Economy

India Inc bracing for lockdown 2.0

Nandana James/Suresh P Iyengar/Meenakshi Verma Ambwani Mumbai/New Delhi | Updated on April 16, 2021

With movement curbs imposed to tackle rising Covid cases, buses remain parked at Mumbai’s CST Depot on Thursday   -  -

Larger companies ready with plans to face disruptions; smaller firms may bear the brunt

Hundreds of companies across different sectors including manufacturing, textile, consumer durables, automobile, travel, and hospitality are facing massive disruptions to business as a number of States have imposed a second lockdown to combat the second surge of Covid-19.

While larger companies appear better prepared this time around with adequate stocks and alternative plans, it is the small and medium-size companies that will bear the brunt as they are yet to recover from the impact of last year’s lockdown.

Workforce issues

The biggest issue is the availability of workforce as not many manufacturing units have the capability to house workers on the same campus. “The lockdown is creating havoc for manufacturers of readymade garments. All the planning for production and sales have been disrupted. Many workers have already left for their home-towns and this is hampering production,” said Rajesh Masand, President, Clothing Manufacturers Association of India.

 

States such as Maharashtra, Madhya Pradesh, and Chhattisgarh, where stricter restrictions have been imposed, contribute significantly to sales of most industries’ sales. Even Delhi, a major market for durables firms, has now imposed a weekend curfews. Many small businessmen told BusinessLine that they have exhausted their savings and capital in dealing with the lockdown of last year and have no more capacity to borrow even to meet day-to-day payment obligations.

Prashant Bhatia, Managing Partner of Mumbai-based Cambridge Clothing Company, said, “the impact of lockdown 2.0 will be far worse than the previous one and will deliver multiple blows. With no sales in April, retailers will not be able to pay for the goods supplied in March for the summer season. This will lead to inventory pile-up as repeat orders are being cancelled. This will upset the payment cycle in the entire chain — from raw material suppliers to retailers.”

 

The ₹20,000-crore seed industry is worried as restrictions in key agricultural States such as Maharashtra could impact the distribution supply-chain ahead of the crucial kharif marketing season. “As restrictions are increasing, it may affect seed processing, testing packing and distribution across the country,” M Prabhakara Rao, President of the National Seed Association of India (NSAI), told BusinessLine.

“The process of licensing, new product inclusion needs to be made through virtual mode or video conferencing and expedited as delays can lead to non-supply of new hybrid and variety seeds,” he said.

Anil Agarwal, MD of Jeevika Industries, a steel-making unit, said “the Covid lockdown has had a big impact on a number of small and medium-size industries with costs of raw materials going up and disruption to supplies in some industries.”

Although online food delivery has been permitted, restaurant owners say that it won’t compensate for the loss of dine-in customers Sagar Daryani, founder, Wow Momos said, “Availability of riders for home delivery post 8 pm is an issue. Our business had come back to 90 per cent of pre-C covid levels but now it’s reduced to 70 per cent again across the country. In Maharashtra, we are down to 50 per cent of pre- Covid levels on delivery. Even in terms of cost of operations, we are struggling because our staff cannot travel via public transport and on the other hand, our revenue has reduced.”

 

 

Bigger companies are, however, better prepared having learnt from the 2020 lockdown. In the consumer durables space, for example, companies are tiding over the lockdown through initiatives like maintaining higher inventories, digitisation of after-sales services, reactivation of rapid task forces as well as measures to ensure de-risking of logistics, production, supplies, and inventory levels. “Generally, what we do is that we carry one month of finished goods inventory, which are there at our branch warehouses and hubs. So, they would be able to feed the market for these 15-20 days when the plants are shut,” said Kamal Nandi, Business Head and Executive Vice-President, Godrej Appliances, adding that the lockdown will impact a sixth of the company’s production capabilities.

Eric Braganza, President, Haier India said, “Our Pune plant is closed and so there will be no production at the plant till the end of the month. But we don’t foresee any immediate shortages in this month but maybe in the first 15 days of May we may face some issues as it will take time to resume production and logistics.”

Auto sector impact

In the auto space, big brands are bracing for a short-term impact. “There will be a short-term impact but eventually the market will bounce back. People will come out and they need to commute in order to earn their livelihood,” said Naveen Munjal, Managing Director, Hero Electric. Companies like Tata Motors and M&M are running their plants with reduced manpower.

Real estate in another sector facing disruption. Anand Gupta, Chairperson, Housing and Rera Committee of Builders Association Of India said the lockdown has adversely affected the progress of all infra and real estate projects. “Compulsory Covid testing, restriction on movement of labour and stoppage of movement of plant and machine has jeopardized minimum 50 per cent labour force with about 40 lakh sitting idle without pay and they are trying to migrate.”

E-commerce companies, particularly those delivering non-essential goods, too fear a loss of business. “Maharashtra, with top cities such as Mumbai and Pune, contribute about 25 per cent of our business. Since we come under the non-essential category of deliveries, our business is impacted. We have begun to write to our customers that the shipments might be delayed,” Ameen Khwaja, Founder and Chief Executive Officer of the Hyderabad-based electronics and gadget retailer pTron, said.

Some bright spots

But it’s not all gloom and doom. Online grocery players are seeing a huge spike in business. Grofers, for example, has seen 60 per cent jump in demand in the markets that are experiencing the second phase of the lockdown.

Certain appliance segments such as dishwashers, air-conditioners, and washing machines are also seeing an uptake. Vijay Babu, Vice-President, Home Appliances, LG Electronics India, said, “Footfalls at retail stores have got impacted but we continue to see strong demand trends in Northern and Southern regions due to high summer temperatures for air-conditioners and refrigerators. Customers who need to buy these products are buying, so sales is happening. We are hopeful of achieving our targets for the summer season but it remains to be seen how things progress in the coming days.”

With inputs from Forum Gandhi, S Ronendra Singh, KV Kurmanath, V Rishi Kumar, Anil Urs, Abhishek Law and G Balachandar

Published on April 15, 2021

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