000
China India Japan Production volume
Minerals Worlds rank
15,000 (Million tons)
12,000 Coal 563 3
9,000 Limestone 278 2
6,000 Iron ores 152 4
Bauxite 21.66 5
3,000
Zinc 1.49 5
0
Copper 0.14 8
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

Source IMF, 2014) Source: Indian Bureau of Mines, 2014)

 6. Construction Equipment Business 8

We anticipate demand for construction equipment will increase by 10% in FY2015 from FY2014, as GDP is
projected to grow, supported by improved market sentiment resulting from popular expectations on the new
cabinet to implement infrastructure development.
Units Demand for 20-ton excavators by market segment Activities in the construction equipment business
8,000
Economy Premium Machine demonstration Service camp
50
6,000
%
49
48 %
4,000 42 % 54 53 53
48 %
% % %
%
50 51 Penetrating the market through machine demonstrations designed to appeal quality
2,000 52 % 47
58 52 % 46 47 of machines developed and produced by Komatsu technologies. Enclosing
% %
% % % % customers by offering high-quality product support.
0
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15BP KOMTRAX
Economy (old and inferior performance models with
locally produced engines): Price-emphasized market
Distribution of
Premium (new and high-performance models with KOMTRAX-installed
Monitoring operating conditions of
units
imported engines): Quality-emphasized market Monitoring 2,381 units of customers machines and proposing
ways to cut down operating costs by
Komatsu sells construction equipment at high prices on PC210 offering fuel-efficient operations.
(as of August 2015)
the premium market where customers appreciate
machine performance and service quality.
Business which leads competitors by using ICT
Maintenance contract Maintenance
contracts (conceptual
Timely delivery of parts, etc. graph)
Parts delivery from the Nagpur depot, in the
central region of India
Number One share of the premium market by Helping customers operate their machines stably and improve their productivity by
emphasizing operations designed to enhance offering periodic machine inspection, maintenance and repairs, as well as timely
delivery of parts.
customers productivity.
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7. Mining Equipment Business
About 80% of total demand for mining equipment in India comes from the coal sector, and demand is growing
in tandem with increasing production of coal.
Production volume of coal and demand for Improvement of jobsite operations with private-
Units mining equipment Mil. Ton
sector customers
1000 1000
Motor grader Wheel loader
Firm demand for coal
Excavator Bulldozer Proposing ways to cut down Improving haul road conditions
800 800
Dump truck Coal production fuel consumption (prolonging tire life)
600 600

400 400

200 200

0 0
FY09 FY10 FY11 FY12 FY13 FY14 FY15BP

KIPL: Sales of mining

Demand for dump trucks by sector Proposing improvement plans to top management by showing actual
equipment and parts
data and implementing the plans at jobsites.
Units (100 million INR)
500 40
Private sector Government sector Eqpt Parts Mining safety improvement activities
400
30
300
20
200
10
100

0 0
FY09 FY10 FY11 FY12 FY13 FY14 FY15BP FY09 FY10 FY11 FY12 FY13 FY14 FY15BP

While successful bidders are chosen by the government only for their
nominal prices, Komatsu promotes improvements of jobsite operations
designed to reduce operating costs and improve productivity of top
three private-sector customers by segment. As a result, Komatsu has Operator training Installation of lights
achieved about 60% share of machines in their fleets, and steadily
expanding sales of parts through service contracts, such as the Full The number of accidents has considerably dropped since May 2012,
Maintenance Contract. when safety improvement activities started.
 8. Future Operations in India (Exports from India) 10

As the export base for 100-ton dump trucks to Africa, Komatsu India Pvt. Ltd. (KIPL) has exported a total
of 153 units of the 100-ton dump truck to nine countries.
KIPL began exports of hydraulic excavators to Nepal and Bhutan, and is planning to start exports to Africa
and the Middle East in 2015.
Africa & Middle India
East Nepal & Bhutan

Chennai
West Africa

Exporting
Export planned
KIPL-made 100-ton dump KIPLs assembly line for
Market introduction of truck in Ghana hydraulic excavators
100-ton trucks made in India

Southern
Africa
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9. CSR Efforts
For Industrial Training Institute (ITI) 2. Donations to local schools (since FY2008)

1. Provided welding equipment for training Instruments for experiment,

Class room facilities, financial
Support to teachers, etc.

2. Dispatching instructors from the Chennai Plant (since
FY2010)
Period: November to June every year (4hrs x twice a week)
No. of students: 20 to 30
Relief assistance to earthquake damages in Nepal
April 25, 2015: Magnitude 7.8 earthquake occurred.
May 12: Magnitude 7.3 aftershock occurred.
May 20: Dispatched KIPL staff members to Nepal to check the damages.
June 15: Dispatched KIPL senior managers to Nepal to review the contents of
assistance and decided to donate prefabricated houses to distributors with damaged
buildings and local schools.

3. Hiring excellent graduate as apprentice (since FY2010)

8 7 No. of apprentices
6 Planned site for distributors building
4 3 3
2
2 Contents of assistance
0
0 1) Temporary 2-story office for distributor : 600m2
FY2010 FY2011 FY2012 FY2013 FY2014 Donation of prefabricated houses
2) Donation of prefabricated house to damaged schools: 80m2 x 5 units = 400m2
Social contribution to local communities Note: The above assistance includes set up and assembly instructions.

1. Plant tours for students of local schools (since FY2012)

11 tours
for 439
visitors
since
FY2012
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Thank you for your interest.