Uncertainty persists even though the lockdown is being lifted in phases across the country. Companies are unable to project demand or forecast recovery due to continued issues in supply chain and weakened global demand. And survival strategies are pivoting around digital transformation, customer-centricity, and an urgent need to look beyond China.
ET Insights reached out to India Inc to assess the impact of the pandemic on Indian companies and unravel the way forward. Most companies have rightly prioritised employee safety over re-starting manufacturing facilities or having their workforce return to the physical infrastructure. The focus has been on providing employees with the necessary tools to collaborate and stay productive. In much the same way, customers have been given DIY (Do-It-Yourself) tools, so they can continue to enjoy contactless customer service. Here is what we found when we spoke to a cross-section of business leaders across key verticals.
Business takes a hit
It is expected that it will take at least two more quarters before recovery is seen. Nearly all industries have been adversely impacted by the lockdown lasting from March through May. For the Air Conditioner (AC) and refrigeration segments especially, April and May are crucial months for sales. Nearly 25% of the industry off-take happens during this period. Annual sales for the industry, including exports, will be hit. Purchases that weren’t made in the peak season are likely to be deferred to next year. “The Appliance and Consumer Electronics industry will be impacted by a loss of about Rs 34,500 crore based on a 60% drop in demand in March 2020 and 100% sales in April,” said Kamal Nandi, President of CEAMA and Business Head & Executive Vice President of Godrej Appliances. The industry is currently valued at about Rs. 1,15,000 crore.
This scenario has played out across other industries as well. “Many customers canceled orders that were in production, stopped payment of shipped goods, canceled goods that were ready to ship, and re-negotiated extended payment terms for all future business,” said Rajeev Krishnan, Founder & CEO, Playfiks, an apparel manufacturer. The steep decline in the global retail sector has resulted in a domino effect on the entire supply chain. This will lead to a 30% drop in the company’s business, according to Krishnan. The supply chain dysfunction has harshly impacted India’s pharmaceuticals and chemicals industries, according to Manjusha Malhotra, CEO, Bascham Life Sciences. The infrastructure sector isn’t expected to fare well either. Business has taken a hit since installation work has completely stopped, according to Amit Gossain, MD, KONE Elevator India.
Since permission to commence production is being given only to those sectors and goods deemed essential, the manufacturing sector may take time to recover. At the height of the lockdown, “our plants were shut and most of our vehicles were stuck in transit. Our aim was to ensure that these vehicles reached their destination safely,” said Amit Kumar, MD & CEO, Prataap Snacks Ltd. Their priority: resume plant operations at the earliest. Though Kumar has successfully resumed plant operations across facilities in Guwahati, Karjat, Kashipur, Hisar, Tumkur, Bengaluru and Kolkata, the company is still facing challenges related to labour availability and logistics.
Exports have been hurt as well due to weak global demand. Orders coming in from countries that want to reduce dependence on China are being kept on hold because of the lockdown and uncertainty about how long it will continue. “The China+1 opportunity that presented itself to India is evading us and benefiting countries like Vietnam,” rues Nandi. Further, the lack of ad hoc export incentives and facilitation to manufacture for exports is compounding the problem.
Focus on customer-centricity
Companies have continued to keep customers first using digital platforms to stay connected and communicate revised contract or SLA terms, extend customer support, etc. Voltas Ltd, for instance, ensured its operation & maintenance (O&M) teams provided real-time services to the ‘essential service’ sites for customers seeking support. Currently, it has 260 such sites pan-India. For its current set of customers who operate medical facilities, KONE has offered to install KONE 24/7 Connected Services for free for the first six months. “These are tough times and our relationships are led by mutual trust, respect and empathy,” said Anil G. Verma, Executive Director and President, Godrej & Boyce Manufacturing Division.
For pharmaceutical company Talent India, being customer-centric took on an urgency. The company manufactures neuro-psychiatric and cardio-diabetic drugs for the treatment of chronic illnesses. Hence, “we jumped into managing the availability of drugs and the growing supply chain issues at hand,” explains Vidhan Ashok, MD and CEO, Talent India.
India Inc. came forward to serve not only its customers but the larger community, from contributing to the PM CARES Fund to the upkeep of hospitals, blood banks, pharmaceutical companies, ATMs, and airports. KONE, for instance, manufactured PPE (Personal protective equipment) as per global safety standards. Voltas engineers relentlessly worked across different hospital sites to convert standard wards into COVID-19 isolation wards using smart ventilation solutions. They also built test centres and provided predictive maintenance of chillers in hospitals and pharmaceutical companies that are involved in the manufacture of life-saving drugs.
Working alongside government organizations, Godrej & Boyce developed a special valve for ventilators. The company also received permission to produce hospital furniture and healthcare mattresses.
Onward and upward
As companies get ready for business in the new normal, they will need to strike a balance between “our concerns and stakeholder interest,” remarked Mandar Agashe, Founder, Sarvatra, a digital payments platform, succinctly capturing the mood of the moment. KONE, for instance, plans to allow only 50% of its staff to return to work. Bascham Life Sciences’ Malhotra expects the pharma sector to enhance IT systems to enable remote working. For the IT sector, Work From Home has always been part of the normal course of business. “While our field operations are completely shut, the remaining 85% of our workforce is working almost at full efficiency,” said Sanket Mukund Sheth, Founder & MD, Elixia Tech, a logistics software company.
Opportunities abound, but companies need to be quick to capitalise on them. According to Krishnan, there is a move to shift away from China, and the Indian apparel and textile industry should grab this opportunity. The pharmaceutical sector is realizing the dangers of depending solely on one country for its raw materials and capital goods. “There is likely to be a paradigm shift in supply chain management with companies looking to procure locally instead to reduce dependence on China,” she remarked. This presents a great opportunity for local producers of active pharmaceutical ingredients.
Companies providing digital transformation services will see an uptick in demand. “There’s a surge for our Unified Fleet Management Platforms which imbibe digital by leveraging analytics, AI and ML,” said Jagmeet Singh, CEO, Axestrack Software Solutions, a provider of IoT solutions for the logistics and transport industry. Abhishek Jaiswal, Founder, CedCommerce, states that his company has seen an increased demand for e-commerce and mobile-app-related solutions. On-demand software testing company Qualitrix has even delivered a few large-scale programs during the lockdown including testing for the largest cloud migration program ever in India and a COVID-19 awareness program for frontline staff by the Indian government, according to Mayank Mittal, CEO, Qualitrix.
With all eyes firmly set on the path to recovery, Mittal says “The need of the hour is to keep alive the trust and belief in one’s customers and investors while ensuring employees’ motivation levels remain high. That is the only way we can deliver extraordinary results in these challenging times”.