1January 20, 2015, New Delhi

LARSEN & TOUBRO

A.K. Datta, Zonal ManagerLarsen & Toubro Ltd, Mumbai

Mission 1 Billion : The challenges aheadAn equipment manufacturer’s perspective

2

Contents

Introduction : L&T , Komatsu

Komatsu Product Range

After Sales Support Network of L&T

Our presence in Coal PSUs

CIL Tenders : Current Scenario & Our Suggestions

The way forward

3

Sales Turnover

Rs 85,889 Cr #

PBIT

Rs 7,489 Cr #

Employees

67,828 *

# FY1314, * As on March 31, 2014

CMB

Hydrocarbon

Heavy Engineering

L&T Construction

Power

Information Technology

Electrical & Automation

Ship Building

Railway Projects

Financial Services

Machinery & Industrial Products1938...

Two Danish Visionaries

LARSEN & TOUBROIt’s all about Imagineering

Henning Holck-Larsen(04.07.1907 – 27.7.2003)

Soren Kristian Toubro(27.02.1906 – 04.03.1982)

...2015An

Engineering

Behemoth

A journey

of 77 years…

Introduction : Larsen & Toubro

Construction & Mining Business

L&T Construction Equipment Ltd

(LTCEL)Bangalore, Karnataka

HYDRAULIC EXCAVATORSPC71 | PC130 | PC210PC300 | PC450 | 300CK

KOMATSU INDIA PVT. LTD

Chennai, T.NDUMP TRUCKSHD465 60 Ton ClassHD785 100 Ton Class

> 50 Years

Experience

4

Introduction : Komatsu

• Affiliates

• Liaison & Regional Offices

• Distributors

• Affiliates

• Liaison & Regional Offices

• Distributors

Established on May 13, 1921Established on May 13, 1921

Sales : USD 19.61 Billion

(FY1314)

Sales : USD 19.61 Billion

(FY1314)

Employees : 47,208Employees : 47,208

5

Model

Operating WEIGH

T

BKT CuM

PC8000 720 42

PC5500 515 29

PC4000 385 22

PC3000 253 15

PC2000 200 12

PC1250 110 6.5

PC800 80 4.5

ModelFlywhe

el HPD575 1150

D475 899

D375 636

D275 452

D155 360

Model

BKT CuM

WA1200 20.0

WA900 13.0

WA800 12.3

WA700 8.7

WA600 6.4

WA500 5.2

WA470 3.9

ModelPayload

TON

960E 360

930E 320

830E 240

730E 190

HD1500 150

HD785 100

HD465 60

Model

Flywheel HP

Blade

CuMWD420 224 3.1

WD500 315 5.1

WD600 5858 ~ 22.5

WD900 853 34

Model

Flywheel HP

Blade M

GD705 200 4.3

GD825 280 4.8

Komatsu Product Range

Tables denote Mining Equipment

6 Pan India Coverage

Tamil NaduKerala

Goa

Karnataka

Maharashtra

Jammu and Kashmir

Gujarat

Rajasthan

Haryana

Punjab

Himachal Pradesh

Uttaranchal

Uttar Pradesh

Madhya Pradesh

Bihar

Jharkhand

Chhattishgarh

Andhra Pradesh

Orissa

WestBengal

Sikkim Assam

Arunachal Pradesh

Nagaland

Manipur

MizoramTripura

Meghalaya

Bhutan

BahadurgarhDurgapur

Pune

• 5 fully equipped Service Stations• Pan India Coverage

• Specialized Service

• Training

• Testing Facilities

• Value added services

• Preventive Maintenance Clinics

• Annual / Full Maintenance Contracts

• Site Support Agreements

• On site Workshops

• Assy. Exchange Program

• Component Repairs

• RECON / REMAN

• Spare Parts Support

• Central Ware house – Planning, procurement & stocking of parts

• Stocking points at 22 territories mainly for insurance parts.

• Parts inventory at customer sites

Product Support : Infrastructure

Kanchipuram

Nagpur

7

Dump Truck Overhaul

Hydraulic Repair bay

Hydraulic Test Bench

Crankshaft Grinding Machine

Dozer Overhauling

Engine Repair Bay

Best-in-class Support

Infrastructure

Product Support : Facilities

8

MARC : 497 m/c, 535 men at 52 sitesSSA : 62 m/c, 37 men at 8 sites

(Machines | Manpower)

NCL Singraui59 | 48 Tata,NM,JD,WB

26 | 29

EMTA Pakur79 | 69

Rungta12| 1

SCCL, Manuguru

27 | 5

SCCL, RMGDM

28 | 7

SECL, Dpk, Gvr9 | 10

SAIL15 | 5

ESSEL (BCML)4 | 13

HINDALCO3 | 8

PLR, Sar8 | 3

EMTA, Tara, BRJA

52 | 47

EMTA, GRB, BRJ

9 | 11

HZL, DECO31 | 62

HZL, DECO45 | 35

SHREE, Beawar7 | 25

Ultratech, KOT14 | 17

Adani (A&M)4 | 4

Lafarge,Sonadih

3 | 6

Holcim, BTPRA16 | 13

EMTA, Baranj64 | 77

Holcim, Chanda

8 | 10

Holcim, Maratha

6 | 11

Dorajiya, Wani

5 | 1

Dalmia, Trichy12 | 10

MARC Sites

SSA Sites

SHREE, Raipur

1 | 3

BCCL18| 8

Ultratech, Gul1 | 2

PLR, BKD4 | 3

Major MARC and SSA Projects

Rich experience in executing MARC &

SSA

MARC : Maintenance & Repair Contract;SSA : Site Support Agreement

9

Model Machine Type Total

25 58 05 114 202

59 59

11 13 24

05 02 07

02 04 01 07

01 01

02 07 09

01 05 06

26 10 20 64 73 89 81 63 426

Total 69 84 25 70 74 149 81 189 741

Our association with Coal PSUs… Equipment

supplied

Equipment supplied as on 20.01.2015; include orders under execution

SECL NCL MCL ECL BCCL CCLHD785 100TDump Truck

D475 860 HP Dozer

GD825 280 HPMotor Grader

WA800 10 Cu.m FEL

PC1250 5.2 Cu.m

Hyd Excavator

HD465 60T Dump Truck

PC2000 12 Cu.m Hyd Excavator

WA600 6.4 Cu.m FEL

300CK 4.0 Cu.m Hyd Excavator

SCCLWCL

10

Coal Mining… with a difference

Mission 1 Billion Tonnes !!!

CIL

Knowledg

e

Mining

Equipmen

t

Facilitie

s

Peopl

e

Availability

Productivity

Guaranteed Parts

Consumption

Safety Features

Environment Friendly

Operator Comfort

After-sales Support

Revamp equipment evaluation

& selection criteria

Superior equipment performance – key to success

2 19

11

Mining Equipment Manufacturer : Concerns Equipment performance is the backbone of any mining

company

In India, as compared to global standards, the following parameters have a lot of scope for improvement› Equipment availability› Equipment utilization› Operators’ skill› Maintenance practices› Respect for safety and environment, etc

With the advent of ICT*, the above have become easy to monitor

The challenge for CIL is to incorporate such superior features in the NIT scope and evaluation process

Such steps shall contribute towards improving equipment utilization, thereby leading to enhanced productivity.

* Information & Communication Technology

This is the time to embrace the change

12

CIL Tenders : Current scenario & our suggestions TECHNICAL

Qualification criteria are extremely broad-based

Deficiency : 1. No weightage for technical

superiority

2. Discourages participation by manufacturers of equipment with advanced / latest features

Current Scenario Our suggestion

1. Re-introduce Technical Merit Rating (TMR) system with adjusted bid price mechanism

2. The earlier system of disqualification under TMR, may be done away with

Calls for Availability Guarantee (AG) of

1 - 3 years

Deficiency :1. Does not value reliability over

a longer period of equipment life

2. Does not reward higher AG achievement

1. AG for atleast 50% period of the economic life of the equipment

2. Better rating for AG over & above NIT

Enlarging participation cannot be the guiding factor for equipment procurement

13

CIL Tenders : Current scenario & our suggestions TECHNICAL

Current Scenario Our suggestion

No weightage is given for user's past experience with the quoted

models

Deficiency :1. Achievement of AG for the

stipulated period (as per PO) is considered sufficient for proven-ness

2. Low equipment utilization shields poor equipment performance, if any, even if AG is formally achieved

3. No mechanism to bring post-AG period experience for evaluation

1. Introduce : a. MTBF (measure of equipment reliability) b. MTTR (measure of after-sales support strength)

The above tools can be used to monitor a. equipment performance for its lifetime b. can form as input for evaluation of similar

equipment for subsequent tenders

2. In case of below-par past performance of the quoted model :c. Demand higher amount of PBG (Phase #

1)d. Disqualification of the equipment model

unless the problem areas are rectified & proven

(Phase # 2)

MTBF : Mean Time Between Failure;MTTR : Mean Time To Repair

Guaranteed Parts Consumption

Deficiency :1. Unused inventory2. Tedious record keeping Thus, no specific benefit to CIL

Introduce ‘Cost Cap’ for spare parts.

Generates more value proposition for buyer & seller; win-win

situation

Expand proven-ness criteria : MTBF, MTTR alongwith AG

14 Expand the horizon of evaluation by including other important elements

CIL Tenders : Current scenario & our suggestions

SAFETY, ENVIRONMENT & OPERATOR COMFORT

Has scope of improvement for inclusion of safety & environment-

friendly features

Current Scenario Our suggestion

Latest safety standards & environment friendly features (e.g. better emission norms, higher oil

change interval etc) should be included in NIT

Fails to fully utilize the after-sales support capabilities of

manufacturers

Deficiency :1. Duplication of infrastructure at

projects2. Deprived of latest maintenance and

continuous improvement practices

1. Introduce rating system (based on MTTR) for after-sales support capabilities

2. Opt for long-term MARC to ensure best performance for the entire economic life of the equipment

AFTER-SALES PRODUCT SUPPORT

MTTR : Mean Time To Repair; MARC : Maintenance & Repair Contract

No weightage for features aiding operator comfort

Deficiency :Ignores the fact that operator comfort is key for equipment utilization, productivity & fuel consumption

Latest standards on operator comfort should be included in NIT

15

CIL Tenders : Current scenario & our suggestions COMMERCIAL

Successful bidder is selected only on L1 basis

Deficiency :1. Discourage manufacturers of

quality equipment to seriously participate in tenders

2. Deprives CIL of latest technologies and its benefits to improve productivity & reduce cost of production

Current Scenario Our suggestion

Successful bidder should be determined by adjusted bid price

mechanism

This adjustment should be based on Technical Merit Score (which should be re-introduced) and should consist of the following :

a) Technical features, especially those aiding production & safety

b) AG, over & above NIT normc) After-sales support capabilities

100% order on L1 bidder

Deficiency :1. Longer lead time for supply of the

entire fleet2. Discourages competition

Distribution of order between L1 and L2. Will benefit CIL by :

1. Shortening of lead time2. Keeping healthy competition

amongst suppliers

Create a level playing field for fair competition

16

CIL Tenders : Current scenario & our suggestions

Low duration of outsourcing contracts;

generally 3 or 4 years

Current Scenario Our suggestion

Increase the contract duration to 8 ~ 10 years

No incentive for exceeding performance parameters

Incentivize higher OB / Coal production over the contracted

quantities

Current tenders are silent on minimum size of equipment or

specify very low sizes

Clearly mention the minimum size of equipment as per the volume

of OB / Coal to be handled / year

OB/COAL OUTSOURCING TENDERS

3 Years 5 Years 10 Years

2160

1296

648

Illustration :100T Dump Truck

Depreciation Cost (Rs / Hour)

Enable contractors to serve CIL better

17

Cost / BCM : An illustration … 100 Ton Dump Truck

* Indicative for 1.5 km lead & 20 m lift haul road profileNote : The above is for illustration purposes only & should not be taken as any form of guarantee

Model ModelA B

Capital Cost (Rs Lacs) ₹ 360 ₹ 300 Model A costs 20% higher than Model B

Owning cost (Rs/hr) ₹ 1,162 ₹ 1,350 Model A has longer economic life, resulting in lower Owning Cost

Operating cost (Rs / hr) ₹ 6,080 ₹ 6,007 For both the models, Operating Costs are similar

O&O Cost (Rs / hr) ₹ 7,242 ₹ 7,357

Working Hours / Year 4725 4500Better reliability & after-sales support shall result in additional working hours per year

for Model A (assumed 5% additional working hours)

Annual O&O Cost

(Rs Lacs)₹ 342 ₹ 331

Production (BCM/ hr) * 132 120Superior productivity, technical features, operator comfort etc will result in extra

production from Model A (Assumed 10% extra production)

Annual Production (BCM) 6,23,700 5,40,000 15% higher annual production by Model A over Model B

Cost / BCM (Rs/BCM) ₹ 54.87 ₹ 61.31Inspite of higher capital cost, Model A is the winner in terms of Cost/BCM on

equipment life-cycle basis.10.50% savings

Remarks

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Radical change in tender norms & evaluation criteria

1. Re-introduce Technical Merit Rating (TMR) system, incorporating the following :a. Technical features, especially those aiding production & safety

b. AG, over & above NIT norm

c. After-sales support capabilities

2. Successful bidder should be determined by Adjusted Price Bid Mechanism, based on the above TMR

3. Constitute a Steering Committee to look into revamping the tender norms & evaluation criteria.

The way forward…

Thank You

Thank You