MSMEs face existential crisis, revenue to fall a fifth
Situation needs lenders to go beyond the box. June 2020
In an exclusive video interview hosted by CONSTRUCTION WORLD, Surajit Ray, Managing Director, ULMA Formwork, discusses how the firm has been coping with the lockdown, how long will it take for recovery, the impact of the rise in steel price on the formwork industry, and more...
Coping with the lockdown: We already had contracts for various projects in hand prior to the lockdown. While some materials could be sent to customer sites, we could not undertake the complete assembly at some customers’ sites as things came to a halt. Ulma in India imports materials from Spain, so in such a situation all our imports from Spain were on container vessels in the seas. Also, nothing could be cleared in the customs. This was our situation during the lockdown. With the lockdown being partially lifted now, customers of four to five contracts we had in hand have asked us to start delivering materials at sites as interstate movement of trucks and trailers have now been allowed. We have also been allowed to open our warehouse on the special permission. We have sanitised the place and our labourers have started coming in. We are also planning to send our engineers to start assembly jobs. Also, during the lockdown we have been working from home with our fabricators, with our quality control people. We will undertake shipments from two to three of our factories to our warehouse in the next few days.
Heading to recovery: We have already lost two months in construction. I don’t think residential and commercial projects for developers will pick up immediately after the lockdown. In fact, new projects being planned may be on the back burner for at least about five to six months, unless one is absolutely sure of the availability of labour, of materials, and at a justified cost. Speaking about construction material cost, while there is no reason for cost escalation, there are increases in cost in the market – there is a temporary hike in steel and cement prices. So I don’t think new projects will pick up in the next four or five months. But ongoing projects that have completed the foundation works and already have a plan in pace, can work in full force. However, with the monsoons coming in, I think there will be sloth in construction activities in the next at least four to five months.
Impact of rise in steel price on formwork industry: Steel prices definitely have an impact on the formwork industry because it is a material that continuous incoming and outgoing operations depend upon. So if there is a stoppage in materials coming in for two months, the stock available prior to the lockdown becomes costly for customers who need it immediately. Evidently, the price hike is because of high demand and less supply. Also, because of logistical issues, materials have not been transferred from the factories to the distributors. Besides this, I don't see any reason of increase in cost in raw materials that should make steel price shoot. I think the steel prices will roll back to what it was prior to the lockdown, in February-March this year, say by November.
Demand from commercial and industrial: Commercial and industrial infrastructure will help us in our business, especially from orders in the South and West of India. We have contracted for many commercial buildings, such as data centres, and for customers like Amazon, Google, etc. Our focus will continue to be on commercial and infrastructure projects. We also have industrial projects on the anvil that are already in discussion is discussing.
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