Next year will be the best for construction industry
Speaking exclusively with EQUIPMENT INDIA after winning the coveted Equipment India Person of the Year 2020 award, VG Sakthikumar, Managing Director, Schwing Stetter India, shares his thoughts on the company’s success, future plans and the market outlook.
What does winning the Equipment India Person of the Year 2020 award mean to you??
I consider this award as a great honour for me being a person in the industry for a long time. This kind of recognition will motivate people and make them think beyond. I would also like to thank my organisation Schwing Stetter India which has been in the forefront of meeting the customer aspirations when it comes to machinery that make, pump and deliver concrete. The people who really worked behind this award are the leadership team, the employees, the workmen, the staff who directly and indirectly connected with the welfare of this organisation, vendors, service providers and the complete ecosystem of Schwing Stetter India.
Having received this award, I have more responsibility to look beyond my current role as the Managing Director of the company. These include working towards the general upliftment of the construction equipment business in the country and trying to do things in the right way that the country gets benefited out of it.
What are the key highlights of the company’s success?
In each of our product category like the batching plants, pumps and mixers, our market share is more than 50 per cent. Our products are technologically strong, with long life and better fuel efficiency. All these put together make the products attractive to the construction and infrastructure companies in India. We directly deal with our customers, so we really know the customer requirements and provide products and services accordingly. Also, we launch new products on a regular basis. Even in the middle of a slowdown, we used to launch new products because we know that the slowdown is temporary and in the long term, our country has a big capacity to grow. We believe that India is a great nation and is going to be a major construction market in the world. Also, India has the potential to become a manufacturing hub of construction equipment for the rest of the world and deliver products from here.
How do you compare the company’s performance this year with that of last year?
Starting with this year, the January-February 2020 period was better than that of 2019 with a growth. Due to the announcement of general elections during January-February 2019, there were no new project announcements. Also due to the IL&FS-related market crisis, the NBFCs and banks were in control mode which affected the equipment funding. All these affected the January-February 2019 performance. March 2020 started of better than last year, but posted a dip in figures due to the lockdown towards the end of the month. During April 2020, the overall operations came to a standstill with sites closed, borders sealed, and factories not permitted to work. But even during these tough times, we did an invoice of Rs 30 crore, from exports which is almost 20 per cent of our normal month turnover. In May 2020, we did around 40 per cent of regular turnover after the relaxations in operations by the government. In June it went up to 60 per cent, July figures reached around 70 per cent, and in August it went up to 80 per cent. In September this year, we reached 100 per cent which is the pre-COVID situation. Going forward, we expect a normal month in October while November and December are expected to be even better. In 2020, the industry is effectively operational only for nine months considering the lockdown during April-June 2020 which means, around 75 per cent of the whole year’s business in normal terms. However, we may be better placed, at around 80-85 per cent of the average figure for the year. Last year, the turnover was Rs 1,730 crore. Schwing Stetter India follows calendar year as the financial year.
How is the company’s manufacturing activity progressing?
Currently, we have five manufacturing units in 38 acres where we manufacture concrete machinery. We are building a new manufacturing facility at Cheyyar (near Chennai) in 52 acres with a total investment of Rs 300 crore. The new facility is being built on a 50,000 sq m of construction space. There are multiple sheds for different products and functions. The new premise will also have the corporate building to accommodate our offices and a small test track for testing the machines. The facility is expected to be ready in next two months as we plan to start the production from the new facility from January 2021.
The new factory will be making self-loading concrete mixers, concrete boom pumps and concrete trailer pumps from the Schwing range of products. We will be upgrading the manufacturing facility to meet the standards of global exports.
We will also start manufacturing hydraulic excavators from the new facility coming up. Initially, we will be assembling the equipment and going forward, we will manufacture the complete machine here, with aggregates, engines and everything from India. We launched the XCMG range of excavators in India at the Excon last year and did some sales there. In January 2020 till date, we have delivered more than 160 machines. We are hopping to close this year’s sales with some 250+ excavators.
Currently, our excavator business is focused in south Indian states. We plan to enter new markets in Maharashtra, Odisha, West Bengal and North-East states in the next phase and by January we will have presence pan-India for hydraulic excavators.
What is the company's export market share? What are the plans to push exports?
Our current export market share is around 10 per cent of the total business. Schwing Stetter India exports to SAARC, ASEAN and sub-Saharan African countries, which are the traditional export markets of the company. We will be relocating some of the productions from Germany to the new facility. Schwing Stetter Germany used to supply the products to the Middle East. Now the Middle East will start sourcing from India.
How are you devising the strategy to strengthen domestic and export markets?
We see India as a diversified market. For example, the markets in Mumbai, Bengaluru, Delhi NCR or the southern and western India are advanced in mechanisation (in concrete related construction activities) compared to the central, eastern or north-eastern regions. So, within the country, we have diversified construction culture. In cities like Mumbai, the real estate construction cost is very high and so need to complete projects at faster pace. On the other hand, in places like Assam and such north-east regions, life is relatively slow and it may take more time to complete the projects. Also, they have geographical challenges to bring the materials. And project size also can be small compared to city projects. So, we as an organisation working in both these markets have an understanding of the varied equipment requirements. This kind of experience cannot be seen in other countries because there the development will be equally spaced. Thus, you can cater to the requirements of the developed export market the way you serve the Mumbai market while you can cater to the less developed export markets the way you are in the rural markets.
What is the role of digitalisation in the company?
We are digitalising our business and manufacturing operations in every area. We have two ERP systems which take care of running our company completely on digital format. Our manufacturing has become digital, and can communicate digitally. For example, if I sell a batching plant to a client, one can have connectivity through optic fibre or mobile and can have all the information on the machine and its function. Nowadays, we have IoT and cloud-based data storage, where we can even workout solution for the owner or manager to get the information on machine operation on mobile itself.
How do you look at the post-COVID market scenario in India?
We are now seeing the pent-up requirement of the business which didn’t happen in the first quarter. I think going forward, the market will stabilise and will see a decent 2021. From now on till the next election year, we are going to grow at a greater pace because the government is supporting the industry with more financial sops. With more projects being announced, 2021 is going to be one of the best years for construction industry in India. Comparing what is happening outside the country, India is soon going to become one of the hotspots of construction activity and this will boost sale of construction equipment.