Arvind K. Garg, Larsen & Toubro

Mr. Arvind K. Garg - Larsen & Toubro
With a guiding philosophy ‘In service lies success’, Larsen & Toubro, manufacturer of a certain range of Construction equipment and distributor of Komatsu and Scania, is passionate about digitalization of its equipment for optimizing their productivity. Mr. Arvind K. Garg, Executive Vice President & Head, Construction & Mining Machinery Business, Larsen & Toubro (L&T), discusses the company’s initiatives to remain the preferred supplier to its customers.

What kind of growth is the construction and mining equipment verticals of L&T seeing currently?

In the Construction equipment segment, we see good traction… good growth. The Mining segment was also showing good growth, but in the recent past, there has been a little slowdown in the private as well as in public-sector purchases, with subdued growth in coal output. But the Government is now putting more effort in reviving the sector. As a company, we will grow at least 10-15% over the previous year, on course with our plan.

How have reforms such as demonetization and GST impacted your business?

We supply premium equipment, so our customers are more in the formal sector, therefore, demonetization did not have much effect on us. For one or two months, there was a little concern as customers could not pay our dealers, but all that has been overcome. GST is something that we are grappling with, as the 28% rate of GST on Construction equipment and Mining equipment, compared to the earlier effective rate of 15–16%, is too high.

The business performance in the first quarter of this year was quite good as compared to the previous year. July-August has been somewhat subdued, but customers are slowly beginning to understand and come to terms with the new taxation structure. There are two issues here: GST rate and the willingness or the unwillingness of customers to get themselves registered with the authorities. We have to work as an industry with our customers to make them understand the benefits, and the Government has to look at rationalizing the GST rate. Overall, I would still say that we are on the right track.

Please tell us about your Mining equipment.

In the Mining equipment space in the private sector, we are the market leader with a lion’s share, because customers appreciate the benefits of buying superior equipment supported by L&T. They look at the machine’s lifecycle cost which makes sense to them in the long run. In the governmental/public sector, our public procurement system continues to be one where everyone has to meet a certain basic threshold, beyond which everyone is equal. So, whether you are technologically at A, B or C level, it does not matter as long as you have crossed the threshold. And then it becomes a matter of the lowest price, and this is what we find a little challenging.

How do you ensure customer retention and prevent brand substitution?

I would say that it’s not just about the brand name; ultimately, the customers want high utilization & uptime to reduce total cost of operation. Our entire emphasis, as L&T representing Komatsu, is to give superior and premium products to our customers, that offer high reliability backed with an extremely strong after-sales service.

Komatsu GD535 Motor Grader

For some of our excavators, we extend warranty upto three years or 9,000 hours of operation, which is a first in the industry. This demonstrates the confidence that we have in our product, which ensures that our customers get maximum benefits. The financier also benefits because by then, he has got back almost 75% of loan value. The resale value is also good for a well-maintained machine.

Our belief is that we must be able to ensure high level of availability, which means that machines breakdown frequency should be kept to the bare minimum and whenever there is an issue, the same should be rectified quickly, so we focus very strongly on providing timely service.

Would you say that L&T is an integrated solutions provider?

We provide comprehensive solutions to our customers. We work with them from the pre-purchase stage, from understanding application, recommending the most appropriate equipment and preparing customer specific after-sales support solution. We have something called ‘next morning delivery’ of parts. We are holding `200 crore worth of inventory of spare parts across the country with 35-40 stocking points. We have a central warehouse in Nagpur, and we have team of highly skilled engineers & technicians to look after our machines. All of this is because we don’t want our machines to be down.

For Mining, we are running full maintenance contracts where our people are at jobsites 24x7, for a fixed cost per hour. So, our customer does not have to worry about anything for the next five years after buying our machine. They realize that when they are buying a Komatsu machine, they are also buying peace of mind. L&T was founded by two Danish gentlemen, who gave us the philosophy ‘In service lies success’, and this remains the guiding principle for our business.

L&T Soil Compactor 1190 D

We have 5 operative Service Stations across India and are also setting up a new service station in Singrauli, which will be commissioned in the next few months. We are setting up a major parts warehouse in Nagpur, to have the right inventory, improve our logistics for timely supply of parts, and at the right price, so that our customers’ machines keep running and remain profitable.

How focused is L&T on digitization of its machines?

L&T’s IT arm had worked very closely with Komatsu in the development of telematics in their machines. Komatsu equipment are contemporary, and what equipment they give us in India is what they give to the rest of the world. These are equipped with telematics for continuous machine health monitoring. Komatsu’s patented system Komtrax, enable customers to remotely see how many hours his machine has worked, its exact location, idle engine running, fuel consumption, maintenance requirement like filters replacement and so on.

Our CEO and MD are very passionate about digitalization, so we are doing a lot of it as a company. We want our equipment to be used optimally, productively, and without idling. We want that our customers’ buying decisions are based on facts and figures, and on what is actually happening on ground with the machines. This way, we want that they are not price-driven, but value-driven. Value for me is all about returns on investment.

What are L&T’s initiatives in skill development and training?

L&T 9020sx Wheel Loader
We do a lot of training for skill development of the operating and maintenance personnel of our customers. Under IESC, for instance, L&T has trained more than 850 operators during the last one year. We have set up a modern simulator costing approx. `1 crore in Nagpur to train operators. We are now evaluating different kind of simulators that can be taken to jobsites for training. We are constantly working with operators to train them in the formal way. Every time we supply a machine, our service people go there and train the customers / operators on how to use the machine. Besides which, they are always available on call.

We have many training programs for the maintenance staff, not only on periodic maintenance but also advanced training where they can actually do diagnosis and learn how to repair certain components so that they become self-reliant. Today, we have an active population of more than 25,000 machines working in the country, a majority of which are being supported by our customers’ maintenance staff.

What new products will L&T showcase at the upcoming Excon?

We will be introducing a range of road making machines, which will be complementing the Komatsu range of products. We also hope to showcase 2-3 other new products, the prototypes of which are ready and they will undergo field testing soon. At the last Excon, we showcased vibratory compactors and this year, we will be adding to the range.

We will also showcase advanced technology and show our customers upgrades in our machines and how they will be more customer and operator-friendly. Japanese machines are extremely high in technology but since the Indian conditions are a little tougher, we have done various adaptations for their use in India. Machines that are used for light duty work elsewhere, are used for heavy duty work in India, so we have to ensure that when our customer is buying that machine, then we must make it suitable for use.

Going forward, what do you envisage for the construction industry?

There is a huge opportunity in the Road sector – The Bharatmala project will give a huge impetus to the CE industry. While roads will definitely drive this industry, the Government is also looking at railways - the Bullet Train for instance - just imagine the kind of work that will come. Also, the dedicated freight corridors, and the infra development in the North-East. We see sustained growth of the industry.

Also, getting skilled labor is becoming a big challenge. Project completion times are now shrinking, so speed of execution has to go up. The Government is very focused on infra development and is moving in that direction, so we have all the right factors in place.

There has been a total shift from the earlier years when elections were won on different parameters. Today, the polity & people both have matured. Everyone realizes that elections will be won on the plank of development. There is this constant refrain that India is one of the bright spots in the world as there is huge potential here. We may not be happy with the pace of change, with reforms like demonetization or GST, but things are moving in the right direction and I think exciting times are ahead for our industry and for L&T as a company engaged in this business.

NBM&CW December 2017

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