The year 2022 is expected to be a booming year for construction and earthmoving equipment in India, a top official of Schwing Stetter India said in an interview with IANS.
"Though the year 2020 started well, the Covid-19 pandemic has had a major impact on the economy. The last quarter of 2020 will tell how the economy would be in 2021. We expect 2022 to be boom time for domestic and export markets," said V.G. Sakthikumar, Managing Director, Schwing Stetter India.
The firm with a turnover of Rs 1,740 crore in 2019 makes concrete mixers and other machinery used in construction works. It also sells earthmoving equipment of XCMG, China.
The Indian company is a wholly-owned subsidiary of German group Schwing Stetter. The German group is owned by the Chinese XCMG group, which is ranked sixth globally among the construction equipment machinery makers.
"The two big economies -- India and China -- are interdependent," he said.
Here are excerpts from the interview:
Q: The construction sector -- residential and commercial -- is down. Cement production is expected to fall by 25-30 per cent this fiscal. What will be the impact on your company?
A: The customers are unsure about how the future would pan out. They are looking at shorter horizons, and not longer. They are buying smaller machines as compared to bigger ones. There will be consolidation in the sector. But that depends on how long the economic slowdown persists.
At the end of the last quarter of 2020, we will know how 2021 would be. We expect 2022 to be the boom time for domestic and export markets. It will take some time for the real estate sector to revive.
On the other hand, with Covid-19 changing the habits of people, there will be demand for online sales, which in turn would lead to growth in logistics and warehousing projects, which augurs well for us. Projects in hospitality and tourism sectors will take a dip.
Majority of the infrastructure work happens in Maharashtra. But that state is affected badly by coronavirus. As a result, work has stopped there.
Q: What is Schwing Stetter's game plan?
A: We are going ahead with our plans. Our new plant in Tamil Nadu will go on stream soon. There is a plan to move out more production lines out of Europe to India for service markets which were earlier catered to out of Europe. The plan is to make a range of concrete boom pumps here. We will also look at cutting our costs.
Q: On the stimulus package announced by the government...
A: The government has come out with various packages. But there is lack of clarity on interest rates. The non-banking finance companies (NBFCs) are in collection mode and not in distribution mode. The banks are lending to those with whom they have an existing relationship, and not to new borrowers.
We are hoping the government to announce the National Infrastructure Pipeline to revive demand as the sectors will need some level of construction works.
Q: On localisation levels in your machines...
A: We are increasing the localisation levels by finding local vendors. The reduction in demand has given us a breathing space to look at local vendors. In the construction equipment product range, the local content is about 80 per cent. With respect to self-loading concrete mixture plants, the target is to increase local content to 90 per cent this year from about 70 per cent. In the case of motor graders, we are using an Indian engine.
Q. How migrant workers going back to their home states impacting Schwing Stetter?
A: With so much negativity about migrant workers' plight, many of the migrant workers with us wanted to go back to homes first and then return back. We had paid them wages. Some of our vendors said they don't have workers. We offered our workers to them, so that they also get some work.
Q. Looking forward and looking back...
A: During the first two months of 2020 -- January and February -- we were logging an average turnover of about Rs 170 crore per month. There were signs of revival of the economy. In March, the revenue was about Rs 110 crore before the lockdown was imposed.
In our estimates, May and June may not be good months. The monsoon is also approaching when infrastructure projects get slowed down. Further, inter-state transportation should also become normal. We found it difficult to bring in components from Karnataka. This year, our excavator sales are good though.
After touching a turnover of Rs 2,050 crore in 2018, we initially thought that the company would close 2019 with Rs 2,300 crore, but the scenario changed completely.
As per our current expectations, we will be touching our 2019 turnover of about Rs 1,740 crore in 2020.