Growth Tonic

31 Oct 2017 Editorial Team

Short-term pain aside, the government's recent policy initiatives offer the prospect of long-term gain, writes KE RANGANATHAN. India has always been a complex market with several local legislations governing commercial taxes in different states. The logistic landscape of our country has traditionally been sullied owing to tax considerations rather than defined by logistic efficiencies. However, the recent past saw some bold moves by the government in the form of demonetisation, GST and RERA with the intent to make business robust in a nation that is otherwise a complex amalgam of diversity. Welcome moves To nobody's surprise, both demonetisation and the introduction of GST met with initial hiccups and, even, chaos. Naturally, the customer had to understand these two big changes before coming to grips with them. That said, with the rise in bathroom spends and consumers looking for trusted brand names in the segment, these steps have increased the growth potential for organised players and are a definite upside for bathroom players like us! What's more, demonetisation has helped bring a lot of transparency in dealings at the shop level. There is an increase in the efficiency of supply chains as manufacturers are not required to maintain several warehouses in all the states in which they operate and warehouses are expected to consolidate. The tax burden on retailers is also likely to reduce. Similarly, the introduction of GST is a saving grace for most; it has aided in ease of business operation by bringing in uniformity in taxes across the country. Indeed, these reforms are tonic-like; though slow in nature to take effect, they will cure the economic malaise and get the economy back on a higher growth track. While the month of June and July 2017 were affected on the revenue front after the introduction of GST, sales have clearly bounced back since August. The destocking at the trade level has been good in one way; unnecessary excess stocking has come down, leading to better inventory velocity, which will improve margins for traders. Meanwhile, the launch of RERA will gradually help stabilise the real-estate market and help it evolve into a more professional and transparent segment. It brings demand-supply dynamics to the forefront where transactions happen in a simple, informed way, cutting out the speculation dramatically. This has helped stabilise prices, leading to healthy market conditions. Sea of gains Speaking of Roca in particular, the new economic moves will gradually ease out everyday business functioning with respect to our dealer network, and make dealers focus on trade and distribution rather than tax compliance and forms. This would help them to usher in greater customer satisfaction. Even though we have eight factories across the country, local taxes impelled us to keep moving goods across states to manage our revenue efficiently. The composite tax - GST - now paves the way for easier administration of taxes and a defined approach without ambiguities. This transparency has been welcomed with open arms and will lead to better planning of resources and enable us to make goods available at attractive prices to end-customers. Indeed, Roca will always endeavour to be relevant and affordable to customers by offering superior quality products. We are working on plans to double our global sales in the next four years, driven mainly by new product launches, brand introductions and exports to other geographies. To tap the growing luxury segment, we will be introducing more brands in the Indian market, in addition to the existing 60 worldwide. At Roca, our focus is on the glass half-full! India offers tremendous scope for growth for organised players and our growth projections are aligned to capture the expected shift for branded products - the government's initiative, Make in India, is a reality for us. All considered, we welcome the recent policies as they give us an added impetus. We welcome this new sea of gains. About the author: KE Ranganathan, Managing Director, Roca Bathroom Products works closely on creating new strategies and opportunities to drive growth and further consolidate the company's leadership position.