Sandeep Singh, Managing Director
Sandeep Singh, Managing Director
Just before Covid-19 started, we had ventured into the rental business of machines, and today, these machines have been productively deployed at sites. The trio of contractors, OEMs, and financers have been converting the current situation into an opportunity to explore new methods of conducting and sustaining business.

We expect the market may shrink further by 30-40% over FY19-20.

Clearly, the first quarter is deeply impacted because of the lockdown due to the pandemic. Post the unlocking, we believe that the second quarter will see the monsoons and therefore, we will see better results in the second half of this fiscal year. Hence, any recovery that is expected will only be in the second half of the year. Given these conditions we expect the market may shrink further by 30-40% over FY19-20.

We are bullish from next year onwards when investment in infrastructure will accelerate rapidly.

As the government has reiterated, India will be a land of opportunities and the NIP confirms the same. It’s just a matter of time before investment in infrastructure accelerates rapidly to meet the needs of its citizens. Therefore, we are bullish from next year onwards.

If you look at the package, there are some good pointers: With the redefinition of the coverage of MSMEs, a lot of our customers will come under its fold. This will help them in getting loans at a lower interest rate from banks as well as priority in payments from Central government departments, which is very crucial in the current times.

Apart from that, they also have access to collateral free loans to the extent of 20% of their outstandings in February at an attractive interest rate of 9.25% pa. There are other measures announced which will also help them sustain and expand business.

Special liquidity measures for NBFCs/HFCs/MFIs and NBFC Partial Credit Guarantee 2.0 scheme will infuse liquidity in them and aid lending to business.

However, there are areas where more clarity is required. The investment figures as per budget are now doubtful, given the challenges in revenue collection. Hence, clarity on focus and means of achieving these targeted investments were lacking in the announced package. Further, a considerable amount of money is still stuck in disputes and although measures have been announced by the Ministry of Roads, there has been very little movement in payments to construction companies.

The reform measures in mining will encourage more investment and drive demand for equipment in mining.

The reform measures in terms of the opening of commercial coal mining, seamless exploration to production of both coal and other minerals, removal of distinction between captive and non-captive blocks will encourage more investment and drive demand for equipment in mining

We have gone through many downturns in the past and are fully geared up to face the current challenge with full confidence. Our primary concern is the safety of all our stakeholders – employees, customers, partners, vendors - and all measures are being taken keeping their safety in mind.

Most of our dealer outlets have resumed operations. We were also providing service using digital means during the lockdown: helping customers maintain their operations. Our support team was available at our FMC sites keeping the machines fully functional and we continue to use both the digital as well as our physical network to support our customers.

Our sales teams were engaged with customers to apprise them of our offerings and how these help their business, going ahead. We even conducted webinars to counsel and instill confidence in customers, dealers and vendor partners and to spread a positive word around the opportunities in infrastructure in the country as well as in their area of operation.

We are constantly engaged with our employees – at the plant, corporate and regional office – to help them utilize the lockdown time effectively; to keep them motivated; and sharpen their skills to be prepared to combat the new challenges that will emerge from the fallout of the Covid-19 pandemic.

Due to the measures announced by the RBI, financers have been engaged with customers to explore the way forward and this has helped a lot of hirers in availing the moratorium for 6 months from March. Therefore, the trio of contractors, OEMs, financers have been fully engaged to tide over this situation as well as convert this into an opportunity to explore new methods of conducting and sustaining business.

Frontline Heroes ZX 470HFrontline Heroes ZX 470H

Given the uncertain scenario, customers are cautious of purchasing new equipment.

Construction activities in major projects were allowed from 20th April and activities have started at most of the large national highway projects. We do see significant recovery in activity this month also. However, given the uncertain scenario, customers are cautious of purchasing new equipment.

Further a large number of laborers at most sites have returned to their native places and customers have to make do with whoever is available. If there are no operators / mechanics - they are unable to execute the projects.

There is still the issue of free movement of goods, especially cement and steel, as these were most affected due to the lockdown. Hence, the construction industry is very cautious and sees normalcy coming back only after the monsoons.

Our telematics products with digital capabilities have enabled continuous communication with our customers.

Even before Covid-19 broke, we have been selling most of our products with digital capabilities. Our EX-series excavators, SHINRAI backhoe loaders and TL340 wheel loader are InSIte enabled and ZAXIS series excavators have ConSite telematics suite. These telematics products have enabled continuous communication with our customers.

Under the current circumstances, we believe customers will greatly appreciate these digital technologies to get the best out of their equipment.

Sometimes, a crisis also brings opportunities and we are glad the way our team as well as our customers have embraced and transitioned to digital means, and we plan to build our engagement in this direction, as this is going to be the way the entire industry will engage in the near term and realize its efficiencies.

Many components can be easily manufactured in India with technology that is already available globally provided the industry is sufficiently incentivized. Also, if the right conditions for global investment are created, we can enter into partnerships with global players and service the Indian market as well as the global supply chain.

From a Construction Equipment standpoint, more than 90% of the volume of machines manufactured in India are localized to an extent of 50%. Again, this is an average figure and some manufacturers have a higher degree of localization. These include the equipment sold in the largest volumes such as Hydraulic Excavators and Backhoe Loaders.

A large base of vendors has been developed over the years of whom many are in the MSME category. In the first phase of supply constraint, these vendors were trying to ramp up their manufacturing capacities with infusion of capital investment in Capex and employing skilled workers. Their ability to deal with demand volatility was severely tested. This time around, the challenges are completely different. Inadequate working capital, supply chain disruption, and depletion of skilled manpower are some of the key issues that need to be dealt with. The government has announced several steps to ease liquidity and provide ameliorating conditions for them to restore normal operations.

As far as global sourcing of components is concerned, one area where there is dependence on imports is precision components such as valves, certain motors, sensors etc. These can be easily manufactured in India with technology that is already available globally if the industry is sufficiently incentivized. Also, if the right conditions for global investment are created, we can enter into partnerships with global players and service the Indian market as well as the global supply chain. We will have to grow our competitiveness to attract these opportunities against other countries doing the same. Some of the inherent common manufacturing disabilities that we have, such as land acquisition, cost of capital and logistics need to be addressed.

Frontline Heroes EX 2500Frontline Heroes EX 2500

The key is to unlock the potential of the domestic market and grow volumes to a level where it is commercially feasible to manufacture equipment here and also grow the export market.

Another area where there is still import of some order is in low volume equipment categories as also very high value capital equipment which could be very specialized by nature. The key here is to unlock the potential of the domestic market and grow volumes to a level where it is commercially feasible to manufacture this equipment here as well as growing the export market to enhance volumes further. This will require a boost to the infrastructure plan and accelerated execution.

In summary, we have the advantages of a young workforce, technical capability, and entrepreneurial energy. If we could enhance national competitiveness further by building on gains made in the ‘ease of doing business’ parameters, there is no reason why we can’t become a major manufacturing hub.
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