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Development of healthcare and physical infra to bring opportunities: Deepak Shetty, MD and CEO, JCB India

G Balachandar Chennai | Updated on July 28, 2021

Deepak Shetty, Managing Director and CEO of JCB India

Firm has lined up a series of new launches beginning now till the end of 2021, he says

After recording strong growth in the March 2021 quarter, the construction equipment sector faced challenges in June due to the impact of the second wave. As the industry is coming out of lockdown, it hopes to gather momentum in the coming months. Market leader JCB India is preparing for the emerging growth curve with a new set of products and strategies. Deepak Shetty, Managing Director and CEO of JCB India spoke to BusinessLine on the impact of second wave, recovery and growth outlook. Excerpts.

How did JCB manage the impact of the second wave?

The second wave was certainly disruptive. However, the business was not impacted severely during this wave. We have more than 160,000 machines that communicate with us through our telematics solution. So, compared to the dip in utilisation we saw in the May-June 2020 period, it was much better this time. We were one of the first set of companies to take a proactive call of pausing the manufacturing operations across our facilities. We did that for the safety of our colleagues. Also, we were among the first companies to start vaccination drives. We had our first vaccination drive on April 2. I am pleased to tell you that 100 per cent of JCB employees across India have got at least one shot of the vaccine. And more than 35 per cent of employees across India have completed the second dose.

How has been the recovery after the impact of the second wave?

As we were coming out of the impact of the second wave, we slowly started seeing the impact of monsoon and the lockdown getting extended in some States. So, there will still be some struggle in the month of July and August. We hope the pace of revival will get better from September onwards.

Overall, how was the first half of 2021 for the construction equipment industry?

The March quarter was really good. We had seen green shoots at the end of the first wave and that translated into a great period in the December 2020 quarter and the momentum continued in March quarter too. But, there was a bit of disruption in April as we also had the CEV Stage 4 (emission norms) transition. Overall, H1 was 65 per cent better for the industry when compared with H1 of 2020. Our performance was also in tune with the industry.

Are challenges continuing in the supply chain area?

Yes, there are 2 or 3 challenges that have impacted the supply chain. While Covid-19 and the consequent lockdown impacted production and supply, the huge increase in commodity price, in particular, steel, rubber etc., is a major challenge. The recent heavy rains in Maharashtra also caused some disturbances. Since Pune is an important supplier base for us, there is some kind of impact on the supply chain.

Has commodity prices spike spoiled the recovery in demand?

It is a huge problem not only for JCB, but also for the industry. Steel prices in particular have gone up significantly and it has inflicted a lot of pain. There has been almost a 100 per cent increase in steel prices when compared with the June 2020 period. How much can one pass on the hike to consumers? On the other side how much can you push back to your suppliers? My heart goes out to MSME suppliers as they are the worst affected. The larger OEMs can sign long-term contracts with steel mills, but people who are buying from the spot markets face a huge challenge. As an industry, we have been raising our voices against this steep hike. Because, the hike has happened so fast, and particularly during this Covid crisis, it is also increasing the cost of the projects everywhere.

Second wave impacted the rural construction sector also. How do you see the recovery in the rural segment?

There are two factors that will drive demand in the rural segment. Focus on infra development through Pradhan Mantri Gram Sadak Yojana will ensure continuous investments. One of the biggest learnings of the second wave has been the gaps in healthcare infra, particularly absence of it in rural areas. I was heartened to see the Centre’s recent announcement of ₹23,123 crore for improving healthcare infrastructure. I am sure a lot of it will be spent on developing rural healthcare infra. Thus, development of healthcare and physical infrastructure will throw up a lot of opportunities for the construction equipment industry — whether setting up a hospital or establishing a road network to connect to hospitals. It is also the need of the hour — much more than a business opportunity for us.

Are you planning new product launches this calendar year?

We are one of the first set of people to invest in CEV IV machines. We have just launched the new set of CEV IV-compliance machines that will ensure lower total cost of ownership for customers when compared with previous machines. The benefits of the new 3DX plus series include 7 per cent lower fuel consumption, 25 per cent higher productivity and 15 per cent lower maintenance cost. While new machines may cost more, the key benefits offered by them will compensate more. We will continue to introduce new machines as beginning now till the end of 2021, and we have lined up a series of new launches.

What is your growth outlook for 2021 amid the threat of the third wave?

I think in the short term there will be challenges. However, it may depend on how quickly we ramp up our vaccination drive further. However, I expect that by Q4 (December 2021 quarter), things should be at last year’s level if not get better. The December 2020 quarter was one of the best Q4. We hope things should certainly improve in the coming months. Obviously, a third wave can be a dampener, but it is something that we can speculate. We cannot make any judgement based on that.

Published on July 28, 2021

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