January 20, 2015, New Delhi

1. LARSEN & TOUBRO Mission 1 Billion : The challenges ahead An equipment manufacturer’s perspective A.K. Datta, Zonal Manager Larsen & Toubro Ltd, Mumbai January 20, 2015, New Delhi

2. Contents

3. Introduction : Larsen & Toubro Hydrocarbon LARSEN & TOUBRO It’s all about Imagineering Heavy Engineering Employees 67,828* Sales Turnover Rs 85,889 Cr # L&T Construction PBIT Rs 7,489 Cr # Power Construction & Mining Business Electrical & Automation Henning Holck-Larsen (04.07.1907 – 27.7.2003) SorenKristian Toubro (27.02.1906 – 04.03.1982) Machinery & Industrial Products ...2015 1938... CMB A journey of 77 years… An Engineering Behemoth Two Danish Visionaries Information Technology Financial Services > 50 Years Experience L&T Construction Equipment Ltd (LTCEL) Bangalore, Karnataka KOMATSU INDIA PVT. LTD Chennai, T.N Ship Building DUMP TRUCKS HD465  60 Ton Class HD785  100 Ton Class HYDRAULIC EXCAVATORS PC71 | PC130 | PC210 PC300 | PC450 | 300CK Railway Projects #FY1314, * As on March 31, 2014

4. Introduction : Komatsu Established on May 13, 1921 Sales : USD 19.61 Billion (FY1314) Employees : 47,208 • Affiliates • Liaison & Regional Offices • Distributors

5. Komatsu Product Range Tables denote Mining Equipment

6. Product Support : Infrastructure Jammu and Kashmir Himachal Pradesh Punjab Uttaranchal Arunachal Pradesh • 5 fully equipped Service Stations • Pan India Coverage • Specialized Service • Training • Testing Facilities Haryana Sikkim Assam Uttar Pradesh Nagaland Rajasthan Meghalaya Bihar Manipur Durgapur Tripura Jharkhand Bahadurgarh Mizoram Madhya Pradesh West Bengal Gujarat Chhattishgarh • Value added services • Preventive Maintenance Clinics • Annual / Full Maintenance Contracts • Site Support Agreements • On site Workshops • Assy. Exchange Program • Component Repairs • RECON / REMAN Maharashtra Orissa Bhutan Andhra Pradesh Goa Karnataka Kerala Tamil Nadu Pune Nagpur • 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 Kanchipuram Pan India Coverage

7. Product Support : Facilities Dump Truck Overhaul Engine Repair Bay Crankshaft Grinding Machine Dozer Overhauling Hydraulic Repair bay Best-in-class Support Infrastructure Hydraulic Test Bench

8. Major MARC and SSA Projects MARC Sites Rungta 12| 1 Tata,NM,JD,WB 26 | 29 NCL Singraui 59 | 48 SHREE, Beawar 7 | 25 HZL, DECO 45 | 35 HZL, DECO 31 | 62 Ultratech, KOT 14 | 17 Adani (A&M) 4 | 4 EMTA Pakur 79 | 69 Holcim, BTPRA 16 | 13 EMTA, Baranj 64 | 77 Holcim, Chanda 8 | 10 Holcim, Maratha 6 | 11 Dorajiya, Wani 5 | 1 Dalmia, Trichy 12 | 10 Ultratech, Gul 1 | 2 Lafarge,Sonadih 3 | 6 SCCL, RMGDM 28 | 7 SCCL, Manuguru 27 | 5 EMTA, GRB, BRJ 9 | 11 SAIL 15 | 5 BCCL 18| 8 PLR, Sar 8 | 3 EMTA, Tara, BRJA 52 | 47 HINDALCO 3 | 8 ESSEL (BCML) 4 | 13 SECL, Dpk, Gvr 9 | 10 PLR, BKD 4 | 3 SSA Sites (Machines | Manpower) SHREE, Raipur 1 | 3 Rich experience in executing MARC & SSA MARC : 497 m/c, 535 men at 52 sites SSA : 62 m/c, 37 men at 8 sites MARC : Maintenance & Repair Contract; SSA : Site Support Agreement

9. Our association with Coal PSUs… Equipment supplied SECL NCL MCL ECL BCCL CCL SCCL WCL HD785 100T Dump Truck HD465 60T Dump Truck D475 860 HP Dozer GD825 280 HP Motor Grader WA800 10 Cu.m FEL WA600 6.4 Cu.m FEL PC2000 12 Cu.m Hyd Excavator PC1250 5.2 Cu.m Hyd Excavator 300CK 4.0 Cu.m Hyd Excavator Equipment supplied as on 20.01.2015; include orders under execution

10. Coal Mining… with a difference 2 19 Mission 1 Billion Tonnes !!! 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

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 Current Scenario Our suggestion Qualification criteria are extremely broad-based Deficiency : No weightage for technical superiority Discourages participation by manufacturers ofequipment with advanced / latest features Re-introduce Technical Merit Rating (TMR) system with adjusted bid price mechanism The earlier system of disqualification under TMR, may be done away with Calls for Availability Guarantee (AG) of 1 - 3 years Deficiency : Does not value reliability over a longer period of equipment life Does not reward higher AG achievement AG for atleast 50% period of the economic life of the equipment 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 : Achievement of AG for the stipulated period (as per PO) is considered sufficient for proven-ness Low equipment utilization shields poor equipment performance, if any, even if AG is formally achieved No mechanism to bring post-AG period experience for evaluation Introduce : a. MTBF (measure of equipment reliability) b. MTTR (measure of after-sales support strength) The above tools can be used to monitor equipment performance for its lifetime can form as input for evaluation of similar equipment for subsequent tenders 2. In case of below-par past performance of the quoted model : Demand higher amount of PBG (Phase # 1) Disqualification of the equipment model unless the problem areas are rectified & proven (Phase # 2) Guaranteed Parts Consumption Deficiency : Unused inventory 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 MTBF : Mean Time Between Failure; MTTR : Mean Time To Repair Expand proven-ness criteria : MTBF, MTTR alongwith AG

14. CIL Tenders : Current scenario & our suggestions SAFETY, ENVIRONMENT & OPERATOR COMFORT Current Scenario Our suggestion Has scope of improvement for inclusion of safety & environment-friendly features Latest safety standards & environment friendly features (e.g. better emission norms, higher oil change interval etc) should be included in NIT 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 AFTER-SALES PRODUCT SUPPORT Fails to fully utilize the after-sales support capabilities of manufacturers Deficiency : Duplication of infrastructure at projects Deprived of latest maintenance and continuous improvement practices Introduce rating system (based on MTTR) for after-sales support capabilities Opt for long-term MARC to ensure best performance for the entire economic life of the equipment MTTR : Mean Time To Repair; MARC : Maintenance & Repair Contract Expand the horizon of evaluation by including other important elements

15. CIL Tenders : Current scenario & our suggestions COMMERCIAL 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 : Technical features, especially those aiding production & safety AG, over & above NIT norm After-sales support capabilities Successful bidder is selected only on L1 basis Deficiency : Discourage manufacturers of quality equipment to seriously participate in tenders Deprives CIL of latest technologies and its benefits to improve productivity & reduce cost of production 100% order on L1 bidder Deficiency : Longer lead time for supply of the entire fleet Discourages competition Distribution of order between L1 and L2. Will benefit CIL by : Shortening of lead time Keeping healthy competition amongst suppliers Create a level playing field for fair competition

16. CIL Tenders : Current scenario & our suggestions OB/COAL OUTSOURCING TENDERS Current Scenario Our suggestion Low duration of outsourcing contracts; generally 3 or 4 years Increase the contract duration to 8 ~ 10 years Illustration : 100T Dump Truck Depreciation Cost (Rs / Hour) 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 No incentive for exceeding performance parameters Incentivize higher OB / Coal production over the contracted quantities Enable contractors to serve CIL better

17. Cost / BCM : An illustration … 100 Ton Dump Truck Note : The above is for illustration purposes only & should not be taken as any form of guarantee * Indicative for 1.5 km lead & 20 m lift haul road profile

18. The way forward… Radical change in tender norms & evaluation criteria • Re-introduce Technical Merit Rating (TMR) system, incorporating the following : • Technical features, especially those aiding production & safety • AG, over & above NIT norm • After-sales support capabilities • Successful bidder should be determined by Adjusted Price Bid Mechanism, based on the above TMR • Constitute a Steering Committee to look into revamping the tender norms & evaluation criteria.

19. Thank You Thank You