From humble beginnings to leading the crane rental industry – explore the incredible journey of Crown Lifters Limited, since its evolution in 1984, and insights from Chairman and Managing Director, Mr. Karim Jaria on staying ahead in a competitive market.
Chirag Gala: Hello and welcome to Smallcap Spotlight. Today, we will be talking to the management of Crown Lifters Limited, which is one of the biggest names in the professional equipment hiring segment. With us today is the chairman and the managing director of the company, Mr. Karim Jaria. So, welcome to the show. Could you tell the viewers about the journey of Crown Lifters Limited? How do you differentiate your brand in such a competitive market?
Karim Jaria: First, let me tell you briefly about Crown Lifters. This company was started in 1984 by the founders, my father and his brothers. So, the company first was established in 1984 and the other brothers joined the company in 1986. Previously, we were into the tyre businesses and we had branches in Mumbai where we used to sell tyres.
And we were supplying tyres to the crane owners at those times and these cranes were used only majorly in the ports those days. So, they made friends with them and they introduced them to the crane market and we had a couple of smaller cranes for Kandla Port and Mumbai Port and that was the place where we used to do the business. Then the boom came in 1995-1994 when Reliance Industry came with a refinery project and they are projecting Hazira, they are projecting Patal Ganga and when Reliance came in, SR came in and those kinds of bigger projects, industrialization started.
Once the industrialization took place, then the bigger size cranes were required. And once the bigger size cranes were required, India was manufacturing up to only 75 tons of capacity cranes. So, 1997 when I joined Crown Lifters, we started importing smaller cranes from abroad and also the larger cranes later.
And we used to do a lot of trading also of those cranes because we couldn’t buy and absorb all the cranes into our fleet because of shortage of funds. But then we started importing a lot of cranes and those cranes were absorbed in the Indian market through our company or through other people who bought them from us. So, that was the foundation that started Crown Lifters as industrialization when it started taking place, I called it 1995, somewhere close to where I started my crane business.
So, the market is, when the market has tailwinds, there’s always the competition going to increase. A lot of new operators want to come in and have their own share, right? So, everybody is buying cranes left, right, center and the market is still booming and there is always competition that comes in. But there is one very important thing here.
See, these corporate companies who rent cranes from us, they have a lot of bigotry on their funds. So, they don’t have to rely only on us to supply cranes. They can go buy the cranes, right? Well, now why do they not buy their own cranes? Because it is very service oriented and it is a niche market where people have to have knowledge of operation of the crane plus the maintenance of the crane.
If everybody is going to just go buy a crane and rent it, it’s very easy. Anybody can go buy a crane today and rent it in the market. But who’s going to service there, right? So, there is somebody who has to execute.
So, the only skill today in the crane market is execution. So, execution from buying cranes, the right cranes for the right projects with the right accessories. These cranes come with different accessories.
You’re buying the right crane with the right capacity, right accessories, right timing for the right project, giving it to clients and giving them the service. When you’re giving them a service, the only thing the client is asking you is not the price, competitive price. What are they asking you? To reduce their production loss.
So, any factory that gets delayed in being built, they lose tons of money in the production loss because the factory that was supposed to be built in one year is now being built in 15 months or 18 months. So, what they want is that the cranes and the other construction equipment or the manpower is supplied in time and they’re giving proper services. So, any factory which is supposed to be made in 12 months is being made in 10 months or 11 months or 9 months.
That saves up the 2 months and that 2 months gives them additional profit because the production starts earlier. So, this is where we capture the market. This is where we come in picture.
Like our vision and mission statement also says we want to become the most preferred crane supplier in India, Pan India and just not the largest. So, you’re preferred only because you can give the service when the crane is placed at the site, your turnaround time, what we call between the crane breakdown and the crane restarting after the breakdown. So, the turnaround time is very, very important and this is where we have our this is where we capture the marketing.
Chirag Gala: The company works in the renting of cranes. So, do you dry lease or what is the scope of supply for these cranes?
Karim Jaria: So, generally in India, the concept is different. In India, it is a wet lease. So, dry lease is not yet very popular. Again, like I said, these companies can buy their own cranes. They don’t need the dry lease concept.
This dry lease concept mainly in countries like say UAE and where the foreign companies would just bring in their machines and technology and the local government will have contractors who will get the labor say from India and in Dubai and American companies are supplying machines and the labor is coming from India or Bangladesh or any other developing countries and they do the dry leasing. Those local companies in Dubai would do the dry leasing of these cranes and they will get their own labor from the local contractors. In India, the company doesn’t want to do anything with regard to cranes and their maintenance and that is why we supply operators, helpers, riggers, supervisors, mechanics plus a service team goes along with the crane plus a diesel that supplies 50 percent of the projects.
We supply diesel and fuel. The company has their own pumps inside the company factory premises and they would supply us the diesel and they will deduct it from our cost, the money that they owe us. So in the end, it is a wet lease, it is not a dry lease concept in India.
Chirag Gala: What are the major challenges that you face while providing services across borders and how do you overcome these challenges?
Karim Jaria: So when we talk about domestic borders in India, if you see, we say it’s one country but we are different by languages at least if not and of course some basic other things but most important is language. The first thing is the language barrier. In a few of the states, yes, it is good that there is English and there is Hindi but in some of the cases where our laborers may not be well known with the local languages there plus local licensing, the factories are always not in the city.
They are away from the city. They are mostly like 40, 50, 100 kilometers away from the main city. So there are smaller villages and these places where the locals have their say in everything.
So local licensing is one thing. Distance from a service center, for example if I am servicing, putting a crane somewhere in say Orissa and not even Orissa near the main airport or the station or the port, it is somewhere in the interior. So the service when the crane is laid down, becomes a little challenging.
Our staff accommodate to the local setup, the food changes, the habits changes because every staff which we have, the labor staff which we have, the operators, the helpers, the supervisors, they come from different regions and different states. So hypothetically if somebody is from say Haryana and he is being placed in Kerala to work, there are different food habits, there are different weather conditions, there are different other local environments. So in that they have to adapt to it and we see them when we are placing our cranes on our people, we see that we try to accommodate people from the same region or hire or train people from the same region.
So we try to keep a balance of people from most of the regions in India and then place them according to the project coming in their regions rather than placing them from north to south or from south to west or vice versa.
Chirag Gala: In the context of a domestic crane business, which sector do you feel has got the most significant growth opportunities and how do you assess the demand supply gap?
Karim Jaria: So see right now the good thing in India is, we were talking about 10 years back, there was always one sector booming. Say when steel was booming or cement was booming together, sometimes the refinery would boom, sometimes the wind sector would boom, sometimes the metros section would be working now.
The good thing after many many years or I think the first time I am seeing is that there is a big and huge demand from every sector. So the government is now growing the infrastructure as a whole. Wind of course, solar of course, together with that to support the other projects, the road development projects and the other building projects or the airport projects, steel cement is required.
For fueling this refinery which has to pump more oil and gas for this industry, the refinery is getting upgraded, and the refinery is getting expansions. We are seeing the first bullet train project and I am sure all of the major cities will be connected with bullet trains in the next 5-10 years, 15 years and this kind of project will keep coming on. Metros are being served now, not only the main capital but even in the smaller cities like we are doing Kanpur metro, you will see Pune metro.
In the smaller satellite cities also the metro projects have now started. So there is a lot of growth in all the sectors in all the states together this time and that is where you see that boom in this industry coming together. Now how do we assess the demand and supply gap? So we work now a quarter or two quarters before the projects are announced.
So our team would go do legwork in all the states looking at the government policies and the projects being announced, then we will see who is getting the projects, what kind of project is it, what capacity projects is it, what kind of equipment and what kind of accessories would be required on those equipments and then we will lay a plan that what is the share of that project and supposing hypothetically there are 50 cranes required, we will see okay we can capture 5 cranes, 10 cranes and the duration would be for this period to this period. So then we will go and order the cranes, arrange for the funds, arrange for the team, trainer team and keep it ready. So when there is a requirement which comes to us generally in 30 days, 45 days before the project begins, we are already there, we are already prepared and when we talk about ground reality that we know and we are prepared with it, we always get the first say and to get the order or not.
So the company would always give us the first preference because they know we are already ready with it when they are announcing it and they don’t really want somebody to come and start the homework now. So we do this homework that’s called R&D that we do from a sales team and marketing team, we keep doing this R&D where we time all the projects that are going to be announced or being announced are or are in work in progress right now and according to the state budget planning what they demand and what the projects are announced, we follow them. So is there a demand drop during the monsoon seasons which the company faces? I would say yes a bit not much because what are we trying to do is last three years again as part of R&D what we are doing is we try and work on the states where there is lesser monsoon effects right for this monsoon Tamil Nadu has a lesser monsoon effect during this July, August, September and then there monsoon generally kicks in November, December somewhere in December and January.
So the fleet utility is always around 90-95% during this monsoon period it comes drops down to 75-80% we are trying to improve it and keeping it around 80-85% that could be a good number if you can keep it for that three months, four months because now last couple of years the monsoon has been bad it is raining whenever it rains it rains too heavily in one of the region it delays the project it delays the job at side the contractors would want to have lesser equipments at the side because the output is lesser and keeping all those things in mind yes there is a 10-15% drop in the business at that time but as I said we are trying to mitigate it by seeing which areas are not less affected with the monsoon and what kind of projects are coming there during those three to four months and trying to get some jobs in that region and balancing it already.
Chirag Gala: Alright, so where do you park and maintain all your idle fleets? Like who is responsible for maintenance of these cranes as and when required?
Karim Jaria: So generally these cranes are very big in size and transport we deal mainly in crawler cranes and because of those there are huge cranes let’s say hypothetically a 600 or 800 ton big crane would be moving between 40 to 50 trailers at one time they need huge parking spaces and bay so wherever our projects are so right now we are concentrated more on the center to the western region of India and whenever the projects are completing we have these parking loads like we have one in Panvel, we have one in Navsari, one we have in Jamnagar so these are small parking loads which we take on rental and once the job is over and if we have to move the crane if there is a time gap between one project to the other or it’s still being marketed or it requires maintenance it will go to our parking bay where it also has a service support so the service is carried out if we require the parts it’s bought from the OEM or the OEM suppliers and dealers if the OEM is not in India for few German brands and US brands if they are not in India we will take it from the dealers who are in India or we would import it directly because we have their network channel of import and we have our own in-house team we have our service engineers in our company who can actually open up the whole crane rebuild it again and recertify it again and of course the certification happens outside from a government agency once a crane is rebuilt again but we can make it to a certification condition with an in-house team we don’t have to only rely on the OEM except for any special maintenance and repairs that would sometimes we would require OEM support.
Chirag Gala: So for the fact that you were appointed as the youngest president of the crane owners association of India how do you leverage this expertise in driving growth and innovation into the business?
Karim Jaria: Okay, so, let me put this forward, there are smaller, very smaller associations like the Mumbai Crane Association, the first earlier called Bombay Crane Association, then we have Vizag Crane Association, we have Delhi Crane Association, Karnataka Crane Association and Gujarat Crane Association. So, these are all smaller, smaller fragmented Crane Owners Associations, which were there for many, many years, then came into picture around 2012 and 13, the Crane Owners Association of India. And I was first appointed as a board member for the Crane Owners Association of India.
And during the second presidential term, I stood for election and I won and I was one of the youngest presidents of all time that had been elected in that election. And I had the opportunity to be the Crane Owners Association of India president from 2015 to 17. I could have had it for two more years.
But due to my responsibilities in Crown Lifters, I wanted to do two years only there. And the advantage I would say there is when you give to the, when you’re ready to give back to your industry something, it also brings in a lot of other fruits that it bears, right. So, I joined it with a motive of giving back to the industry with my experience and bringing everybody together and making an association that stands for the smaller companies to the larger companies and bringing unity and bringing in knowledge, knowledge based growth for every company and making a fair ground for everybody to work.
And during this time, I came across associations and I traveled a lot to all the states. We networked with a lot of people. And of course, they became friends with us.
We also met a lot of government agencies with the policy for policy drafting and a lot of things. So, we connected with lawyers, we connected with government agencies, we connected with manufacturers, we connected with financers, we connected with all the crane owners, smaller crane and larger crane association up in India. And due to this, a lot of knowledge was gained by me and a lot of network was gained by me.
So, what happens today, if I say, if my crane is working in Delhi and I don’t require to bring it to Mumbai, I have a friend sitting there who will offer me his parking node or his service engineer or his local licensing officer or his spare parts if I require. So, I have this network which helps us in growing our company, you know, so it also forms a parking base for everybody. So even we do exchange these with them.
So whenever they want a land, they want a parking base, we would offer it to them. And this is one of the agenda which I had when I was a president of the association that we share everything. We don’t all have to own everything, which is a cost to every company.
So the land could be shared, some spare parts could be shared, inventory, of course, could be shared, some knowledge that could be shared, the local licensing, we could help each other. So those kinds of arrangements still help us and still bring us a lot of advantages in the company. We met a lot of OEMs that time, we were dealing with them and we worked with the insurance company to try and get an insurance cost for everybody together.
We learned a lot. We had a lot of brainstorming sessions. So a lot of knowledge that was passed on from both of us to them and them to us.
So that helped a lot growing there.
Chirag Gala: So what are your perspectives for the international market for crownlifters? Do you plan to put your presence out in the international market?
Karim Jaria: I feel as we speak, it’s a long road ahead to capture a feasible market size in India for cranes for us. As I said in one of our last phone calls, that there’s a lot of regions in India where we have had our presence in the past. We had our presence in the past, but are we not being able to capture because of the shortage of cranes in our fleet? So we are trying to cope up with that to make a mark in different states and different sectors in India.
Of course, there’s a huge demand now coming in Saudi Arabia. There’s a huge demand for cranes coming to other global parts of the world. And we have our network and connections again through my training, which I did in earlier years.
I know a lot of crane companies there through the association network. I know a lot of crane companies there. And being in this market, a lot of people we have connected there and it’s easy to get a job.
But again, if there is demand in India where we are not able to cope up right now, it’s too early for us to go in beyond the domestic markets, but definitely it could be something that can be looked into in the future. It’s something that we are not going to ignore if required.
Chirag Gala: Alright, so do you subcontract cranes? If yes, what is the revenue percentage which is expected out of these contracts or general margins from these contracts?
Karim Jaria: Like I said, we have a limited fleet right now and we are growing at a faster pace as much as possible and as sustainable.
And we have sometimes work orders coming from clients for a couple of cranes together or a few cranes together. And a couple of cranes which are not in our fleet we require to hire. Say, for example, we are getting a project where there are four or five crane requirements and the client wants one contractor giving all the four or five cranes and we have three cranes per set.
So what we will do is we will take two cranes from the market or one crane from the market and get the whole contract. So at least there is no other competitor entering that client and making the rate contract with them. So sometimes, yes, we do this.
I mean, it’s not sometimes. We continuously have this habit of doing a subcontract. And sometimes for the reason given now that we have one or two short machines out of the four or five machines and we take their machines.
And sometimes we use it as a buffer. How does this buffer work? For example, if we are going to import two units of 100 ton crawler cranes in our fleet in January and if I am getting the work order right now in November, my cranes are not ready because the funds have to be arranged. I mean, the cranes have yet to come.
We will subcontract the crane from the market for say three months. And we see that this project is for a very long duration, maybe a year or two. And we will import a crane in three months and then release that crane.
So this works as a buffer for us. And the margin you ask. Generally, the margins on these are very, if a higher size capacity crane, the bigger order value, it could be 5-7%.
If it’s a smaller order value or a reasonable size value, it would be around 8-10%. So that kind of margin. And the total of our revenue, if you see, should not be more than 10-12%. Maximum 15% in the earlier year, but now 10-12% maximum.
Chirag Gala: Could you name some landmark projects which Crownlifters has been associated with?
Karim Jaria: Crownlifters has been here for 40 years now. And we’ve been associated in almost, I would say, all the states. Maybe one or two states here and there, but almost all the states we have worked. The ones I’ll tell you, because we are in Mumbai and a lot of projects that people can relate or think about is the MTHL project, which was the Shri Vajpayee Bridge, which has now been opened.
The Ulve project, which is connecting Panvel to Vadala. Then the Mumbai Coastal Road project. Earlier, we did the Bandrawali Sea Link project.
Mumbai Airport project, T2 Terminal project, Bullet Train projects, Metro projects, Statue of Unity projects, Reliance Refinery project, which is Asia’s largest refinery. And one of the projects which I was associated with when I just started my career was at Shri Haripota. So, the rocket launching project happens there, right? So, our crane was given to F-con infrastructure at that time.
And we were doing the piling for them in that project. I remember staying in that project and starting my career from that point. So, yeah, Shri Haripota is one of the larger projects.
So, there’s a lot of projects that we’ve been associated with in steel, cement. These are the more infrastructure projects. But in the city, yes, it’s Bandrawali Sea Link, MTHL, Coastal, Mumbai Airport, Bullet Train, Metros, Statue of Unity, these kinds of projects and stadiums.
What factors should investors look at while analyzing the business? Okay, so a lot of time people tell us that your fleet size is not growing as fast as the other competitors or the other market players or as for the demand. So, we tell them this is a very asset heavy business and we buy cranes based on the projects which are very, very long term. We are focused on a long term project.
We are not looking at a very short term project. So, we are looking at very long term projects and we associate with that project. So, the ROI gets better.
This is also what I have spoken in the call earlier also. And the way the investor has to look is not by the number of cranes. They have to look at the investment value that we are doing in those cranes, right? Because our revenue is spent with the investment value, not with the number of cranes.
Because of the number of cranes, our administrative cost goes up. And the more the number of cranes, the smaller cranes that means. So, if we are able to get mid to higher size crane orders and we can keep our admin costs lower and the longer term projects, the ROI improves.
Then again, what the investor needs to see and hear and keep their ears open is to listen to what government spending is happening in which kind of sectors. And are we associated with those sectors? Are we working in those sectors and are we working in those states? We are working pan India, right? So, that’s the kind of news they have to be associated with. They have to look at our corporate governance that we are following.
That we are improvising every time. And in our professionalism, the corporate governance, are we trying to keep pace with it? Are we following and fulfilling all the requirements? Then you have to see the long term projects that we keep announcing on the LinkedIn profile. We keep announcing on the NSE platform.
The type of projects we are doing. The type of cranes we are buying and the type of investments we are doing. And we also try to mention what kind of longer term projects and what kind of clients we are getting.
So, the much longer term projects that we are announcing, they have to keep their ear open to that. And they have to keep watching the news. What kind of projects are those? What kind of clients are we serving? Then, of course, year on year growth.
I would say they need to watch our year on year growth. What are we presenting as a year on year growth? And these are the things if they concentrate and they see that year on year we are getting better. Our investment value has increased.
Our borrowing powers have increased. Our corporate governance is getting better. Our equipment is being placed on a longer term project with the best clients or the good clients.
And yes, that’s where they would be able to see our actual growth. How it is going to happen and only looking at the equipment numbers.
Chirag Gala: Thank you so much sir for joining in with us. It was definitely an insightful conversation. To get more insights, stay tuned to Small Cap Spotlights and subscribe to us by hitting the bell icon.