De Neers Tools Ltd Management Discussions

A Tran formative Decade Ahead

The global hand and power tools industry stands at an unprecedented inflection point, presenting extraordinary growth opportunities that align seamlessly with Indias

manufacturing renaissance. As we navigate an increasingly competitive landscape, the sectors trajectory offers compelling prospects for stakeholders committed to strategic excellence and operational agility.

Global Market Dynamics and Growth

Trajectory

The global tools market, currently valued at approximately $100 billion (2022 estimate), is poised for remarkable expansion, with

projections indicating growth to $190 billion by 2035?€”representing a compound annual growth rate of nearly 6%. This expansion is driven by accelerating infrastructure development, the burgeoning DIY culture and increasing industrial automation across emerging economies.

Within this expansive market, hand tools command a $34 billion segment (2022

estimate), expected to reach $60 billion by 2035. The power tools segment, including accessories, represents an even more substantial $63 billion opportunity (2022 estimate), anticipated to surge to $134 billion over the same period. These growth dynamics mark the sectors resilience and its critical role in supporting global manufacturing ecosystems.

Indias Domestic Market Size and Growth Dynamics

Indias hand tools market presents a compelling domestic foundation, valued at $1.3 billion in 2023 and projected to reach $2.6 billion by 2033, representing a compound annual growth rate of 7.2%?€”significantly outpacing the global average of around 6.0%. This superior growth trajectory reflects Indias position as the worlds fastest-growing major economy and the favorable macroeconomic environment supporting industrial expansion.

Favourable Macroeconomic Environment

Indias economic dynamism creates an exceptionally supportive environment for hand tools market expansion. The governments commitment to infrastructure development is evidenced by the allocation of 511,11,111 crore for capital expenditure in Budget 2024-25, representing 3.4% of GDP. This sustained fiscal support, combined with initiatives such as "Make in India" and the Smart Cities Mission, establishes a foundation for accelerated sectoral growth over the next five years.

INDUSTRY STRUCTURE AND TRANSFORMATION

The Organized Sector Advantage

A defining characteristic of Indias hand tools landscape is its structural evolution from an unorganized to organized framework. Currently, 80% of the sector operates in the unorganized space, creating substantial opportunities for organized players to capture market share through superior operational capabilities and compliance standards.

Regulatory Catalyst: The implementation of GST has significantly reduced tax evasion by bringing unorganized businesses under the formal tax framework, levelling competitive dynamics in favour of compliant, organized players.

Digital Transition: Demonetization initiatives have disrupted traditional

cash-based transactions prevalent in the unorganized sector, encouraging digital payment adoption and operational transparency.

Quality Evolution: The market is experiencing a fundamental shift from price sensitivity toward quality consciousness, with both consumers and industries prioritizing durability, precision and application-specific performance over cost considerations.

Sectoral Expansion: Growth in aviation, heavy engineering, automotive, gardening, woodworking and construction sectors has intensified demand for high-quality, specialty tools?€”a segment predominantly served by the organized sector.

These dynamics position organized players to significantly outpace overall industry growth rates, capturing disproportionate value through structured operations, quality focus, and specialized product offerings.

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THE ELECTRIC VEHICLE REVOLUTION:

Redefining Indias Hand Tools Market Landscape

Indias electric vehicle transformation represents a paradigm shift that is fundamentally reshaping the hand tools market ecosystem, creating unprecedented demand for an entirely new category of specialized, safety-critical instruments. As the nation pursues its ambitious vision of achieving 30% EV sales penetration by 2030?€”with targeted adoption rates of 30% for private vehicles, 70% for commercial vehicles, 40% for public buses, and an remarkable 80% for two and three-wheelers?€”this transition is catalyzing the emergence of a sophisticated, high-value market segment for insulated EV hand tools.

The governments strategic Make in India initiative, which envisions achieving 100% domestic EV production capacity, serves as a powerful amplifier for this demand trajectory while simultaneously creating compelling import substitution opportunities for Indian enterprises. The intricate engineering requirements of modern high-voltage EV systems mandate the deployment of specialized, precision-engineered insulated tools that not only ensure technician safety but also comply with stringent international industry standards and regulatory protocols.

As Indias electric mobility infrastructure matures and expands across urban and rural markets, the addressable market for these essential specialized tools will experience exponential growth, creating substantial value creation opportunities for enterprises positioned to serve this emerging demand with technical expertise, quality assurance, and comprehensive product portfolios.

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INDIA S STRATEGIC POSITION AND GLOBAL EXPORT POTENTIAL

While China (2022 estimate) maintains market leadership with commanding positions in both hand tools (50% market share, $13 billion in exports) and power tools (40% market share, $22 billion in exports), Indias current market presence represents a significant opportunity rather than a limitation. With hand tool exports (2022 estimate) of $600 million (l.8% market share) and power tool exports of $470 million (0.7% market share), India possesses substantial headroom for growth within an expanding global market.

The transformative potential becomes evident through NITI Aayogs ambitious yet achievable vision: India can realistically target $25 billion in combined exports over the next decade by capturing a 10% market share in power tools and 25% in hand tools. This strategic expansion would catalyze the creation of approximately 3.5 million jobs, positioning the sector as a cornerstone of Indias manufacturing ambitions.

COMPETITIUE LANDSCAPE AND STRATEGIC IMPERATIVES

The industry faces well-defined challenges that, when addressed systematically, present competitive advantages for forward-thinking organizations. India currently operates with a 14-17% cost disadvantage compared to Chinese manufacturers, primarily attributed to structural factors including elevated raw material costs, logistics inefficiencies, and scale limitations.

However, these challenges (as per Niti AYOGs recommendations) are increasingly addressable through coordinated policy interventions and strategic investments. The development of world-class manufacturing clusters, spanning 4,000 acres across 3-4 strategic locations under public-private partnerships, promises to deliver plug-and-play infrastructure that will fundamentally enhance operational efficiency and cost competitiveness.

Recommended policy intervention includes rationalization of Quality Control Order restrictions, import duty optimization on essential raw materials, streamlined Export Promotion Capital Goods schemes and potential bridge financing support of ?8,000 crores?€” such investments can potentially generate 2-3 times their value in tax revenues over subsequent years (as per NITI AYOGs estimates).

STRATEGIC OUTLOOI FOR MARKET PARTICIPANTS

The confluence of expanding global demand, robust domestic growth, supportive policy framework and Indias inherent manufacturing capabilities can create an exceptionally favourable environment for established distribution networks and manufacturing enterprises. Organizations positioned to leverage advanced supply chain capabilities, maintain quality excellence and demonstrate operational agility will capture disproportionate value from this secular growth trend.

The alignment of industry growth with Indias "Make in India" initiative and the vision of "Viksit Bharat @ 2047" creates a synergistic environment where private sector excellence and public policy objectives converge to accelerate sectoral transformation.