‘Exchange rate depreciation will pressurize CE manufacturers’

Schwing Stetter India is a wholly owned subsidiary of the €850-million Schwing Group of companies, Germany. Schwing Stetter (India) Pvt. Ltd manufactures concrete batching plants, transit mixers for transporting readymade concrete to construction sites, pumps and concrete placing booms and recycling plants.

Anand Sundaresan, Vice Chairman and Managing Director, Schwing Stetter (India) Pvt Ltd in an interaction with Sandeep Menezes says that the problem that has hit the Indian economy is created by us.

Excerpts from the interview:

Although the equipment industry is not growing currently, what growth do you foresee post elections?

The equipment market has been flat, but the footfalls at Excon 2013 exhibition have been good. Also the things have been improving in the last two to three weeks with the Cabinet Committee clearing 20 projects. But we have to see when the actual implementation begins. If projects commence around February 2014 then immediately things will start moving. If the project implementation does not happen then we will have to wait until the elections are completed. But all manufacturers and customers know that even if current year remains flat, the next year will definitely be much better. This is the general feeling that everything will get better as things can’t continue to remain like this.
The problem that has hit the Indian economy in last two years is our own creation – it is not the influence of US market or other external factors. Internally we have created this trouble for ourselves. Therefore everyone is optimistic that 2015 onwards things will definitely be better.

But even if projects take-off, it will still be few quarters before the benefits are felt by the construction equipment segment. Comment.

If all the 20 projects that have been approved by the Cabinet Committee takes-off, then in the next three to five months things will get better. But if projects are not executed then we will have to wait till end of next year for recovery. Also the general sentiment in the market will improve and stalled projects shall take-off.

Raw material costs are rising while the market slowdown is not allowing manufacturers to increase prices. Comment.

Because of commodity prices rising and also exchange rate depreciation manufacturers like us who have lots of imported components will face huge pressure to meet the costs levels. We are trying to look at exports from India so that there is little bit balance.
We have taken initiatives to lower our costs through increased efficiencies. Of course we can’t cover the entire costs increase, but it helps us to cover it to some extent.

The Rupee depreciation has actually thrown open a huge exports market by making locally manufactured products cheaper?

We don’t have an export target at the moment because our company is new in the export market. But the initial results that we have received in areas that our company has been operating are encouraging. Earlier the export market was handled from Germany; therefore we can’t predict how much our export shall be. Also earlier our customers had an apprehension towards India manufactured products. Since we are a German company they were apprehensive if locally manufactured products would meet the same quality standards. But in last six months the customers who have purchased India manufactured equipments are happy about the quality.

Due to Rupee depreciation many OEMs are increasing the localization content of their products. What is the quantum of localization in Schwing Stetter’s product range?

It actually differs from product to product. There are certain products wherein we have localized to nearly 95 per cent. There are other products wherein the imported content is nearly 55 to 60 per cent because they are actually new products wherein lot of indigenization has to still occur.

But we have a very clear plan to localize the products in India. We have not only localized for our own requirement in India but some of the components also go back to Germany. We also send these components to Germany for them to test and try it – the way things are done out there. Then finally they give us an approval to go ahead with the component.

What is the current quantum of trained equipment operator shortage across the industry?

We have an operator training facility. Which ever customer buys our equipment sends their operators to get trained in our facility. As far as batching plants and concrete pumps are concerned – it is a continuous process.

The equipment industry has witnessed a negative growth of 15 to 20 per cent last year. How has been Schwing Stetter India’s performance vis-à-vis the industry?

I would say that 2011 has been the best year for all of us. There was already a negative growth in 2012 when the industry sales reduced by around 10 to 15 per cent. And this year there has again been a negative growth of roughly around 10 to 15 per cent. But our market-share has increased. In segments wherein we were strong our growth has been by one or two per cent. But in segments wherein our market-share was not strong – we have grown by around 5 per cent.

Tell us about Schwing Stetter India’s new products launched at Excon 2013?

We have launched five new products. Two are in the batching plants segment and three are in the concrete pumps segment.

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