Nirmala Sitharaman has just announced COVID Relief Package of 20-L cr for the various industrial segments of India. Kindly brief on the amount allocated for the infrastructure field, and how much portion of it will be used for the development of the construction equipment companies of India?
The package that has been announced by the Finance minister has given a lot of impetus to the infrastructure sector. It will benefit the industry and the construction companies in two ways, one the outstanding payments which have been due to the contractors from the government that would be released and secondly with the benefits and lending stimulus given to the MSME’s (majority of the contractor segment) to bid for new projects and also help in liquidity support during the lockdown time. The ease of access to financing would enable construction equipment companies to sell their equipment in the market and reduce the brunt of impact on sales. Also with the infrastructure spend which the government had envisaged in their budget and now allocated for supply chain development it will also help in boosting the sector. However the implementation and the guidelines around this would be key in estimating the dissemination of the programs. Also how states and other agencies that have various infra projects fare given the liquidity issues in the current environment.
Kindly share with us any special financing plans which your organization is going to bring in the coming times for supporting the CE industry players to regain their economic strength and boost their businesses.
We feel that with the focus on MSMEs and a majority of the contractors being in that segment it will really be a boon to the sector. We are working with our finance and OEM partners on two strategies to assist the industry. One we are working out with OEMs and their dealers to on board them on the marketplace portal so that in the current Covid environment and with social distancing, customers can pick and choose equipment online and place an order to their respective dealer online rather than going physically. We are also working out to come out with special loan programs with the OEMs and our finance partners specifically for the MSMEs, which again they can apply online and track it, thereby reducing physical contact wherever possible. Also we are working on various exchange programs and also assisting people in redeploying their fleet or replenishing it through our auction and rental platform.
How much time do you think will it take for the CE players to return to their best economic condition and what economics you think is predicted for the industry for the year 2020?
This year is very uncertain and it is more to do with science then with economics. As we witness the lockdown being eased and economic activity are starting but the disease and infections still growing. Also with the flight of the migrant workers it has caused a lot of disruptions to the availability of labor a various sites especially in urban areas. And with social distancing very challenging at construction sites it will be a challenge to complete projects on time and take up new projects. So we estimate that there will be a overall decline in the activity and sales of equipment this year. But I believe that with the governments push on improving the infrastructure of the country, as that will be key in making ‘Atmanirbhar Bharat’ it should reduce the impact. Also I believe that now it is more of a short term approach at handling things than looking at a long-term perspective because we are dealing with nature and science and till a cure/vaccine comes we will not be able to predict things accurately. And normalcy would take time to come back.
How do you the overall infrastructure financing market of India for the year 2020? What are your business targets and ambitions to overcome the COVID challenge, in terms of the impact COVID has created for making everybody work in ‘new normal’ norms and rules as well as ‘new normal’ conditions, such as taking precautions and yet giving your best?
If you see infrastructure financing in terms of project financing has been on the decline given that private investment in it has reduced and we see that it will further be dented given the Covid issue. So the government will do majority of the spending and too on an EPC basis rather than PPP. And therefore the major focus would be on working capital and equipment financing. With some of the liquidity getting freed also in terms of bank guarantees, it will assist the contractors, so the focus would be majorly on providing equipment financing. Therefore in this scenario our focus is to educate the customer and assist them to utilize our portal (www.iquippo.com) to the maximum for all their needs. This would help in maintaining social distancing norms and also help them take an informed decision at the touch of a button. We have also introduced chat bots online through which they can communicate rather than in person. And even in our workplace we have benefited from work from home and have given that option to our employees.
Is there is any market recovery prediction you have for the construction equipment sector and how much the reality of it can be true in the coming times, such as the challenges of your clients and the way your organization is set to solve those setbacks?
I think this year would be a very tough year to predict, as this is a black swan event. And we hope that things should get better post monsoons. And it will be a decline in the activity and sales this year but I would play it by the month depending on the scientific metrics. But I feel that any challenge brings an opportunity so I feel that this will also be a time for our clients and us to re-strategize on how to go about the business. For example we will now see that people would prefer to lease an equipment rather than own it as the holding cost etc is too high in such situations and also it blocks capital. Therefore we are developing programs around that as well. It is also good time for many people to unbundle their assets and replace their fleet around which also we are assisting them in doing this.
Is there is something you would like to share with your audience at large?
I would just like to add that these are testing times for everyone and I am sure we will come out of it stronger. Like in life you sometimes need a break from daily life and so this is a break, which the environment has given us to reassess things and reboot for the future.
